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Douglas Shimp has five employees he rarely sees, but works closely with everyday. His consulting firm, 3 Back, based in Milwaukee, Wis., offers training and coaching to help software development teams increase their agility and productivity. Shimp and his colleagues would have a very hard time doing what they do without a set of collaborative software tools that allow his fanned-out team to work seamlessly with each other as if they were all in the same office together. “We rely, for example, on our wiki tool heavily,” Shimp says. “It allows us to collaborate with each other on the road when we’re working with clients, whether it’s sharing documents or sharing a development problem.” A wiki is a special kind of website that allows multiple users to add or revise content collectively. Wikis are just one example of so-called collaborative software. Other popular applications include instant messaging, file sharing, Web conferencing, blogs and team spaces. Social networks These technologies, and numerous others, are being combined in ways to turn offices into social networks of co-workers, clients, vendors and contractors pocketed individually literally anywhere in the world. And if the sales figures on the collaborative software market are any indication, it’s transforming the workplace as we know it. According to Gartner, of Stamford, Conn., the combined markets of collaborative software, instant messaging and Web conferencing for business worldwide was more than $1.3 billion last year and is expected to grow another 17 to 20 percent this year. Some of the more popular offerings on the market include: Microsoft SharePoint and Groove 2007 : Prices for both of these collaboration software packages start at $299. These products may especially appeal to small and mid-size business owners “since most of these companies have a Microsoft infrastructure already in place,” points out Michael Speyer, a senior analyst from Forrester Research, of Cambridge, Mass. Ezenia: Collaboration software prices start at just under a thousand dollars, server packages between $5,000 and $10,000. Features include audio chat in real time and a virtual whiteboard Tomoye: The company doesn’t publish its prices, since their products are often bundled with consulting services. However, it’s “communities of practice” approach is worth a read on the corporate website. WebEx’s WebOffice: A modest pricing tier available for small and mid-size businesses will make this more palatable for the bottom line. Starting prices begin at $60 a month for up to five seats. Features include the ability to customize shared databases, online calendaring, Web meetings, online group polls and a task manager tool. Plan for online polls and audio chat Shared white boards, online polls, live chat with audio? For the business owner with a sweet tooth for tech candy, there can be irresistible pull to commit to collaboration tools without thinking through whether it’s a worth while investment. Tom Eid, a vice president of research at Gartner, sees it all the time. “Usually people jump to the technology first,” Eid says. “Companies need to have a plan in place first that everyone on the team agrees to.” Eid advises managers to consider the following questions in advance: Purpose — Who makes up this new community and what is their common purpose? Determining roles –Who is sponsoring the community? What department? Who will be the moderator and the participants? Tools — What tools does the team need? What tools are bundled into the software that they don’t need and might present a time drain if abused? What kind of training is involved? Access — Who needs permission to see what? Lifecycle –What’s the start and end date of each project or initiative? How will the team decide when it’s time to mothball content to avoid a data pileup? So what kinds of businesses benefit the most from these technologies? “Basically any business with a design or content element is a likely fit for collaboration software” Eid says. “Anyone who has something to share: lawyers, graphic designers, sales staff, even government contractors.”
1. An Apprehensive Employee Is a Good Employee Researchers at Rice University have found that being in a bad mood may actually spur creativity. Professors Jennifer George and Jing Zhou collected data from 67 employees at a helicopter manufacturer, and they found that when workers were happy, excited, or enthusiastic, they were sometimes overly confident about the work they had done. In contrast, people who felt uneasy, distressed, or mildly fearful were critical of their own performance and thus more motivated to come up with new ideas. “If you’re working on a creative task, you have to decide for yourself when you’ve done enough,” says George. “People often use their mood as input into those kinds of judgments.” 2. Serving a Captive Audience Headphones are headphones, right? Not in prison. Koss, the Milwaukee-based maker of audio headphones, has designed a model specifically for use behind bars. They are made from clear plastic so that prisoners can’t hide drugs or other contraband in them, and they include fewer metal parts that can be fashioned into weapons. The cord is also special, designed to snap in the event someone tries to strangle another person with it. Both the prison population and Koss’s sales hit all-time highs this year. 3. Migraine Relief for Your Teeth Dr. James Boyd, a dentist and migraine sufferer, has come up with a mouth guard designed to alleviate painful headaches. Boyd calls the FDA-approved device the NTI (for nociceptive trigeminal inhibition system). It is small, covering just the two front teeth, and designed to keep the jaw from clenching while the wearer sleeps. In clinical trials, more than 80% of patients felt some relief after using the NTI for two months. It costs around $500 and is available by prescription from a dentist. 4. A Chair That’s Got Your Back A funny-looking seat with 11 fake “vertebrae” running up its spine recently won an award from Design Journal. The Verte ergonomic office chair adjusts in three dimensions, moves with you as you bend, and sports a thick foam seat and headrest. Manufacturer RFM Preferred Seating in Hillsboro, Oreg., says that the $1,995 chair, which a chiropractor dreamed up, moves in sync with you as you shift and remembers the contours of your spine — thus easing back pain and improving posture over time. 5. Reinventing the PC Keyboard So long, QWERTY! The FrogPad keyboard has just 20 keys and repositions the most commonly stroked letters so that you can type with only one hand. The device is tailor-made for designers, architects, and others who often handle a mouse or other instrument while typing. The board is also helpful to anyone with an injured or disabled hand. It is the size of an index card, weighs only 4.9 ounces, and links with Macs, PCs, and most mobile phones and PDAs. The price ranges from $150 to $225.
