Posted: May 01, 2011
Trends in tech
A status report on Colorado's top six tech sectorsBy Eric Peterson
Trends in technology change so rapidly it's easy to mistake yesterday's news for tomorrow's. Same goes for trendsetters. But what separates the trends from the fads? Fads come and go, but true trends actually go somewhere.
Kristin Russell, the state of Colorado's newly minted secretary of technology and chief information officer, sees today's trends leading to a bright high-tech future.
"I believe Colorado is the best-kept secret when it comes to innovation and tech industry growth," she says. "We have a highly educated work force. We can tap into some of the best institutions of higher learning in the country. And we have a lot of land and a good climate for green tech."
Identifying the expansion of rural broadband as a priority that will catalyze the economy (as well as education and medicine), Russell says she is also committed to luring Fortune 500 companies to the state as well as fostering homegrown startups.
"We need to be able to focus on both ends of the spectrum and everything in between," she says. "It is an ecosystem that evolves over time. I'm really bullish about Colorado and our future, and specifically our future in technology."
Looking at six of Colorado's hottest tech sectors - aerospace, bioscience, cleantech, cloud computing, social networking and telecom - the dynamics and logistics are so disparate that it's not easy to pull the curtain back and identify the common thread. Experts in these sectors talked with ColoradoBiz to help illuminate the issues that are defining their markets today, not to mention tomorrow.
Colorado is third in the nation in terms of aerospace employment, with more than 160,000 workers in the industry's ranks here. Considering California and Florida are ranked ahead, and Texas is ranked behind, it's clear Colorado is playing with the big boys in this industry.
But it's small companies that capture the imagination of Diane Dimeff, executive director of eSpace: The Center for Space Entrepreneurship in Boulder. She touts the hybrid propulsion technology of TIGON EnerTec, currently a client of eSpace's in-house incubator. "I'm really excited about it. It's kind of like a flying Prius."
Dimeff notes a worrisome trend in aerospace: an aging work force and no heir apparent. "The industry is very worried about it," she says. "They won't have the personnel to keep us competitive. Many companies are reaching out to colleges and universities with space-related programs." eSpace is in fact a collaborative effort of a private aerospace company - Sierra Nevada Corp. - and the University of Colorado. "Especially the larger companies are reaching out to educate teachers on how to teach aerospace-related subjects and encourage students to study aerospace."
Also a hot topic: the commercialization of space transportation. "The whole issue of the commercialization of space transportation is a huge shift in how the government has approached space transportation," Dimeff says. "The government is saying private companies can do it less expensively. There's a real entrepreneurial opportunity for companies to commercialize space exploration, and not just the companies that are flying spacecraft, but all down the chain. It's a significant change, and with that comes challenges as well as opportunities."
Is the change a net positive? "I like the idea, but the jury's still out, and it will be for quite some time," Dimeff says. "Aerospace is not like the software industry. It moves much more slowly. They can't put out a beta rocket. It has to work the first time."
On the confluence of cleantech and aerospace, Dimeff notes that aerospace was green before it was in vogue. "Spacecraft have always had to be green by definition. They need to reuse energy. There is no garbage. A lot of the green breakthroughs we've had on Earth have been related to the development of spacecraft."
Holli Baumunk, president and CEO of the Colorado BioScience Association (CBSA) in Denver, is bullish, and she has the numbers to back it up.
"Biotscience is one of the few sectors that's been growing in the past two years," Baumunk says. From 2005 to 2010, the biotech and pharmaceutical industries in Colorado grew by about 3 percent, while the larger industry suffered through a 4 percent contraction over the same period nationally. And Colorado's medical device industry outdid biotech and pharma by growing 8 percent over those five years.
However, not all is well in bioscience, Baumunk says. "We're a little concerned about regulatory issues at the federal level and financial issues around the country," she says. "The FDA is undergoing major reforms that are having an impact on the bioscience industry. It's becoming a lot more stringent toward the medical device industry.
New devices could have to go through the same trials a drug goes through. The cost of that is extremely high. What we're really concerned about is what this will do to U.S. competitiveness globally. If we're constantly implementing more and more regulation on our companies, it's not going to be cost-effective for them to manufacture here. It's a long haul already, and this makes it longer."
