Technology sector emerges leaner, more savvy

“Obviously the events of September 11^th – and the economy – have weighed heavily on the minds of everybody, but I feel that the state’s IT sector has weathered this storm,” said Brad Waugh, managing partner at Providence’s WatchHillPartners. “In years past, our state was severely impacted because of the concentration of our economy in defense and manufacturing, but 10 years later, after the last economic down turn, we have a landscape that is much more diverse. We have a greater concentration in financial services, IT and biotechnology than we ever had before. So personally, I see things starting to turn.”

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Waugh predicted the economy will return to normal levels in the second quarter of 2003, and Jay McNally, owner and founder of Ibis Consulting, located in Providence, thinks that technology businesses will recover from the recession more quickly than expected.

“There is a lot of pent up demand for products out there. The businesses that needed to die have died. The rest are leaner and more able to play the game,” said McNally.

McNally said there was an industry tendency toward mergers and acquisitions in 2001, for example, the purchases of DefendNet and Network Six by Guardent, Inc. and TRW, Inc., respectively. McNally said he expects the trend to continue “until the markets start to look favorable on new issues.”

Atrion Networking Corporation Chief Executive Officer Charles L. Nault said that it has been a difficult year for value-added resellers (VARs), and mentioned several regional and national businesses of this type who have struggled in 2001. South Africa-based Cisco Gold Partner Dimension Data, which has an office in Cumberland, had a couple of layoffs in 2001, Nault said.

“It is a scary time to be a VAR,” he said. “It requires a level of business management savvy unseen in the past 10 years or so. That may not be all bad as we are forced to return to old fashioned business practices.”

On the other hand, Nault said a “very bright spot in Rhode Island has been the OSHEAN (Ocean State Higher Education, Economic Development & Administrative Network) network connecting higher ed and even RInet (Rhode Island Network for Educational Technology) to very high speed Internet connections and employing the absolute latest technologies in Internetworking.”

OSHEAN, a nonprofit consortium whose members include the state’s major colleges and universities, works to expand access to the Internet in Rhode Island.

Nault said Rhode Islanders should expect to see more widespread adoption of wireless LANs (local-area networks) in 2002. Atrion is helping the state’s Cooperating Libraries Automated Network (CLAN) libraries with the technology, and according to Nault “businesses should not be far behind. As standards and advanced features make their way into the IP Phone Systems we expect wider adoption of that technology – IP Telephony – as well.”

Waugh agreed that the “second revolution” of the Internet will be wireless.

“Bringing the Internet to hand-held devices for businesses, and then consumers, will be the next frontier,” he said. “(Newport-based wireless broadband supplier) TowerStream is taking advantage of this area. Firms like GTECH will be well poised to deal with the high transaction rates from increased traffic, as they have already done in countries outside of the U.S.”

McNally said he has seen evidence of more cohesion within the state’s IT community this year.

“More of the people in RI that are focused on technology are talking together and right now there are a lot of deals that people are considering,” he said. “Up until this past year, not enough of these folks knew each other for this kind of thing to happen. This will lead to more technology businesses in the state.”

In fact, McNally said, the time to start a new high tech business is now.

“No questioncreators of new technologies should be – and are – starting up now,” he said. “The economy isn’t as bad as people thought it would be, we’ve had significant changes to the countries state of mind. We need new technology to bridge the gap. The businesses can’t be just good ideas. They need to have real business models that tie them to reality – and lead to profitability. Oh, and it’s not about raw technology. It’s about technology that meets a market need. Sales drives technology R & D.”