Many companies talk about getting close to the customer, but Microsoft pushed this idea to the extreme when it hired Nelle Steele to show up at 5 in the morning at the Milwaukee home of Tim Tucker. The owner of Air Engineering Inc., a supplier of industrial air compressor parts, is Microsoft’s model customer. Steele’s mission was to observe Tucker at close range, arriving as soon as he stepped out of the shower, then shadowing him until his workday ended at 10:30 p.m. Steele, a cultural anthropology Ph.D. student on leave from the University of Wisconsin, is one of five anthropologist-ethnographers (and the only one focused on entrepreneurs) that Microsoft hired full-time to conduct a field study. Called “Dawn to Dusk,” the study documents the work habits and thought processes of a species the software behemoth had never before tried to understand: owners and employees of small businesses. In tailing her quarry, Steele discovered, to her surprise, that small companies kept vital information in disconnected places — what she called “data silos” — from scribbled notes on scraps of paper to files on a PC that could be accessed by only one employee. This made it harrowing to try to answer basic questions like, “How did we do in the Northeast last quarter?” “I saw the pain that data silos caused day to day,” says Steele. Her work is part of Microsoft’s $2 billion research and development effort aimed at convincing these tribes of technological primitives to join the modern world. While most of that is earmarked to improve products, a lot of it is going to spreading the word. That’s in addition to two recent acquisitions — Great Plains and Navision business management software at another $2.4 billion — to enhance its offerings for small business. Even for Microsoft, with $50 billion in cash in the bank, that’s a major investment. Microsoft has started trying to care about these customers. Why us, you might ask, and why now? Partly it’s because “enterprise” customers, those that have more than 1,000 employees and 500 PCs, aren’t spending on tech the way they used to. So the industry’s top names, including IBM, Hewlett-Packard, and Dell, have started going after the littler fish. Even among this crowd, though, Microsoft’s push into small business is remarkably fervent and richly funded — and for a good reason: competition. There are two parts to the story that follows: the first is the challenge Microsoft faces and the criticism it has endured in the past. The second is what Microsoft is doing — with a degree of success — about both. Microsoft’s push into small business is remarkably fervent and richly funded — and for a good reason: competition. Today, 90% of small and midsize businesses run on the Microsoft platform, says Mika Krammer, an analyst at Gartner, a research firm. That’s a stranglehold on this enormous market of 8 million companies in the U.S. and 40 million worldwide. Globally, these companies pay almost as much for info tech — $400 billion a year — as America spends on defense. But despite its long history of dominance, Microsoft faces a looming threat from Linux and the insurgent open-source “free software” movement. Linux could do what the Justice Department couldn’t: end the era of Microsoft’s near monopoly and strip a sizable chunk of its sales and profits in the coming decade. Many industry analysts and media critics think that Linux is more secure and reliable than Windows, a prime target for hackers. Entrepreneurs have been paying close attention to the debate. Two of their biggest role models — Amazon and Google — now rely on Linux to run their websites. At a Yankee Group conference in San Francisco in March, small-business owners commiserated with one another about Microsoft’s disappointing customer support and their dislike of paying licensing and upgrade fees. They griped about how Microsoft’s new releases often seemed more like beta software — test versions with plenty of kinks — than reliable finished products, and they bemoaned the software’s vulnerability to viruses and the constant need for patches. With mighty IBM putting its clout behind Linux, some small businesses are starting to convert, often with impressive results. Satellite Records, a 35-employee music retailer in New York City, made the switch after IT director Steve Shapero found Microsoft’s software simply too high-maintenance. “It’s like American cars and Japanese cars,” says Shapero. “Do you want a Chevy Impala or a Honda Accord? It’s great that Detroit and Microsoft are finally making things that don’t suck, but we’d rather have the state of the art.” Shapero said that Microsoft server software would require a full-time person to keep it running, which the company didn’t want. “As an independent consultant I like to set up a Linux box, deploy it, and ideally never hear from my client again,” he says. Other customers were motivated by cost savings from not having licensing fees. Westport Rivers Winery, a 20-person family business in Westport, Mass., cut its annual tech budget by 60% with Linux, according to an IBM case study. Rob Meyer, Internet director for Anaconda Sports, a 200-person sporting goods distributor in Lake Katrine, N.Y., says it saves around $3,000 a year on licensing fees now. What’s more, small-business owners still feel a residue of fear from Microsoft’s long history of