This article describes the high tech boom in the Washington, D. C. area.
It shows that our perceptions about a region's employment may not be
current with actual market trends. while many think that that the largest
number of people in the region work in government, that is not true today.
Most people working in the Washington area work in the technology field,
with the region being home to such companies as AOL and MCI. The other
trend is evident as well: most of the new jobs are being created on the
suburban fringe, literally beyond the beltway. This spells trouble for
those who don't drive.
kelly
The New York times
October 12, 1999
Information Superhighway Roars Outside the Beltway
By JOEL BRINKLEY
WASHINGTON -- Anyone trying to understand who holds power in the
nation's capital need only look in one place: the owner's box at
Jack Kent Cooke Stadium, home of the Washington Redskins.
Photo credit:
Stephen Crowley/The New York Times
Photo caption:
Cranes dot the landscape in suburban Virginia, where companies like
America Online are building and expanding and hiring. Metropolitan
Washington, in the view of many, is fast becoming the technology
capital of the United States.
_________________________________________________________________
For as long as anyone can remember, the owner's-box guest list has
been dominated by prominent Government officials and media stars.
But when the Redskins played the archrival Dallas Cowboys last
month, a new figure joined the Washington elite, reflecting a
cultural sea change for this city.
Seated next to the team owner, Dan Snyder, was the leader of a
local business, Stephen M. Case, the billionaire chief executive of
America Online, which has its headquarters in suburban Virginia.
For its entire history, Washington has been viewed by most
Americans as a swampy den of political intrigue. The capital's
culture, sometimes derisively called inside-the-Beltway, is seen as
a narrow world of bureaucrats and politicians, lawyers and
lobbyists, all feeding off the Federal Government.
But quietly over the last several years a new, outside-the-Beltway
culture has grown up in and around this city -- so quietly, in
fact, that even longtime residents are generally unaware of the
change. Now Washington and its suburbs are home to far more
entrepreneurs and other businesspeople than Federal workers and the
assorted private companies and institutions connected to the
Government. In fact, by at least one measure, Washington is now the
technological capital of the United States.
Over the last several years, vast high-tech corridors with
thousands of businesses and hundreds of thousands of employees have
grown up in the city and its Virginia and Maryland suburbs. Now
these Internet, computer services, telecommunications, aerospace
and biotechnology companies employ more than 470,000 people, easily
outnumbering the roughly 350,000 people employed by the Federal
Government, for two centuries the base of this city's work force.
Several local and national studies have also shown that these
rapidly growing high-tech companies employ more technology workers
-- engineers, scientists and other technical employees -- than the
companies in California's Silicon Valley or Boston's Route 128
technology corridor. These two areas have long been regarded as the
most important technological centers of the United States. And by
other significant measures, including manufacturing and industry
profits, they remain so.
Still, the Washington area, with more than 9,000 technology
companies, has come to be an important and growing national player,
by most measures easily outdistancing other technology clusters
including those in New York City, Austin, Tex., and Research
Triangle in North Carolina.
"This area is exploding; we have some of the best talent in the
industry right here," effused Lou Scanlon, chief executive of UUCom
Inc., one of the small Internet engineering companies in suburban
Virginia that, like hundreds of others, has experienced growth in
revenue of several hundred percent a year for the last few years.
Annual studies by Washington Technology magazine show that the
area's 50 fastest growing high-tech companies, most of them quite
small, earned $55 million in 1993 and $1.32 billion last year, a
24-fold increase.
The challenge, and the potential to grow rich, is tempting even
some senior Government officials -- who normally would walk through
the revolving door to a comfortable position as an industry
lobbyist -- to become local entrepreneurs instead. In a city where
the goal has always been to acquire political power, the
acquisition of capital and the entrepreneurial spirit have been
permeating and changing the culture.
Melissa Moss, for example, held senior positions in politics and
government for 20 years. Her jobs included finance director for the
Democratic National Committee and director of the Office of
Business Liaison at the Commerce Department. But when she left
government three years ago, she decided to start a business.
"I wanted finally to run something of my own," Ms. Moss explained.
So she started the Women's Consumer Network, which offers advice
and special deals to its members, primarily through a Web site.
Her company is small, with just 12 full-time employees, but CBS
recently announced it would invest $50 million in the company. Ms.
Moss says that she often receives calls from friends still in
politics and government who want to follow her path into business
and that she does not miss their world a bit.
