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Wi-Fi for the Masses

It looks like a large Styrofoam takeout container. The 14-pound box would fit into a backpack were it not for the two antennas, set well apart. It can withstand subfreezing temperatures and 165-mph winds; it’s even lightningproof. With the lid bolted down tightly, the box offers no clue as to what’s inside. But disassembled, it reveals intricate innards that look like nothing so much as a city viewed from a plane: A million tiny wires crisscross like streets and weave among square parks the size of your thumbnail. The magic of the box occurs when you mount it on the horizontal arm of a city lamppost, so that its long ears reach up to the sky. Install 30 of them per square mile (which isn’t hard, since an installer using a single tool can put up a unit in 15 minutes) and they immediately begin communicating with one another via radio waves. Data, the same information that flows through the wired Internet, begins traveling between them. Establish some hub connections to usher the data back onto the Net and you’ve created a wireless network that can transmit signals all over real, life-size cities–into parks, schools, juice joints, bars, offices, playgrounds, and homes. The boxes, known as routers or nodes, are made by Tropos Networks, a Silicon Valley upstart that’s landed in the middle of a burgeoning movement among U.S. cities to create municipal wireless networks, or metroscale Wi-Fi–essentially, an effort to deliver wireless bandwidth to the masses. Since Tropos began selling its equipment in 2002, dozens of municipalities have signed up. The Twin Cities suburb of Chaska, Minnesota, built a wireless network to cover its 16 square miles and serve all 18,000 of its residents. Corpus Christi, Texas, bought 300 Tropos nodes to cover 24 square miles and has since decided to expand to 147 square miles. As it rebuilds in the wake of Hurricane Katrina, New Orleans plans to cover the whole town with a Tropos network. This summer, Anaheim, California, will hit the switch, giving 325,000 citizens across 50 square miles ubiquitous broadband Internet access. Tropos-powered networks also are in the offing in Philadelphia and San Francisco. Launched with what Bill Gurley, a Silicon Valley venture capitalist and early Tropos investor, calls “four guys under 30 and an algorithm,” the Sunnyvale-based company spent less than $3 million getting its first product to market. Since then, it has grown into the leading equipment provider in this incipient market, with more than $15 million in revenue in 2005 and a projected $45 million in 2006. It has had roughly 350 customers to date–including some in far-flung locales such as Bangkok, Kuala Lumpur, and Doha, Qatar–and partnerships with EarthLink, Google, Motorola, IBM, and others. Given its recent contracts, the company is well ahead of competing equipment makers. Yet Tropos faces some difficult tests before it can realize its vision. The new, large-scale projects in San Francisco and Philadelphia will get the technology out of dress rehearsal and in front of a major audience. These launches will be key to the company’s fate. As hundreds of other cities look on, contemplating whether to install their own cheap broadband, and as a phalanx of massive data carriers like Verizon and Comcast glower over what may be a new threat, Tropos will march out onstage. Says CEO Ron Sege: “The best thing we can do is make sure the big cities do well, for everyone to say, ‘Oh, my God, it works.” “What Stops the Internet From Being Everywhere?” In San Francisco, there is a new café every year that has “the best coffee in town.” At the moment, it’s Ritual, a chic place in the Mission District with leather couches, wireless Internet, and PowerBooks on every table. The two founding engineers of Tropos–Narasimha Chari, who goes by “Chari,” and Devabhaktuni “Sri” Srikrishna–are sitting at a small table, drinking lattes and reflecting on recent news. About a year ago, the mayor of San Francisco put out a request for proposals, looking for the optimum plan for “unwiring” the city–that is, for creating a citywide Wi-Fi network. Just the day before, out of a half-dozen contenders, the selection had been announced–and Sri and Chari’s list of big wins had gotten one municipal contract longer. But the two men, both 32, scarcely stopped to rest. That’s because each successive contract brings them closer to answering a question that’s intrigued them since they met as undergraduates at Caltech about 15 years ago: “What stops the Internet from being everywhere?” The magic of the box occurs when you mount it on a lamppost. Install 30 of them per square mile, and you’ve created a wireless network that can transmit data all over a city. The inquiry arose out of mutual concerns about India and other developing countries. As a brainy boy growing up in Calcutta, Chari would take long excursions through the city searching for textbooks containing just the kind of math and science materials you can download in seconds today from the Internet; he knew that connecting people in poor and remote regions could be a profound form of change. Sri, for his part, had a deep desire to be