abusing power in its quest for total dominance. They remember how the company tried to hijack their websites in 2001 with SmartTags, an aborted Windows feature that would have turned many of their own words into links to Microsoft’s sites and advertisers’ without asking their consent. And they read about Microsoft’s vendetta against guitar-string maker Ernie Ball, based in San Luis Obispo, Calif. Four years ago, the founder’s son and CEO, Sterling Ball, was a victim of a “nail your boss” campaign by the Business Software Alliance, a trade group that Microsoft co-founded. BSA raided the operation and found that a few of its 80 computers had unpaid copies of Microsoft products. Ball said it was an accident, a case of unused programs left over on old PCs when they were passed from engineers to clerks. But he still had to pay $90,000 in fines and legal fees. Microsoft sent the news clips to other small companies as a threat. Since switching to Linux, Ball has saved more money than he lost in the contretemps. “The money that I’m not spending on new versions of Office and on fighting viruses is going into marketing and R&D,” he says. Now that it fully grasps the Linux threat, Microsoft isn’t being so heavy-handed with small businesses. Instead, the company is trying shrewdly to make its own claims of parity or superiority. Executives dispute Linux’s claims of better security and reliability and point out that “free software” isn’t actually free because you need to hire people to install, maintain, and customize it. (That’s how rivals, particularly IBM, are looking to profit.) Still, Linux is “a real threat, and we take it seriously,” says Darren Huston, the Microsoft vice president who leads U.S. initiatives for small and midsize businesses. The stakes are stunningly high — a $400 billion-a-year global market! — and this is going to be an epic battle waged over a long time. Krammer says that Microsoft will continue to dominate that market for several years because smaller customers are often slow to switch to new software and most buyers won’t really consider Linux until it becomes more mainstream. Besides, there aren’t yet many business programs based on Linux, and those that are available, such as Sun’s StarOffice, aren’t as good as Microsoft’s offerings. Microsoft remains vulnerable, however, because small-business owners resent being captive to such a powerful force and not having viable choices. A January Yankee Group survey of companies with fewer than 500 employees found that 43% of them are concerned about becoming overly reliant on Microsoft’s products and services; of those respondents, 72% were actively seeking alternative vendors. “Microsoft’s challenge,” says Krammer, “is to go from being a necessary evil to something that small businesses like to invest in.” Improvements are being made, but there is always room for more. In April Microsoft launched a revamped and much easier-to-use Web portal at www.microsoft.com/smallbusiness. Still, you might have to wait half an hour when calling customer service. Even more frustrating is how Microsoft keeps smaller customers at arm’s length by forcing them to work through intermediaries — local consultants who sell Microsoft’s software, set it up, show buyers how to use it, or write their own software to work with it. There are some 325,000 of these folks, who go by awkward acronyms and names such as “VARs” (value-added resellers), “ISVs” (independent software vendors), and “certified partners” (individuals who have passed training courses run by Microsoft). Small businesses hook up with these “partners” mainly through word of mouth, but if you’re an entrepreneur with little tech savvy, it’s hard to know whether your accountant’s sister-in-law or your lawyer’s fraternity brother is the best person to apply software to the challenges of your business. To help, Microsoft’s newly redesigned Web page has a “partner finder” to identify local consultants and their areas of training and expertise. The cottage industry of Microsoft’s partners is getting some big new players. Both HP and Dell are starting to hawk their consulting services to businesses with fewer than 500 employees. IBM is reaching out to entrepreneurs too, but rarely dips below the 500- to 1,000-employee range. While all three companies embrace Linux, they also promote Microsoft’s products as part of their overall packages for clients. Although finding the right partner and setting up a new software system can be stressful, there’s a compelling reason for sticking it out: Microsoft now offers many extremely useful products for small and midsize businesses. Microsoft divides this huge market into two parts: The 7.5 million “small” businesses with fewer than 50 employees, with no more than 25 PCs and with a maximum of $5 million in annual revenue. The 330,000 “midmarket” companies with fewer than 1,000 employees have up to 500 PCs and up to $500 million in revenue. The smallest businesses probably don’t have a PC network or even a professional info-tech employee. These start-ups can benefit from Small Business Center (formerly bCentral), a set of Web-based services hosted by Microsoft on its own computers. The pitch is that it’s like hiring Microsoft to be your info-tech department for a monthly or annual rental fee, usually after a 30-day free trial. First developed in 1999, the services — aimed at businesses with fewer than 25 employees — have quickly become popular, attracting more than 2 million users in the U.S., Microsoft says. One of them is Jack Marshall, president of Pastry Chef Central in Boca Raton, Fla. His small family business sells baking and pastry tools through pastrychef.com. “It’s supercheap,” Marshall says of Microsoft’s “shopping-cart” services, which cost only $249 a year (excluding credit card verification fees, which are billed by a third-party partner). “You can’t beat it.” And even though Microsoft can’t give the little guy all the powerful features of an Amazon, “they’re moving toward that,” he says. Marshall particularly likes the new “order status link” that sends e-mail purchase confirmations to customers with Web links so they can check on delivery