At America Online, the largest and most important technology
company in the region, most members of the public relations staff,
among others, are émigrés from politics or Government. One, Andrew
Weinstein, had worked for Bob Dole and Newt Gingrich. But his new
job, Weinstein noted, feels eerily familiar. "Like a campaign, it's
long hours with an incredibly fast pace," he said.
The New Suburbs
______________________________________________________________
Beyond Washington, a Changing Landscape
The transformation of this area has not changed downtown Washington
much, if at all. There, clearly, Government remains the dominant
force.
And Washington's poor residents have benefited little, if at all.
But for anyone who takes the time to turn off the Dulles Airport
toll road in suburban Virginia, or Interstate 270 just over the
city line in Maryland, the change is obvious. Unassuming low-slung
office buildings line the roads for mile after mile, with telltale
names like Proxicom, PSInet and Digital Fusion Inc. Amid the
assorted cars and trucks in the parking garages is a healthy
sprinkling of late-model, 500-series BMW's and similar cars, along
with an occasional Corvette -- visible fruits of recent initial
public offerings of stock.
Construction cranes dot the horizon. And local newspapers list page
after page of help-wanted advertisements for computer programmers,
systems analysts and software engineers. Personnel executives at
several of these companies estimate that the area has 30,000 to
50,000 unfilled new positions for technology workers, while
Government employment has remained stagnant for years. Today,
Amazon.com, the Internet retailer based in Seattle, confirmed that
it would build a second national data center, in suburban Virginia.
Still, many Washington denizens are not aware that the character of
their city has changed. America Online, founded here 11 years ago,
is now the nation's largest Internet service provider. The company,
with 18 million subscribers and 12,500 employees, is continuing to
grow at an astounding pace, endowing its workers with stock options
that have made thousands of them quite wealthy. Local real estate
agents and auto dealers say they wait and pray for an "AOL
millionaire" to walk in.
And yet when George Vradenburg 3d, a senior vice president for AOL,
drives downtown for meetings, quite often he is asked: "So, when
did you fly in?"
The Seeds
______________________________________________________________
Computer Networks Began in Government
Although most of these companies do little if any business with the
Federal Government, many of them acknowledge that without the
Government, a high-technology center might never have grown up
here.
Many years before the term Internet was coined, the Defense
Department's Advanced Research Projects Agency was creating a
national computer network enabling computers at the Pentagon to
communicate with others across the country. From this, the Internet
evolved, meaning that many industry pioneers were here.
_________________________________________________________________
Map
A Wired Washington
Outside the Capital Beltway, in suburban Virginia and Maryland,
high-technology companies are popping up all over.
_________________________________________________________________
Meanwhile, Washington has long been home to a large concentration
of defense contractors, like Lockheed Martin and the General
Dynamics Corporation, as well as aerospace companies, including
Comsat and the Orbital Sciences Corporation. They located here to
be close to their customers, the Defense Department, the National
Aeronautic and Space Administration and the National Security
Agency, among other Government agencies.
At the same time, a rich concentration of biomedical research
institutions grew up around the National Institutes of Health and
the Food and Drug Administration laboratories in suburban Maryland.
When human genome research grew to be a cutting-edge topic in the
1980's, many of these companies took up the challenge.
As for telecommunications, MCI, now the nation's second-largest
long-distance phone company, opened here in 1969 to be close to the
Federal Communications Commission and other Government agencies
that were managing the deregulation of the telephone industry. As
MCI expanded, a cluster of smaller companies grew up around it.
All the while, the Government grew ever more dependent on
computerization, and a large network of computer-service companies
known as system integrators evolved to install and service the
agencies' vast computer networks.
So the seeds were here, thousands of engineers and scientists
working in the Washington area, principally on Government contract.
Then, early in this decade, events conspired to roil this mix. The
cold war ended, forcing the defense and aerospace companies to
scale back. Through the early 1990's, Government employment stopped
growing, and the number of Government contracts began to shrink in
number and size.
As a result, just as the Internet started to become a commercial
phenomenon, thousands of engineers with vast experience in related
technologies began looking for new work.
From their early ventures a larger concentration of technology
businesses gradually began to grow because metropolitan Washington,
with nearly five million people, had the character and
infrastructure to support it. As an overwhelmingly white-collar
town, Washington has a higher percentage of college and
graduate-school graduates than any other city, according to census
figures. It has long had among the highest per capita incomes of
any major metropolitan area, eight local universities and excellent
public school systems in the suburbs.
