Isles’ tech
potential high

Experts say Hawaii can
create a tech 'hot spot'
by discovering and
building resources

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By Alan Vaughn
Star-Bulletin

BY THE TIME Gov. Ben Cayetano delivered his State of the State speech Jan. 22, billions of dollars in unsold computer networking gear were already clogging the warehouses of technology giants such as Cisco Systems and Nortel Networks.

Before Cayetano said one word about expanding established efforts to develop high-tech businesses as a pillar of Hawaii's economy, the technology bubble, if not burst, was deflating rapidly. Many technology companies were going under or writing whole tablets of pink slips in an effort to stay afloat.

Still, Cayetano urged the state to do more to develop high technology and biotechnology to diversify Hawaii's economy -- into an industry with a history of meteoric rises and equally sudden falls.

Since Cayetano's speech, the technology death toll has widened. Highly touted Internet companies have shut their doors, selling their assets for pennies on the dollar, and tens of thousands have been thrown out of work.

This is the industry Hawaii should develop to offset the unreliability of tourism?

Yes, say experts. And do it now.

"I frankly don't see anything else Hawaii can do," said Rob Atkinson, director of the Technology and New Economy Project at the Progressive Policy Institute, a Washington, D.C.-based non-profit aligned with the Democratic Party.

Atkinson developed the institute's State New Economy Index, and has studied Hawaii's economy and efforts to develop a technology industry.

Creating information technology businesses is natural for the state, Atkinson said, since tourism fluctuates and consuming natural resources is simply not viable. Information technology, however, doesn't consume resources and is not dependent on proximity to customers.

Despite the national freefall, developing a technology industry should not be written off or delayed, Atkinson said.

"I don't think the new economy's dead at all. We added 12,000 (information technology) jobs last month. That's not a recession," Atkinson said. "It's not the autos of Detroit in the 1980s."

Worldwide spending on information technology services is projected to double to $1.4 trillion by 2005, according to a recent survey by Dataquest Inc., with the Asia-Pacific market leading the way.

States that will pull out of the technology downturn the fastest are those basing their economies on innovation and globalization, Atkinson said. "I think Hawaii's doing a good job."

Likewise, he said, the companies that will do well are those that continue to invest in research and development instead of retracting.

"The best thing that can happen to a state like Hawaii is for other states to back off," Atkinson said.

THE ISLANDS MAY already be getting some advantage from layoffs in Silicon Valley and other high-tech hot spots. Local firms that had trouble competing for technical workers are finding more employees available, and at a lower price.

"The pool has been building up and getting bigger since last November," said Ryan Okahara, manager of organization and staffing at Pihana Pacific, which runs data centers. "It's just really picked up in the last few months."

The company is receiving resumes from workers cut by Cisco and Nortel, he said.

For Pihana, that's meant it has been able to hire a network design engineer. The job requires a high-level Cisco technical certification held by only two people in Hawaii, Okahara said. In a recent week, he heard from five applicants seeking to move here.

Last year, applicants would demand $130,000 in base salary plus stock options, he said, but now are willing to work for less. A job that used to take a month to fill can now be staffed in half that time.

"There are candidates from Nortel all over the West Coast, Asia and the Pacific," Okahara said. "In general across the country, we just have a lot of people looking for work."

Those applying to Hawaii companies are kamaaina who chased jobs to San Jose and San Francisco and now want to come back, as well as experienced mainland workers tired of the grind in high-tech centers, recruiters say.

"We certainly have a lot more success attracting applicants," said Laura Schoenrock, director of recruitment for Adecco Technical, a staffing service that supplies tech workers.

Mainland workers were hesitant to apply to Hawaii during economic boom times, but now are more flexible, she said. California's rolling blackouts and high cost of living also have encouraged technology workers to find new locales.

But some local companies, too, are starting to slow their hiring, she said. More companies are outsourcing jobs that don't relate to their core business and putting off filling some jobs. For example, a company that wants a Web site may contract out for it instead of hiring a Web designer.

At Pihana, that's meant taking a second look to make sure the job is necessary.

"We just look a little harder," Okahara said.