without having to contact the company: “That’s been a fabulous timesaver for us.” Besides time, there’s the money: Microsoft says that the top 100 customers for Small Business Center’s e-commerce service averaged $43,000 in revenue last December. Small Business Center also offers ListBuilder, which enables companies to send mass e-mails to customers to let them know about sales or other news. Microsoft handles the mailing, then tracks who opened the messages and were inspired to visit the sender’s website. The cost: $29.95 a month or $299 a year. Microsoft surveyed 100 ListBuilder clients and found that businesses sent e-mails to an average of 30,000 customers, though some had amassed lists of more than 100,000 names. (Microsoft says it does not keep e-mail addresses for its own use.) One of Microsoft’s most useful hosted Web services is SharePoint, which allows colleagues to share information and collaborate with one another and their customers. SharePoint is sadly underused by small businesses, but it’s a smart idea. In a Microsoft case study, Jeff Williams, president and owner of Carolina’s Choice, a furniture manufacturer in Rocky Mount, N.C., says SharePoint allowed his company to make up-to-date sales information available 24 hours a day to a network of 700 furniture dealers (the cost: $19.95 introductory price, then $39.95 monthly). As fledgling companies grow, Microsoft wants to wean them from paying monthly rental fees to investing in licensed software installed on PCs (which is how Microsoft has always made most of its money). The staple of the desktop PC has long been Microsoft Office (Word, Excel, Outlook, and PowerPoint), which boasts 400 million users worldwide. “Everyone I hire out of college can use it,” says Eric Meslow, president of Timbercon, a 30-person, $4.5 million fiber optics manufacturer in Portland, Oreg. That gives Microsoft a big advantage over Linux, which often requires training. The latest twist: Last October, Microsoft introduced Office Small Business Edition 2003, which lists for $449, while earlier Office users can pay an upgrade price of $279. The prices are up to $50 higher than the standard version, but Microsoft throws in two compelling programs. First, Business Contact Manager consolidates all the information you have about a customer, a dramatic improvement over the haphazard data silos discovered by Nelle Steele that could spell lost leads or missed sales opportunities. The program can identify long-neglected sales accounts or alert you to what’s coming up in the pipeline in the next seven days. Timbercon’s Meslow says that before his salespeople had this “sales funnel” feature, it took them an hour a day to monitor their accounts. Now it takes “about two minutes,” he says. Meslow figures that saves a total of 20 hours a month for his typical salesperson, who generates an average of $150 to $200 an hour. Office’s other addition, Publisher, is a tool for creating websites, e-mail newsletters, and other marketing materials so you don’t have to hire professional design firms or printers. Timbercon saved $72,000 in the first year by designing portions of its website and product data sheets. “Publisher was one of the larger surprises of the new line for us,” Meslow says. “Five years ago you could tell if something was created in Publisher. Now it looks professionally done, and it’s relatively easy to use.” It’s also fast, he says. A project that once took three weeks for outside firms to design and print can be created in-house within a week. “Five years ago you could tell if something was created in Publisher. Now it looks professionally done.” Terry Szpak, VP of marketing and sales at Telesystems West, an 18-person, $2.5 million company in Bellevue, Wash., that sells and installs phone systems, estimates sales rose $5,000 to $10,000 a month thanks to Publisher. Over its first dozen years, Telesystems had put together a database of 5,000 customers, but employees were too busy to create or manage promotions to sell additional products. With Publisher they were able to turn out flyers and e-mails. “It’s hitting people who already trust us,” Szpak says. “Marketing to our existing customer base has been a boon.” Office and Business Center provide benefits to companies with multiple PCs hooked up only through the Internet or what’s known as the “sneaker net” — people simply walking around, a likely scenario for a start-up. But as the business grows, even greater opportunities can come from setting up a PC network with a separate machine dedicated as a server. About 7 million of America’s 8 million small businesses still don’t have a server, according to Microsoft. It charges $599 to license its Small Business Server software for five users, and Dell and HP both sell the hardware with this software already installed for under $1,000. (Customers can later expand by licensing up to 75 users before they have to switch to a more capable product.) The investment usually pays for itself quickly. A server makes it easier to back up data that might otherwise reside on isolated PCs. It lets employees look at each other’s calendars and contacts, hook up to the network remotely, and share software for business functions such as accounting and inventory. Having a server enables a company to host a SharePoint intranet, which is how the Fischer Group changed the way it did business. The 23-person, $10 million Orange, Calif., food manufacturer representative firm had relied on old-fashioned paper files for purchase orders, contracts, contact information, and memos. They were often misplaced. Worse, employees could only get to the files during business hours. “Our biggest problem was wasting time and money physically handling job documents,” says Gene Austin, the company’s general manager. “It was like putting $100 bills in a pile and setting them on fire.” Once Fischer digitized this material, finding information and responding to customers became easier and faster. Small Business Server also provides security for a company’s network, an area where many small businesses are turning to Linux, including Timbercon, which runs its firewall on an open-source software