useful and an appetite for solving engineering problems. So while attending graduate school in the late 1990s (Sri at MIT, Chari at Harvard), the two men would hang out in the bars around Cambridge and talk about how to get the Internet everywhere on the planet. The intellectual challenge soon became as enticing as the moral one. It was a problem of cost efficiency: How could you bring the power of computer networks to villages hundreds of miles from the nearest cable TV, places where people can’t even afford phones? It was a technical problem, of bouncing signals around in the air over large areas and then back to the nearest data wires. And finally it was a problem of overcoming natural physical limitations: the distance transmitted signals could travel, for one, and the amount of stuff that can be sent simultaneously. “It’s just a very fascinating subject,” says Sri. “We never really set out to start a company.” Any solution had to be dirt cheap. Even in the United States, broadband is so expensive, both to provide and to purchase, that its growth has not kept up with consumer appetites. Today many rural areas around the country have no high-speed data services, simply because it costs so much to dig up the streets and lay wire. Jupiter Research, a market research firm, estimates that 35 percent of Internet users in exurban or rural areas can get only dial-up connections. In some cases, the necessary conduits reach town, but jackhammering the last bit of pavement to serve a smattering of houses is more of a burden than it’s worth. “There are some places where the economics are prohibitively expensive,” says Brian Blevins, a Verizon spokesperson. For Chari and Sri, the alternative to digging would have to be radio, and while drinking beer and poring over dense technical books, they came across a radio technology developed in the 1970s for military uses. The technology worked on battlefields, but its inventors and the engineers who came after assumed that it wouldn’t scale. Sri and Chari thought otherwise. They suspected that if you could program the nodes of these radio networks cleverly enough, teaching them to move information around quickly, you could make the network as big as you wanted. Their idea was a variation on the principle of the bucket brigade or steppingstones. If you can’t get the signal to reach all the way to the wired Internet, make it hop from one transmitter to another until it does. And give it some basic rules for finding the most efficient pathway there. Here at Ritual, for instance, e-mail data comes in over wires to a base station or router somewhere in the room and then heads through the air to the nearby laptop. Everyone in the café is just one hop from the wired Net. This configuration requires every user to be within about 100 feet of the device that’s plugged in, and it’s why wireless broadband is generally limited to offices and cafés. But what if you told that router to select another router for passing along its message, and told that router to select yet another after that? If you taught those routers to make efficient choices that wouldn’t require arduous processing, eventually the Internet would spill out into the streets. Sri and Chari got hold of some Wi-Fi gear–a cheap type of radio technology recently introduced to the enterprise market for office environments–and started playing with their routing ideas. They mounted antennas on cars and tooled around Cambridge, testing the performance of nodes programmed to obey their new steppingstone rules. “When we started doing this,” Chari says, “people laughed at us, saying Wi-Fi is an indoor technology. But our approach has always been, don’t take anyone’s word for it.” The two men soon realized that they were no longer solving a math problem: They were developing a product. So they picked up and left Boston for northern California. They hooked up with two friends of friends who understood finance and formed a company. It was not a particularly opportune time. “In 2001, we were out there looking for funding. It was awful,” says Chari. But Bill Gurley, whose firm, Benchmark Capital, invested early in companies such as eBay and Red Hat, liked their ideas. “I don’t think anyone at that time was thinking about municipal wireless,” Gurley recalls. “But what was keeping Wi-Fi from going outside?” Even in the united states, More than a third of Internet users in exurban or rural areas can get only dial-up connections. Well, nothing. In the United States, most towns already own the infrastructure for suspending 14-pound boxes in the sky: lampposts, traffic lights, telephone poles, city buildings. The Tropos routers themselves cost only about $3,500 each. So with 30 per square mile installed in a city like San Francisco, you’d spend about $5 million on boxes to serve more than 700,000 citizens. According to a report by PricewaterhouseCoopers, building a fiber network costs $2,000 “per home passed,” in the industry’s argot; providing DSL costs a few hundred dollars. Compare both with Philadelphia’s estimate that the cost per home passed of its Wi-Fi network will be $30. On the user end of the equation, the hardware economics look even better. The Wi-Fi cards that early