Proposals to lower the length of a patent on biosimilars, generic versions of biotech drugs with expired patents, from 12 years to seven have also raised the industry's ire, Baumunk says.
"It doesn't give companies enough time to recoup their investment," she argues, noting that the average drug requires a decade to get out of the red. "Why develop it? Where's the money? Another thing we're very concerned about is lack of financing for emerging bioscience companies. Venture capital money has really dried up."
The CBSA is pushing for a five-year renewal of the Bioscience Discovery Evaluation Grant Program, which funneled $27 million to early-stage companies in recent years. "We want that to continue," Baumunk says. Same goes for Small Business Innovation Research (SBIR) funding at the federal level.
Nevertheless, Colorado is well-positioned with its fast growing medical campuses and programs at the state's institutions of higher learning. Baumunk cites both University of Colorado and Colorado State University as well as Colorado School of Mines. "We are really lucky to have all of these research institutions."
"You might use the headline, ‘Renewables under threat,'" says Adam Rentschler, a Denver-based cleantech consultant and executive, judging chair in the Rocky Mountain Region of the Cleantech Open.
"The economics of renewable energy are sensitive to the price of legacy fuels," Rentschler says, specifically citing the flat pricing projections for the U.S. gas market. "Natural gas prices are now decoupled from oil. That's all based on where this stuff comes from." Rentschler says hydrological fracturing, or "fracking," will potentially uncork a century or more of natural gas for the country, threatening the economics of utility-scale wind and solar.
Intermittency and storage are two complementary issues also holding up renewables, Rentschler adds. "Solar and wind are both intermittent. To overcome that, the renewables industry needs to come up with better storage solutions." Rentschler says it's unclear what technology will emerge from concepts as disparate as pumping water uphill to storage rooted in chemical energy. "It's very difficult to pick the winners right now," he says.
"The intermittency also becomes a problem for the utility," Rentschler adds. "It turns out that coal and nuclear plants do not like to be turned down."
Rentschler says natural gas-fired generators are more "throttle-able," but exactly how to balance generation and demand becomes increasingly complex as more and more variable renewable sources enter the mix. He also foresees a coming shakeout in solar generation technologies. "It's all going to come down to dollars per watt."
But the domestic cleantech industry will likely need further federal support to fulfill its promise. "We would do well to emulate Germany and Canada. Incentives are really low in this country," Rentschler says.
"With a coherent national energy policy, we can overcome these challenges," he adds. "The goal is to beat coal, oil and gas on price as well as cleanliness."
Cloud computing has boomed in the last year at Englewood-based Statera, an IT consulting firm with five offices. "It's probably at least a third of our business," says Brad Weydert, Statera's president. "Last year it just exploded. It's not just hype anymore."
Largely implementing name-brand cloud computing solutions from Salesforce.com and Microsoft Business Productivity Online Services (BPOS), Statera worked on a number of large projects for Fortune 500 companies in the last year. "Cloud computing is prime time now," Weydert says. "It's not a risk anymore. Security is there, integration with other apps is there. It's not just early adopters anymore. Now you're seeing government moving to the cloud. You're seeing hospitals moving to the cloud. There's peace of mind."
The benefits of cloud computing are many. "You can access your system anywhere, anytime," Weydert says. "You don't have to hire an IT staff. You don't have to invest in hardware. It's like electricity and the light switch: You just flip it and away you go."
Not only is cloud computing cheaper than traditional computing on a per-user basis, but it's also easier to implement than previous solutions. Instead of a two-year installation of a CRM system, "You can be up and running in three to six months," Weydert says. "It's incredible how quickly you can get them done."
Weydert describes a client: an architectural firm with more than 100,000 public folders. "They want to streamline their operations," he explains. "They don't want to be in the IT business." A "hybrid solution" was carved out that relied partially on the cloud, without eliminating the legacy systems entirely.
Some legacy systems, he adds, won't ever be ported to the cloud. "They're just too complicated," he says.
"You're seeing all sorts of creative ways to cut costs," Weydert says. "You don't have to make that investment in hardware, software, telecom, people and electricity anymore. We're just seeing the tip of the iceberg. Any time you're in a down economy and people are looking to cut costs, technology is a good place to do it."