server. Even though Microsoft still relies on its partners, it’s trying much harder to make direct contact with its customers. The company now offers free seminars for small businesses in 160 cities, many of them far-flung rural outposts like Casper, Wyo. Cynthia Bates, Microsoft’s general manager for U.S. small business, says that everyone on her team has to spend one day a month working for a customer’s company to see what daily life is like. “We want to humanize Microsoft rather than be the company in the backroom,” says her boss, Darren Huston. Meanwhile, our intrepid cultural anthropologist Nelle Steele has begun a new two and a half year study called Small Business Better Together, which is applying technology to three small companies in the Seattle area. The owner of one of the three didn’t want customers to wind up with voice mail; he insisted that an employee take a message. But these employees relied on sticky notes applied to computers or chairs. When these fell off, the customer’s needs would go ignored. Microsoft responded by buying new hardware and donating software. Now, Steele reports, “people are taking messages for each other in Outlook.” The notes haven’t gone away entirely. Some things stick for a long time, and no amount of technology will change that. Sidebar: Microsoft a la carte Info-tech options for your small business Small Business Center (formerly bCentral) What It Is: Online services for hosting e-commerce websites, processing customers’ orders, developing sales leads, and launching e-mail marketing campaigns Pros And Cons: Microsoft rents many useful Web-based services on a monthly or annual basis, though the other options — especially eBay — are popular with small merchants and with customers. Alternatives: Amazon, eBay, Yahoo Office Small Business Edition 2003 What It Is: Tools for creating and editing documents, spreadsheets, presentations, and marketing materials; managing e-mail and calendars; and tracking contacts and leads Pros And Cons: Everyone’s already trained on Microsoft’s excellent suite, the global standard with 400 million users, but OpenOffice is a viable option — and it’s free. Alternatives: OpenOffice, Sun’s StarOffice Small Business Server What It Does: Runs and provides security for PC networks Pros And Cons: It’s a good product. But Microsoft charges $599 for five users, while open-source rivals like Apache are free — and critics say they offer lower maintenance costs and better security. Alternatives: Apache, EmergeCore IT-100, Novell’s Small Business Suite, Red Hat Linux Alan Deutschman is a writer living in San Francisco and Roanoke, Va.
The Fourth Annual Inc Web Awards: Start-up Strategies Company: 1Ricci, in Milwaukee URL: www.1Ricci.com What we liked: At a time when few consultants used the Web, Laura Ricci dared to start a company that required customers to work with her virtually After 20 years helping engineers and scientists win government grants, Laura Ricci knew two things. She knew she hated flying all over the country to client sites, where she would spend days or weeks advising technical teams about how to write their funding proposals. And she knew that her customers used the Internet — and had, in fact, been using it long before the World Wide Web bounded onto center stage. So in 1996, Ricci decided to launch a grant-writing consulting company from a spare room in her home. She would do practically all her work there, posting customized training manuals on a Web site and FTP-ing proposal drafts for both sides to mark up. Vendors, contract employees, and even customers would be required to work with her virtually. Face-to-face interaction would be almost eliminated. “It was an experiment,” says Ricci. “I was designing against being a road warrior.” The first virtual project Ricci managed was the construction of her own Web site by a developer in Albany, N.Y., that she had never met. She also took advantage of her early-mover status by snagging free prime placement in the consultant and marketing categories of Yahoo. But Ricci’s temerity was most evident in what she didn’t do. She refused, under any circumstances, to print brochures. “If people ask me what services I offer, I refer them to the Web. If they insist on a brochure, they’re not worth pursuing,” she says. In fact, in 1999 she broke off talks with a large computer company — one with a growing E-business specialty, no less — because it required printed marketing material. On the other hand, companies like Radian International and Lockheed Martin have been more than happy to play by Ricci’s rules. “Lockheed Martin is a big organization with a massive bureaucracy around contracting with new people,” says Ricci. “Yet it made a decision to pick me based on the Web site alone. That proves this can be done.” The Fourth Annual Inc Web Awards Start-up Strategies Rock Star Virginia Is for Manufacturers The Absolutist A Sharper Image The Dirtbag Demographic Please e-mail your comments to email@example.com.
Cover Story Evanston, Ill., ran out of room to grow. So an enterprising group of residents is expanding the city online Evanston, Ill., doesn’t look much like the City of the Future. After all, Evanston remains pretty much what it’s been for the past century: a pleasant, bustling suburb and college town clinging to the shore of Lake Michigan just north of Chicago. But to longtime residents like Ron Kysiak, Bill Floyd, and Patricia Widmayer, the leafy midwestern municipality has all the makings of a model community for the 21st century. Especially online. For starters, they’ll tell you, Evanston is uncommonly diverse for a city of 73,000. It’s got old-money heirs and new-economy millionaires, working- and middle-class families, senior citizens, and college students, as well as neighborhoods filled with Hispanic, Asian, Indian, Caribbean, and Eastern European immigrants. It’s got a major university (Northwestern), several smaller colleges, and a high-tech research park. It’s got a vibrant downtown full of such charming, locally owned businesses as a Himalayan restaurant and a bird-watchers’ boutique. And it’s got a rich heritage of innovation: previous Evanston natives