Still, in the early days, sustaining a technology business here was
difficult.
The Foothold
______________________________________________________________
Luring Workers at First Proves Slow
Raul Fernandez was an aide to Representative Jack Kemp in the
mid-1980's. He helped research tax legislation and got involved in
debates on financing for the rebels in Nicaragua. At the same time,
he worked on the office's computers, just because he was
interested, allowing him to meet workers from some of the local
system-integration companies that served the Government.
In 1988 he left Kemp for a job with a local system integrator, and
in 1991 Fernandez used money he had saved for a house to open his
own system-integration company, Proxima, looking for Government
contracts.
Like many others, he opened his business in Virginia because rents
were cheap and "it was easy to get to because it was
counter-traffic. Rush hour was going the other way."
But hiring was tough. "Who wanted to move here?" he asked. For most
technology workers then, Washington was not even on the map.
In the mid-1990's, Fernandez decided to change the focus of his
business to Internet consulting and engineering. He renamed it
Proxicom, and quickly the company began to grow. By 1997, hundreds
of other companies had opened or moved nearby. As a result, he
said, echoing statements from other local executives, "there's now
a critical mass. People are no longer reluctant to move here
because they know they'll have flexibility in job options. They can
hop around."
Proxicom had 250 employees last year but now has almost 600 in
offices around the world. The company made an initial public
offering of stock last spring. It opened at $18.88 on April 20 and
closed this evening at $67.25, giving Proxicom a market
capitalization in excess of $1.5 billion.
Asked what percentage of his business now is Government contracts,
Fernandez smiled and said, "None."
Full Circle
______________________________________________________________
Banding Together for Political Clout
"Every day, five or six network camera crews are stationed in front
of the Capitol and White House," noted Thomas G. Morr, managing
director of the Greater Washington Initiative, an arm of the board
of trade. "People here and around the country think that's what all
the news from Washington is about."
But in more subtle ways, Washington is beginning to feel the
change.
Case's invitation to the Redskins owner's box last month is just
one indication.
Meanwhile, the technology companies are beginning to throw their
political weight around with the view that they, unlike their West
Coast counterparts, understand politics.
"That I happen to be in Washington is lucky, because I came to this
job already knowing the power of organizing constituent groups,"
said Ms. Moss, the former Democratic National Committee official,
who recently entertained President Clinton at her Georgetown home
with high-tech executives.
And Vradenburg, who worked for CBS in New York and Fox Television
in Los Angeles before joining AOL in 1997, said: "Washington, as it
turns out, happens to be a very good place to be. There's a very
interesting mix of Government, business and media people here that
produces much more interesting conversations. And the policy makers
are here, the ones who need to be informed."
Busloads of members of Congress make the 40-minute trip out to
AOL's campus just beyond Dulles every week or two. They are given a
presentation on AOL's political issues and then each is seated in
front of a computer with a personal trainer, who explains and
demonstrates the Internet. Some members had never used the Internet
before.
One, Representative Thomas J. Bliley Jr., the Virginia Republican
who is chairman of the Commerce Committee, is an aficionado of bow
ties. When he made a trip out to AOL a few weeks ago, his trainer
demonstrated the Internet and showed the Congressman several
bow-tie Web sites.
Three months ago, several of the area's largest technology
companies formed a political action committee, called Capnet.
Vradenburg, who is co-chairman, says Capnet has 30 members so far.
All have made the maximum allowable contribution, $5,000. That's
$150,000, hardly a menacing war chest. But "we're picking up steam
at an amazing rate," said William Lecos, a senior vice president
with the Washington Board of Trade. Capnet will contribute to
national candidates who favor positions of interest to the
companies on issues like Internet privacy and taxation.
The technology community is also trying to flex its political
muscle in development debates, particularly on schools and roads. A
consortium of the companies is working to build support for a new
freeway, called the Techway, that would link the technology
corridors in Virginia and Maryland and reduce the traffic problems
that have grown up near Dulles Airport along with all the new
businesses. But the proposal has not moved far.
Even with their growing political savvy, sometimes the technology
companies lose sight of the political realities surrounding them.
And so it was in August, when several thousand of the Virginia
companies formed a coalition called Region. It promptly called for,
among other things, a sales tax increase in Northern Virginia of 1
percent to pay for new roads and schools. The proposal crashed.
With a shake of the head, Vradenburg ruefully acknowledged, "It was
not well received."
_________________________________________________________________
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