Though applications are increasing, Hawaii isn't the only place competing to attract technology talent. Twenty-four other governors used their State of the State addresses this year to push programs bolstering technology employment. And that doesn't include already established tech centers like California, Massachusetts and Virginia.

Hawaii has all the pieces to be competitive, said Keith Rollman, an established tech hand in Austin, Texas, who returned to the islands for a vice president's job overseeing the technology division at McNeil-Wilson, a public relations firm. Now the state needs to put the pieces together.

"I think a lot of people are out there going, 'Where is the next hot spot'?" Rollman said. "Sometimes it's helpful to be a little out of sync."

While in Austin, Rollman saw the community willfully build the technology industry to pull itself out of doldrums following the 1980s oil bust.

"The Austin model is a classic case to get the pieces to fit together," Rollman said. "You can create a hot spot if you set about it with determination."

Hawaii's private sector is starting to form a collective will to develop the industry, he said. Technology events like the E-List networking nights are drawing a crowd of 300 to 400, and there are more workers with the right skills to support the industry.

But, Rollman said, Hawaii isn't there yet. It needs more resources, more entrepreneurs and more investors willing to put money into small ventures.

Now is the time to for communities to work harder at finding and building those resources, said Arthur "Skip" Porter, Oklahoma's secretary of science and technology development and a key player in building Austin's high-tech industry.

"In today's age, technology is the coin of the realm," Porter said. "You don't need a lot of land. Microsoft doesn't need to be next to a nuclear power plant."

To build a technology industry, he said, a community has to do three things: Find the right people, get them in the community and keep them there. The place to focus, Porter said, is on college undergraduates, by creating an environment that mentors them, values their contributions and will keep them in the community.

"These industries come out of where the assets are," he said. "It's probably easier to create an industry than recruit a company out of one."

But that environment can be created only in the private sector, not by government, he said, since politicians seldom can look beyond the next election.

"You've got to have one person who loves Hawaii, who has resources and is prepared to risk that capital to get things going," Porter said. "You need a success and you need to get started."

Finding those people willing to put their money where their start-ups are hasn't been easy, said Bill Spencer, president of the Hawaii Venture Capital Association.

"I think there is some fear factor in high-tech, but I think it's going away," Spencer said.

The association's monthly meetings, which five years ago would draw a dozen people, now fill a 75-person room, while a half-dozen people wait outside in case there are empty seats.

The association works to convince investors that high-tech companies in Hawaii are as worthy as those in Silicon Valley or anywhere else.

"Their record is not any better than what we can do right here," he said.

BUT SPENCER STILL has his work cut out for him. One key, he said, will be to reach a critical mass that will draw more-cautious investors.

"They see a lot of people involved, and they feel more comfortable," Spencer said. "Hawaii has always had the attitude of, 'You try it first, and if it works I'll follow you.' "

One answer is to convince the managers of large portfolios, such as pension funds, trusts and estates, that it is responsible to invest in small start-up companies in their communities.

"We're talking about 1 to 2 percent on their portfolios that they are willing to lose, and they are willing to risk it because they could get 50 to 1 rates of return," Spencer said.

If those investors come around, then the tech bust will shake out positive for Hawaii, he said. "That's the thing. There's no get-rich-quick scheme."

Tech-related events:

>> The next E-List Party, a pau hana networking event for tech workers, is 6 p.m. June 5 at Blue Tropix on Kapiolani Boulevard. No reservations necessary. See: http://www.elisthawaii.com

>> The next Hawaii Venture Capital Association luncheon will be 11:30 a.m. to 1:30 p.m. June 28 at the Plaza Club, on the top floor of the Pioneer Plaza, 900 Fort Street Mall. For reservations, call Gail Caveney at (808) 262-7329.

>> The Wayne Brown Institute will conduct "The 21st Century Entrepreneur: Can Your Team Win in the New Economy," a seminar for entrepreneurs and executives June 4, 6 and 7. The first seminar will be from 8-10 a.m. at the Maui Research & Technology Center. The second seminar will be 2-4 p.m. at the Orchid at Mauna Lani on the Big Island. The third seminar will be 8-10 a.m. on the eighth floor of HEI Pacific Tower in Honolulu. The seminar is $35, with attendance limited to 50. For more information, call (888) 446-3655, or visit the Web site http://www.venturecapital.org.