adopters were sliding into their laptops in 1999 went for about $2,000 apiece. Today the devices are preloaded into nearly all new computers and cost less than $10 each. Right now, as Chari and Sri drain their lattes at Ritual, there are an estimated 50 million Wi-Fi-ready computers out there. So Bill Gurley got onboard. He liked the open standards of Wi-Fi technology and how quickly the price on the user’s side was dropping. He loved Chari and Sri’s vision of teaching routers with limited range and capacity how to build bucket brigades and choose the most promising pathways, based on the condition of the network. “It’s very elegant,” Gurley says. He also liked the growth potential of the market and the focus on software. “As a venture capitalist, I love everything about the Tropos model,” he says. In January 2002, Benchmark Capital ponied up $2.2 million for the young company to work with. Other VC firms followed, including the Intel Communications Fund and Siemens Venture Capital. And so did Ron Sege. Good Enough Beats Best Ron Sege (pronounced seh-gee) is a tall stick of a guy with blue eyes and blond eyelashes, whose elaborately stitched jeans were meant for a younger man. At 49, he is on his second wife, his second batch of kids, and the fourth small company he intends to make large. In a sense, Sege is a Web 2.0 guy all around, bringing hard-earned experience to a young company with a still-unproven business model. As he puts it, “I’ve seen this movie before.” Sege began working in technology in the 1980s, but really hit his stride in the ’90s, as a manager at 3Com, the company that spawned Ethernet technology. 3Com had a few hundred employees when he perspective, good enough beats best,” he says. Ethernet, the protocol that allows office PCs to share databases and printers and storage in a small local network, was far from perfect. “But it was inexpensive, easy to use, and anybody could design to it.” Sege learned the beauty of this approach to business–float a quick and dirty product, let users and other product developers improve on it, and push it as a dominant shared platform. “Wi-Fi has many of the same attributes,” he says. After 3Com, Sege took a job as executive vice president of Lycos, one of the first Internet portals, where he helped engineer an Internet-bubble buying spree that included acquisitions of Matchmaker.com, Quote.com, and Wired Digital. “That was my media mogul period,” Sege says with a laugh. He left Lycos in 2001 and joined Ellacoya Networks, a company based in Merrimack, New Hampshire, that creates software to help broadband providers ease congestion in their networks. Bill Gurley, tipped off by a Benchmark partner who’d worked with Sege in the past, saw in the Ellacoya CEO someone who’d ridden small companies through significant growth and who understood a good deal about data networks. He contacted Sege and told him about Tropos. The company made sense to Sege. Taking off-the-shelf indoor base stations and sticking them up on power poles–that was a formula he understood. Sri and Chari had already come up with the tricks, the proprietary algorithms for handling data traffic and monitoring the system from one main PC, which would set Tropos apart from its direct competitors. (The company has 30 software patents and patents pending.) In 2004, Sege came onboard–”to do all the stuff not involved with writing software.” At first, that meant selling Tropos boxes and software to a small but eager market the start-up had identified: police and fire departments. After September 11, the consequences of poor emergency communications became painfully clear to city leaders nationwide, and many municipalities were attempting to do something about it. What few civilians realize is that their heroes with hoses and their men and women in blue have always relied on only one of their senses for passing information: their ears. They use the same two-way radio technology today that police departments adopted in the 1930s. Some forces have introduced computers into their cruisers for searching DMV or criminal databases, but these hookups are as slow as your first dial-up modem. Forget about downloading a mug shot. Maps, surveillance videos, traffic updates, real-time messaging? Impossible. What emergency responders need is broadband. And it has to be broadband that’s everywhere, broadband that moves. Tropos could deliver that. Sege traveled the country, giving presentations to police and fire departments, steadily signing up customers. Oklahoma City bought Tropos technology to build a network for its police department covering 620 square miles. In Milpitas, California, about 10 miles from the Tropos headquarters, a 40-node Tropos mesh allows police to look up DMV photos and monitor video surveillance of high-crime areas. So Sege and his team were surprised in the spring of 2004 when they got an order from Chaska, Minnesota, a Twin Cities suburb that wasn’t looking to serve its police force. The town’s city council wanted cheaper connectivity–for all of its residents, who were stuck paying $45 per month for high-speed access from Sprint and Time-Warner Cable. The goal was to provide broadband access for all of its citizens for