But Weydert also sees cloud computing as the IT industry's "last big wave," adding, "By the time we're done helping clients move their apps to the cloud, I'll be retired."
Facebook ‘s 500 million users are a testament to the profound impact social networking has had in Silicone Valley, Cairo, and pretty much everywhere else.
"The reality is the world is always looking for a better way to tell a story," says Jason Cormier, co-founder and managing partner of Boulder-based social media agency Room 214; clients include the Travel Channel. "We've followed that rabbit hole by offering a whole new service in video scribing."
Video scribing involves animation of a whiteboard art with audio from a brainstorming session; the technique is lauded for its impact and viral nature. "It's next-level infographics with a storytelling bent," Cormier says. "It humanizes our brands."
Cormier says the "attention economy" plays by its own rules. "The reality is you only have a few seconds to capture someone's attention, and keeping it is a whole other strategy." Outside-the-box thinking is mandatory, he adds. "It's easy for marketers to get caught up with the tools in the tool shed rather than what's growing in the garden."
QR codes have also taken social networking by storm. "QR stands for quick recognition," Cormier says. "They are two-dimensional bar codes that you scan with your mobile device to be taken to a website, a contact method, or a field of text." While it's been in use in Japan for more than 20 years, the technology has only taken off in the U.S. in the era of the smart phone - and now that there are 20 million of them, it's here to stay, says Cormier. "This is a trend. It's not a fad, it's a trend."
Look for QR codes on every imaginable product, as well as construction sites in New York and advertisements of every kind. Room 214 is working on a platform for a QR code that takes you to a Facebook ‘Like' button. "They're popping up everywhere," Cormier says.
The flip side? "People aren't using them very well. They could be doing a lot more with them. It's still gimmicky, but you're going to start seeing companies use them a lot more effectively. There's a world of opportunity that hasn't been tapped yet."
Boulder-based Trada is Cormier's Colorado company to watch in the space. The company offers crowdsourced pay-per-click marketing and landed a $5.75 million investment from Google Ventures last year. "They're hiring like crazy," he says. "This takes crowdsourcing to a whole different level."
You can never have enough bandwidth: The thirst for high-speed connectivity is proving difficult to slake. "The main thing that stands out is the increasing need for broadband both on the business side and on the consumer side," says Donna Jaegers, a senior analyst specializing in telecom with financial consultancy D.A. Davidson in Denver. She expects to see more build-out in 2011 and 2012. "Qwest is continuing to build out fiber to the node and I would expect CenturyLink will accelerate that."
What was seen as too much capacity a decade ago is now not enough. "A lot of the dreams that inspired the building of that capacity are now coming true," says Jaegers, citing streaming Netflix as the most prominent example of a product of this seemingly limitless bandwidth. "Even the dream that you'd be able to get multiple camera angles of a sporting event from hitting a button on your remote has come true."
With cheap and plentiful broadband comes innovation, Jaegers says. "It's a virtuous cycle. That means you get new apps consumers want and that drives the customer to imagine new apps as well."
Consolidation is on the horizon for the telecom space, especially on the long-haul side, Jaegers adds. "We've got too many players in the market and that's making it hard for them to make money on their investments."
A decade in the making, "The stars are starting to align" for a wave of M&A, she says - Level 3 and Global Crossing might just be the first domino to fall.
on the web
eSpace /// www.espacecenter.org
Colorado BioScience Association /// www.cobioscience.com
Adam Rentschler /// www.adamrentschler.com
Statera /// www.statera.com
Room 214 /// www.room214.com
D.A. Davidson /// www.davidsoncompanies.com
Denver-based writer Eric Peterson is the author of Frommer's Colorado, Frommer's Montana & Wyoming, Frommer's Yellowstone & Grand Teton National Parks and the Ramble series of guidebooks, featuring first-person travelogues covering everything from atomic landmarks in New Mexico to celebrity gone wrong in Hollywood. Peterson has also recently written about backpacking in Yosemite, cross-country skiing in Yellowstone and downhill skiing in Colorado for such publications as Denver's Westword and The New York Daily News. He can be reached at Eptcb126@msn.com