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Hawaii anchored
at the core of
Digital Island’s
network
A high-tech center in
By Russ Lynch
Honolulu serves as a link
to Asia, the South Pacific
and the mainland
Star-Bulletin
SINCE Digital Island Inc. moved its headquarters to San Francisco last March, the impression has lingered that the company got formed in Hawaii, attracted venture capital here, got its operations started and then promptly left for greener pastures.
That's far from the truth, company executives said this week, as they showed off their new network operations center in the 1132 Bishop St. building.
Alliances with other businesses and acquisitions of some make Digital Island unique as a worldwide operator of a network for high-speed, high-bandwidth, huge-volume audio, video and data exchange.
It arose from the expertise of founder Ron Higgins, who in the early 1990s saw that the Internet would catch on so fast it would soon encounter bottlenecks that would jam communications.
Higgins' vision was an "overnet," neatly bypassing the crowded areas of the Internet and linking Internet service providers, big business and other users through thousands of miles of fiber-optic cable, most of it under the ocean.
He formed Digital Island as a private company in California in 1995, moved it to Honolulu in 1996, before its network got started. Higgins attracted private investors and one of them, indirectly, was the State of Hawaii.
In 1995, a venture capital fund was formed with $2 million invested by a state agency, the Hawaii Strategic Development Corp. The new fund, HMS Hawaii Management Partners, in the next few years invested the $2 million in five startups, one of which was Digital Island.When Digital Island made its initial public offering at $10 a share in June of last year, HMS ended up with 315,000 of the publicly traded shares which it had bought for $1.43 a share. By late December, when restrictions on selling that stock were lifted, Digital Island had risen to more than $132 a share, making the HMS investment worth, on paper, $42 million. Like many technology stocks, Digital Island shares have dropped back this year but at today's closing price of $85.62, the state-backed HMS holding is still worth $27 million. William K. Richardson, the Hawaii partner of HMS, said today HMS has a plan to sell its Digital Island shares in an orderly way so as to maximize the value. As it does, profits on the sales, likely to be substantial, will go directly back to the state.
Hawaii is key location
Hawaii, the center of wide fiber-optic networks that reach out to Asia, the South Pacific and the mainland, is an essential point for the type of business Digital Island does.The company is still completing its network-operations center and data-transfer node in Honolulu but has already turned its original 4,000 square feet of office space into 10,000 square feet over two floors. The Honolulu center employs 30 and is looking to hire another five. Many of the employees have foreign-language skills so they can talk to clients throughout Asia. The company has more than 250 employees worldwide.
Jason Roeber, who manages the Honolulu network operations, said its basic job is monitoring Web sites around the world to make sure that their customers can get to their Web pages. Digital Island executives said they moved the company's headquarters back to the mainland last year primarily to be closer to the big Internet and electronics companies. But, they said, maintaining a major presence in Hawaii is important because it builds links throughout Asia, helps attract investors and allows the company to develop new services.
"This is a strategic area for us," said Irwin Greenstein, Digital Island director of public relations, who was in Honolulu for the Pacific Telecommunications Council conference at the Hilton Hawaiian Village. Not so long ago, he said, Digital Island had 30 offices. Now it has 400 around the world and Honolulu is the company's key link to Asia.
The Hawaii operation "clearly demonstrates that Hawaii is a tremendous asset for doing business, he said.
"Digital Island has shown that you can in fact get significant Silicon Valley capital into the state," Greenstein said.
Ray Chan, the overall Hawaii boss as director of network operations, said the Honolulu center maintains the Asia-Pacific-U.S. connections. An identical center in London works the Europe-U.S. side. Both work 24 hours a day, seven days a week, but each takes it turn to do most of the work when it is daylight in its area.
"We shift off every 12 hours between here and London," Chan said. Each center has skilled workers monitoring a wall of displays that makes it look something like a small-scale version of the control center NASA uses to monitor shuttle flights.
They can see data traffic moving, step in to shift directions when a snag is threatened, and help their clients trace trouble quickly.
Because of its particular mix, Digital Island considers itself unique. Its mix is changing all the time. Late last year, for example, the company joined up with Sun Microsystems Inc., which invested $20 million, and Inktomi Corp., kicking in $6 million. Together they plan to deploy 5,000 servers -- powerful computers that relay information in and out of Web sites -- around the world.
Alliances to boost e-commerce
That will boost e-commerce capabilities. By the end of the year, Digital Island had merged with Sandpiper Networks Inc., giving at an even broader e-business delivery capability. In early January, Digital Island brought in TraceWare, a system that enables business to trace hits on their Web sites back to the source.Chan said that gives businesses the capacity to bounce right back with specific marketing to specific locations. If TraceWare shows that a Web site in Honolulu is getting a lot of inquiries from Japan, for example, the business could do some Japanese-language programming, he said.
In mid-January, Digital Island acquired Live On Line Inc., a provider of live and on-demand "streaming" media services. That allows Web site owners to show live or on-demand animated advertisements, from which customers can order and pay for their goods right on the web site.
Late last year company founder Higgins left the company, saying he wanted to get out and do some things for himself. Among them, he said, is helping Hawaii attract more high-tech businesses.
Greenstein said there are a lot of possibilities, as shown by this week's announcement that Pacific Internet Exchange Corp. will set up a $12 million facility at near Honolulu Airport. Hawaii just has to "think global" and understand where it fits in the world and it can continue to attract such investments, Greenstein said.