invented Tinkertoys, the block party, and the ice-cream sundae. That innovative history notwithstanding, Evanston is no business nirvana, and nobody knows that better than Ron Kysiak. As director of Evanston Inventure Inc., the local economic-development organization, Kysiak has monitored the city’s commercial activity for some 15 years. Unlike the city’s wide, tree-lined streets and miles of beachfront parks, its business landscape hasn’t always been a pretty sight. Right now most Evanstonians who want jobs have them; earlier this year the city’s unemployment rate was just 4.3%, only a hair above the national average of 4.1%. But Evanston literally has no room to grow: the city, which measures just 8.5 square miles, ran out of open space long ago. That means there’s no place to accommodate new factories, office parks, malls, or retailers. In recent years Washington National Insurance Co., Illinois Superconductor Co., and Rust-Oleum Corp., among others, moved from Evanston to communities with more or cheaper space. So did the back-office operations of two Chicago-area banks and the headquarters of Peapod Inc., the online grocery-shopping service. “It’s costly to redevelop in a city like Evanston,” says Kysiak, who previously headed economic development in Milwaukee and New Haven, Conn. “You have to knock something else down first.” Although today Evanston is home to 3,000 businesses, 9 of its 10 largest employers are nonprofits. First on the list: Northwestern University, with 4,000 employees, followed by two hospitals, the city government, the public schools, and the world headquarters of Rotary International, to name some. That worries Kysiak, a tall, thoughtful fellow with a Tim Conway-like manner that manages to convey mildness and intensity at exactly the same moment. “They’re a huge economic engine, but they don’t pay property taxes,” he says of the nonprofits. That, in turn, pushes up taxes for commercial businesses, which then move to cheaper digs elsewhere, boosting city taxes even higher. Kysiak, who thinks carefully before he speaks and doesn’t seem prone to overstatement, sums up the result this way: “It’s a death spiral.” E-Tropolis Evanston is executing a simple, yet wildly ambitious, mission: providing constant high-speed Internet access to every business, home, school, institution, and government office in town, at competitive rates. Meanwhile, since their built-up city has no malls and few big retailers, Evanstonians spend a lot of their money in neighboring Skokie and Wilmette, and even in Chicago’s Loop, just 13 miles away. And because Evanston’s highly educated, computer-savvy populace already uses the Internet — 60% have connections at home — Kysiak and others began worrying about losing business and sales taxes to E-commerce ventures like Amazon.com. So about four years ago, Kysiak — who also oversees a high-tech park jointly run by the city and Northwestern — decided to focus on wooing small high-tech start-ups to fill existing office space, boost the tax base, and hire local residents. The only problem: his counterparts in other Chicago-area communities were doing exactly the same thing. Clearly, Evanston’s high quality of life wasn’t going to be a big enough bargaining chip. The city needed to bring something distinctive to the table, something to offset not only the lack of space, but also the high taxes, limited parking, and awkward location several miles from the nearest freeway. Technology companies want good technology. Perhaps, Kysiak mused back in 1996, Evanston could provide the best. And perhaps everybody in town could benefit from it. He already had a model right down the street. Northwestern had recently rewired its 150-building campus with a 222-mile fiber-optic network. He enlisted Patricia Widmayer, the university’s manager of IT planning and development, to help him design the same kind of project for Evanston. Over countless working lunches, the two — Kysiak the visionary, Widmayer the organizer — began pulling together a 20-person community task force to design the electronic city. Among the task-force members was Bill Floyd, a big, sandy-haired man who had lived in Evanston since 1973. He had recently retired from his job as chief information officer at Chicago-based Novus Services Inc., now Discover Financial Services. He was antsy and looking for something to do. His technical knowledge supplied the project’s missing piece. Today the group — now a nonprofit organization called E-Tropolis Evanston, led largely by Kysiak, Widmayer, and Floyd — is executing a simple, yet wildly ambitious, mission: providing constant high-speed Internet access to every business, home, school, institution, and government office in town, at competitive rates. The underlying concept — equal access for all — isn’t new. During the early 1990s at least three dozen other communities set up “free-nets,” offering free or cheap Internet service. But those early networks generally focused on helping people reach the global electronic village rather than on building a local electronic community. And back then people got what they paid for: pokey dial-up connections, usually through text-only bulletin boards. Today many other cities brand themselves as “America’s most wired community,” usually citing their sophisticated new fiber-optic networks that provide almost unimaginable bandwidth. (See ” On the Wired Front.”) By those standards, Evanston isn’t yet a world-class wired city: its fiber-optic system won’t be up for at least a year. Meanwhile, E-Tropolis Evanston offers Internet access over existing telephone lines using digital-subscriber-line technology, which allows a fast Internet connection that’s always on and doesn’t tie up telephone lines. What does distinguish Evanston’s E-Tropolis effort is its founders’ insistence on looking beyond the wires. From the start, Kysiak, Widmayer, Floyd, and their colleagues envisioned an electronic version of the city, a parallel community where residents could chat, send mail, post announcements, get maps and weather forecasts, read local headlines, shop in local stores, order take-out, reserve tennis courts, apply for building