A Silicon Valley feel is growing on the Silicon Prairie. More technology companies call Sioux Falls home

There’s a buzz in Sioux Falls about the proliferation of tech businesses, especially as construction begins on a nearly $3 million technology accelerator center.

By:
Jay Kirschenmann
Sioux Falls Argus Leader
Sioux Falls, SD

From 10 to 30 start-up businesses can set up shop at the center, to be built this year just north of USDSU, at Southeast Technical Institute.

Many tech companies already call Sioux Falls home, from newcomer Hematech and 4-year-old companies Bay Technology Group Inc. and BrightPlanet, to the more-established 7-year-old SolCom.

They are part of what pushed Sioux Falls to the No. 11 ranking among the top 25 metropolitan areas for software-related employment, according to a March 2002 study by the Software & Information Industry Association.

"The financial, health and technology business is growing fast in Sioux Falls, so there are a lot of employees in the IT business, per capita," said Steve Kurtenbach, president and chief executive officer of Bay Technology Group. He founded the company in San Francisco in 1997 and relocated to Sioux Falls in 1998.

"Think about all the tech employees here at Citibank and Wells Fargo alone, and all the related businesses," Kurtenbach said.

Sioux Falls’ national ranking illustrates strides the city is making toward attracting more tech businesses, said James Kim, director of marketing for the Software & Information Industry Association.

"It takes commitment by local officials, like Sioux Falls has, to create an environment where people want to be," Kim said.

"You’ve got a good quality of life there, tax advantages and a lot of reasons that have to do with Sioux Falls itself. The leadership there has a strong desire to make it attractive to this type of industry," he said.

Bright future

Thane Paulsen, president of BrightPlanet in Sioux Falls, said his business is growing fast as the company continues to increase productivity for clients.

The company specializes in searching the "invisible" Web: hundreds of billions of documents that regular search engines like Yahoo and Lycos don’t reach. Services such as Google are a data base "in and of themselves," providing only about 6 percent of what is available on line. BrightPlanet software searches Google and about 55,000 other data bases for documents found deep within the Web.

"We’re in a definite growth mode," Paulsen said. "It’s an exciting time – we’ll have 19 new employees by the end of the month, and 36 by June. About seven will be in other states, with the rest in Sioux Falls." Positions include developers and support staff, he said.

Founded in Sioux Falls in 1999, the company moved to new offices in mid-January, at 3500 S. Phillips Ave. Paulsen said his company considered locating on the West Coast, but operating costs in South Dakota are much lower, and his service can be sold here as easily as anywhere.

Sioux Falls also is a good labor source for both development and sales staffs, he said.

"Other technology companies that would start and grow here are not competition for us," Paulsen said. "No one will be doing exactly what we’re doing. Overall, the new center is good for Sioux Falls."

Testimonials help

As local companies sing the praises of the city, word continues to spread.

Kurtenbach’s Bay Technology company was featured in the March 2001 issue of Computerworld, part of a story focusing on opportunities for IT and other tech professionals. The story makes note of Sioux Falls’ lower cost of living and "a wealth of talented employees," especially in the technology field. The small-town atmosphere also is emphasized.

"The people here are as competent, or more so, than others I have met in larger cities and around the world," Kurtenbach said in the story.

While the highest salaries for IT professionals in Sioux Falls are lower than those in major metropolitan areas, the cost of living is nearly 15 percent below the national average. So the lower salaries don’t necessarily have an effect on lifestyles, he points out.

Kurtenbach’s company provides e-business, management consulting, information technology consulting, outsourcing, and training services for small businesses and mid-sized corporations nationwide. He admits to laying off employees during an economic downturn.

"That was more related to clients wanting to cut costs, which is not unique in many businesses lately," he said.

But he diversified and concentrated growth in other directions, including his AllSportRunning .com Web site, a resource for runners. International endeavors appear to be more resilient to U.S. economic downturns, he said.

Tech incubation center

The "build it and they will come" philosophy should attract more tech business in the future, said Dan Scott, president of the Sioux Falls Development Foundation.

Credit for establishing the tech incubation center goes to Forward Sioux Falls, he said, a joint program of the Sioux Falls Area Chamber of Commerce and the development foundation.

"And as soon as the frost is out of the ground, you will see dirt work being done and footings going in for the new center," Scott said.

For the past four years, Rich Naser Jr. and others have been working on the accelerator project for both groups, Scott said. Naser is the technology and communications director for the chamber and technology director for Forward Sioux Falls.

"Work by volunteers and community leaders has pushed ahead to the point where now we will start seeing results in this long-term process," Naser said.

The project took stamina and dedication. "We’ve been meeting, sometimes twice a month, since March 1999," he said. "These are busy people who were not looking for something extra to do."

Members still believe that a technology based development strategy will boost the local economy.

Financing for the center came from several places: One million dollars is pledged by Forward Sioux Falls, $300,000 from the chamber, another $300,000 from the development foundation, $500,000 from the state, and Sen. Tom Daschle found $800,000 through a federal grant program.

"The technical center is the first step in the whole strategy, whether a business locating there it is a start-up or an expansion," Naser said. "We can focus on growing our own people who have a concept, or expanding a small company that has growth potential."

More call city home

Whatever tech businesses develop at the center, they’ll be in good company. Many other technology businesses call Sioux Falls home, some for decades.

Nearly 30 years ago, the EROS Data Center opened near Sioux Falls. It is a world leader in receiving, processing, archiving and distributing remote sensing data from aircraft and satellites. Among the hundreds of employees, there are 370 Science Applications International Corporation workers. The employee-owned, high-technology research and engineering company, based in San Diego, Calif., began contracting services to the government in November 2002.

Another longtime neighbor is Hutchinson Technology, which opened a plant in Sioux Falls in 1988. Production operators, technicians, engineers, toolmakers, and support staff keep the high-volume production of suspension assemblies rolling. Corporate headquarters are in Hutchinson, Minn.

The SolCom company has been in Sioux Falls since fall 1995. It has 50 employees, most at its corporate headquarters, 2516 E. 52nd St. N.

"The founders were looking at the East Coast when they first started, but decided on Sioux Falls because tech companies are so well received here," said Julianne O’Connor, marketing manager.

"The economy is good, and the work ethic is very strong here, too," she said. "And we often hire from the educational facilities here, which produce highly skilled professionals."

The company’s clients include health care institutions across the nation and Canada. SolCom offers electronic health record systems and patient financial services.

Meanwhile, a newcomer to the area, biotech company Hematech, moved 20 scientists and its labs to Sioux Falls from Massachusetts and Kansas last year. Corporate headquarters are in Connecticut.

The facility helps produce human vaccines. Hematech scientists have developed a process that begins with implanting a human gene into a cow embryo. Antibodies from the offspring’s blood are used to produce vaccines to fight human illnesses.

"For us, there were many practical reasons for locating here," Jim Barton, the company’s CEO, said from his office in Westport, Conn. Hematech wanted to be close to cattle, he said, and it wanted to be near Trans Ova Genetics of Iowa, a company Hematech works closely with.

"But we also wanted to be in an urban center so that we could attract the kind of scientific staff that we need," Barton said. "It is important to be near world-class universities in the field we’re in.

"And other factors include the good business climate and an outstanding community that supports and works with us."

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