no more than $20 a month. “Tropos was selling a system for public safety departments. Our IT guys thought, ‘Why couldn’t you do 3,000 connections instead of 300?” says Chaska’s city administrator, Dave Pokorney. For Tropos, this was exhilarating. Chaska had come up with this plan on its own, with no help from Tropos, which was focusing its efforts on public safety. The company had helped create networks designed to serve the general public, but only in parks or other circumscribed areas. Chaska was out ahead of them–and within three months, the city had a real-life metroscale network available to anyone in town. Sleeping Giants Everyone at Tropos agrees on what made the company take off. It happened in August of 2004, when Philadelphia, the largest municipality to date to do so, announced plans to blanket the city with Wi-Fi. The idea was to deliver cheap, and possibly free, broadband Internet access to the 1.5 million souls–digital haves and have-nots alike–who lived within the city’s 135 square miles. This was a bold, pioneering step, lauded by civic groups and techies around the country. But the news hit one party particularly hard: Verizon. At the time, the vast majority of Philadelphians who wanted fast connections to the Web had been coming to Verizon for DSL. Now the company would have a new competitor. The proverbial sleeping giant was caught off guard. It’s one thing to build a wireless network for 8,000 households in the suburbs of Minnesota. But it’s something else entirely to do so in one of the nation’s biggest metros. Verizon’s lobbyists marched straight to state lawmakers in Harrisburg and demanded action. And they got it. A telecommunications bill that had been lingering around the capital for more than a year suddenly came up for a vote, and it had a brand-new provision attached to it. The measure said that Pennsylvania cities intending to create high-speed data networks must give the dominant local phone company the right to build first. If the incumbent proceeded within 14 months, the city would be required to drop its plans. For the leaders of Philadelphia, that meant doing nothing for more than a year before getting their project under way. It also meant that cheaper service–some subsidized for the poor–would happen only at the whim of Verizon. But the prospect of an Internet cloud floating through every park and into the city’s overlooked neighborhoods had already intrigued many Philadelphians, and the state legislature’s intervention galvanized people to protect the idea. “The school district, the nonprofits that wanted to serve poor neighborhoods, even our tourism organizations saw the potential,” says Dianah Neff, Philadelphia’s chief information officer and a 14-year veteran of Silicon Valley businesses. “When the legislation came up, we put the pressure on. We had 3,000 people call, write, and e-mail the governor.” Tropos, which already had been tapped to install two pilot projects in public parks, watched the events unfold. Sege hired a Washington lobbying firm, which showed up in Harrisburg, attempting to sway leaders to spare local governments from restrictions. In late November 2004, just as the bill was approved, Philly’s Wi-Fi enthusiasts got a break. “It was almost like diving to get the catch in the end zone,” says Sege. The state agreed to exempt Philadelphia from the requirements. (All other Pennsylvania municipalities remain bound by it.) The way Sege sees it, Verizon’s in-your-face tactics were the best thing that had ever happened to the start-up. The giant telecom’s reaction made dozens of other cities take notice. If Verizon was so ruffled, people seemed to think, then Philadelphia must have been on to something interesting; the technology’s potential must be real. “The phone was ringing off the hook,” says Sege. Cities around the country, from Minneapolis to Tempe, Arizona, began announcing plans for wireless networks. Several months later, the technology was validated by another waking giant when Cisco announced it would begin building routers for muni Wi-Fi. Tropos sales went from 90 municipal clients in all of 2004 to 75 in just the first half of 2005. The next step in the Philadelphia project was to respond to the city’s RFP, and Tropos now had to get down to details. The company had the gear and the software for monitoring and troubleshooting the network, but there was a lot the small company was lacking. Customer service for one thing. And billing. And consumer sales. Rather than build those capabilities in-house, Sege began searching for an established Internet service provider with which to partner. EarthLink fit the bill. The ISP, based in Atlanta, had thrived as a middleman, buying wholesale dial tone, wrapping it up in an attractive brand, and selling it to Internet surfers. But as the world shifted to faster wires and fiber optics, EarthLink had little to offer. Unlike the phone companies, it owned no connections into the home. In January 2005, Bill Gurley paid a visit to EarthLink’s board of directors. He presented his case for a partnership, in which Tropos would provide infrastructure–the actual broadband network–and EarthLink would handle customer support and sales. In response to