permits, pay parking tickets, and even download the homework that kids forgot to bring home from school. The E-Tropolis founders believe their electronic community ultimately will both better serve Evanston’s residents and woo the high-tech businesses that the city’s economy needs to thrive in the next decade. But even as the first group of subscribers sign up for service, it’s not clear whether it’s possible — or even desirable — to wire everybody in town. Once they are wired, residents will be able to access the Internet up to 30 times faster than they could using a standard household modem. And long downloading times will go the way of Prohibition (a movement that, by the way, traces its roots to Evanston, home to Frances Willard, a pioneer in the Woman’s Christian Temperance Union). Once they are wired, residents will be able to access the Internet up to 30 times faster than they could using a standard household modem. The monthly cost of the service is $43 to $50 for home subscribers and small businesses, depending on the connection speed and the customer’s distance from the telephone company’s central office. That’s a break-even proposition for people who will be able to dump their current Internet service providers and second telephone lines. Larger businesses pay $100 to $260 a month. All installations, currently free, will eventually cost $99. Residential subscribers get up to 10 E-mail addresses on a single account, home-page space, and free training; businesses get home pages enabled for limited E-commerce. Once the fiber-optic system is in place, the E-Tropolis founders also hope to offer cable TV, local and long-distance telephone service, and networking capability. But defining E-Tropolis Evanston solely in terms of speed and wires is like describing the real Evanston by way of its streets and sewer system. The E-Tropolis visionaries want more for the people of Evanston than warp-speed Web connections, some local content, and a few conveniences. They want transformation. They believe E-Tropolis ultimately could improve the quality of life in ways its creators can’t yet imagine. “It’s not just a new way to communicate,” says Kysiak. “It’s a carefully thought out strategy to redefine and revitalize the entire community.” The founders also hope the project might help improve relations between Evanston and Northwestern, a relationship that careens from neutral to tense to downright ugly. Kysiak, Widmayer, and others with a foot in each camp believe E-Tropolis Evanston might be one venue for bringing the two sides together. It’s too early to say whether E-Tropolis Evanston will realize any of its lofty goals. Launched last spring, the service had signed up just 50 paying customers by early summer, many of them task-force members. Another 150 subscribers were awaiting hookups, a process delayed because wiring each home or business involves scheduling three separate contractors — the telephone company, to wire the outside of the house or building; an Internet service provider, to set up the inside; and an E-Tropolis employee to configure the desktop. But the founders say they’ve reached several goals, ones that are less tangible than simply signing up subscribers. Most of all, they’re pleased that they’ve been able to retain community control of E-Tropolis Evanston rather than turning it over to a telecommunications company or a government agency. The founders launched the program without spending a penny of public money; the city’s mayor and two city council members are just three more members of the nonprofit group’s board of directors. “The mere fact that it’s here adds to our image as a city of technology, and that benefits all of us,” says Evanston mayor Lorraine Morton, an Evanston resident for nearly 50 years. But even though the city supports, uses, and helps publicize E-Tropolis Evanston, the project will remain privately financed, she adds. And the E-Tropolis Evanston group’s efforts have evolved into an unprecedented partnership with a new for-profit company, E-Tropolis Partners Inc., in Chicago. That new venture is picking up the project’s multimillion-dollar price tag in exchange for most of the revenues and the rights to market Evanston’s E-city model to other communities. (See “King of the World?” below.) Meanwhile, the folks at E-Tropolis Evanston grapple with some sticky social problems. Chief among them: preventing low-income Evanstonians — even in this strong economy, some residents remain unemployed and 30% of the public high school students come from low-income families — from being shut out of their own virtual neighborhoods because they can’t afford computers or the subscription fee. That possibility so concerns Kysiak that during a recent interview he returned to the subject repeatedly. “This kind of high-speed information has the potential to drive an even deeper wedge between the haves and the have-nots,” he said at one point. “Nobody has answers. We don’t, either.” Eventually, E-Tropolis Evanston plans to set up a computer-refurbishing center where local residents and businesses can donate older machines that technicians will overhaul and donate to low-income families. The nonprofit group will also get 5% of the revenues its for-profit spin-off, E-Tropolis Partners, makes from doing installations and charging monthly service fees; that, too, will be used to help Evanston’s poorer residents get online. But such philanthropy remains somewhere in the futuristic city’s future. For now the founders are concentrating on more prosaic matters: putting down wires and signing up subscribers. In laying the groundwork for E-Tropolis Evanston, Kysiak started by looking 1,000 miles away, at a rural community in the Blue Ridge Mountains. Blacksburg, Va., home of Virginia Tech, had gotten headlines as early as 1992 for deciding to offer low-cost Internet connections to everyone in town. Today more than 80% of Blacksburg’s 36,000 residents have Internet access, and the project has slowly helped pump up the isolated community’s high-tech research center to 85 companies employing more than 1,200 people. But after attending a one-day “how-we-did-it” seminar in Blacksburg, Kysiak went home convinced that the model for Blacksburg’s first-generation E-village, although impressive, wouldn’t transfer wholesale to Illinois. For one thing, Virginia Tech ran Blacksburg’s project; Kysiak envisioned a broader public-private venture for Evanston. Like those of the “free-nets” before them, Blacksburg’s connections at that time were dial-up, not the “always-on” high-speed hookups Evanston’s high-tech community would expect. (Even today, half of Blacksburg’s users still use modems.) “Blacksburg certainly sold me on the idea of the E-city,” recalls Kysiak, who moves seamlessly from scholarly commentary on the Greek origins of the word e-tropolis to referring to E-Tropolis Evanston’s various capabilities as “really neat” and “very cool.” “I admired their creativity and the fact that they were earlier. I just wanted to do a lot more.” He and Widmayer started by pulling together a task force that looked like a “Who’s Who of Evanston.” Members included city and school-district officials, top employers, and leaders of civic groups ranging from the chamber of commerce to the NAACP. The group had no budget. Evanston Inventure covered about $15,000 in office and telephone expenses; Kysiak’s and Widmayer’s employers donated their time, and everyone else volunteered. Over the next two years the task force hit one technology roadblock after another. Early on, the group considered using cable modems but dropped that plan when the local provider said it would wire only homes, not the city’s 3,000 businesses. Then the group solicited and reviewed proposals from six telecommunications companies, ultimately rejecting them because each wanted to regulate E-Tropolis’s policies and, to a large extent, its content. “They pretty much said, ‘You finance it, we’ll build it, and then you keep your noses out of our business,’ ” Kysiak recalls. But E-Tropolis proponents insisted on retaining local control. When talks with the last contender, AT&T, collapsed, in December 1998, the Evanston group very nearly threw in the towel. “If it had been a paid effort, I think we would have cut our losses and shut it down,” Widmayer recalls. “Because it was running on ideas and energy, we were able to keep going.” “This kind of high-speed information has the potential to drive an even deeper wedge between the haves and the have-nots.” –Ron Kysiak, director of economic development organization Evanston Inventure Inc.
Come April 21, Zeeks.com will face a new challenge — as if constantly coming up with “kewl” features for its ever-changing young audience wasn’t hard enough. As of that date, the one-and-a-half-year-old Internet playground and search engine for kids ages 6 to 13 will have to comply with the Children’s Online Privacy Protection Act (COPPA). COPPA, which emerged in response to widespread concern about the unregulated online collection of information from children, requires that commercial Web sites catering to the under-13 crowd obtain “verifiable parental consent” before collecting any information that could be used to identify or contact their preteen users. That includes the child’s name, telephone number, and E-mail and street addresses. While COPPA imposes the same requirements on all kid-oriented sites, two factors make the burden especially hard for smaller businesses to bear. One is cost. For instance, if Zeeks.com adds 1,000 members a day, the company would be looking at a compliance cost of at least $240,000 a year, including the tab for records storage and for five new employees, says cofounder Steven Bryan. But a larger problem is the potential loss of traffic. Once parents start receiving those permission requests, says Bryan, familiar brands like Disney will have an advantage over relative unknowns. That could spell trouble for sites that, like Zeeks.com, rely primarily on advertising revenues to stay afloat. Compounding the problem is the fact that some kids may choose to evade the consent process by heading for sites designed for teens or adults. Jorian Clarke, founder of Milwaukee-based KidsCom.com, a five-year-old online activities center for kids, dubs the dynamic the “peas and ice cream factor.” “If everything on a site becomes peas,” she explains, “kids are going to be looking elsewhere for the kind of content that meets their dessert needs.” Clarke worries that COPPA, which layers on extra costs, will help transform the Net into a playing field where only the large can compete. But others take a more optimistic view. Elizabeth Lascoutx, who directs the Children’s Advertising Review Unit at the Council of Better Business Bureaus, believes that the cost of complying with COPPA will soon decline. “I don’t think COPPA will have an enormous impact on the industry,” she says, “except for increasing parents’ comfort level with letting their kids surf the Web.” In fact, Bryan, who like Clarke supports COPPA’s goals, even sees a bright spot in the law. COPPA allows sites to retain information collected before April 2000 without obtaining parental consent. But Zeeks.com’s new competitors will have to comply with COPPA from day one. With 250,000 registered members as of January, Bryan observes, “I now have a position that is going to be very, very hard for a start-up to match.” Getting into the Act If your business must comply with COPPA, consider these tips from Toby Levin, team leader for Internet advertising at the Federal Trade Commission: Decide whether you need identifying information at all. There are lots of ways to provide content that don’t require you to collect information. For example, if you want your site to offer kids a personalized greeting, use screen names, not real ones. Take a look at the exceptions to the consent rule. For example, you can collect a child’s E-mail address in order to respond to a onetime request. If you delete the address after responding, you won’t trigger the other requirements of the rule. Consider methods other than print-and-send for collecting information, such as toll-free numbers, credit-card verification, or E-mail accompanied by a digital signature. For more information, visit www.ftc.gov or E-mail firstname.lastname@example.org.