Gurley’s presentation, EarthLink sent a team to visit Chaska to see for themselves if the new technology worked. The group toured the town and climbed under tables testing the network’s reliability. They interviewed folks in bars. And they were sold on it. “Municipal Wi-Fi is really important for us,” says Donald Berryman, EarthLink’s president of municipal networks. “It’s one of the top three investments we’re making in future products. It can help us control our destiny because we’ll own the network.” Tropos and EarthLink have since landed deals with five cities and have proposals out to five more. But Will It Really Work? Not surprisingly, the Bells and other data-access providers haven’t backed down. Since the maneuver in Pennsylvania, giants like BellSouth and Comcast have fueled a fight against muni Wi-Fi across the country. Lawmakers in Ohio, Virginia, Kansas, and Oregon, among others, have proposed legislation to keep local governments from building their own networks or at least make it more difficult for them to do so. Fourteen states, including Florida and Colorado, have already passed restrictions. “We have not supported a ban on municipal networks,” says Verizon’s Brian Blevins. “But we’ve felt where there’s vibrant competition, the networks can undercut and disrupt a market that’s working very well.” Critics of muni Wi-Fi argue that if local governments participate in building broadband networks, they’ll exploit unfair tax and regulatory advantages, irresponsibly drain public coffers, and mismanage the services. To counter the legislative gambit, Sege and others have taken to evangelizing in Washington, D.C., and state capitals. They’ve made some progress. In June 2005, Republican Senator John McCain of Arizona and Democratic Senator Frank Lautenberg of New Jersey introduced a federal bill in answer to the activity in the states. The Community Broadband Act of 2005, still in committee, would “preserve and protect the ability of local governments to provide broadband capability and services.” Says one Lautenberg staffer: “The senator doesn’t think there should be obstacles–we’re 16th in the world in terms of broadband penetration.” A bill awaiting a vote by the House, on the other hand, would create barriers–for instance, requiring cities to partner with a private company. A restriction like that, though seemingly innocuous, would have prevented Chaska from building its network. These policy struggles are not the only hurdles Tropos is facing as it lunges for profitability in 2007. There are big technical questions. It’s one thing to build a wireless network for 8,000 households in the suburbs of Minnesota. But it’s something else entirely to do so in one of the nation’s biggest metros. “Nobody’s demonstrated that you can have 135 miles of Wi-Fi,” says Julie Ask, a research director at Jupiter Research. Radio signal is notoriously unpredictable. When your cell phone drops out every time you round the corner of Elm Street, that’s because the mobile provider didn’t predict a problem there. Home devices from cordless phones to baby monitors might cause interference. Tempe, Arizona, where Tropos competitor Strix Systems provided 500 wireless routers, discovered that signal wasn’t getting through house walls beyond 150 yards from the routers. Many Tempe users found they needed an additional $100 device to receive and send data from indoors. Tropos could face similar problems. Dozens of municipalities have joined in, but there is not much of a record. “As a mayor, why wouldn’t you say, ‘I want to bridge the digital divide’?” says Ask. “EarthLink wants to point to Philadelphia and say, ‘Hey, it works,’ but until there’s proof…” After a city government invests $20 million, no users will be happy if their connections go down or their webpages load slowly. The last thing Tropos needs is for annoyed customers to head back to Verizon. Another looming question is what business models will work. Will consortia like the EarthLink-Tropos team for San Francisco prove easy for cities and profitable for the participating companies? Will the Bells hedge their bets and start offering their own systems? Will cities build their own public Internet utilities, just as many today deliver power without the help of private entities? In any of these scenarios, Tropos’ business doesn’t change. The Bells, the city governments, the ISPs–they’ll all need to buy boxes from someone. As experiments are made and the best models emerge, Sege insists that Tropos will stay relevant. First, of course, he has to deal with Philadelphia, which is building its 15-square-mile test area this summer and plans to roll out the full network in 2007. “I honestly believe that a lot of people are waiting to say, ‘We told you it wouldn’t work,” Sege says. Philadelphia CIO Dianah Neff doesn’t seem to mind that tension. “There’s a lot of pressure on Tropos and EarthLink. But that’s to our benefit because they’re trying really hard,” she says. “It’s like you live in a fishbowl. It’s not just other cities, but the world that’s watching.” Martha Baer is co-author of Safe: The Race to Protect Ourselves in a Newly Dangerous World. This is her first story for Inc.

He Took On the Whole Power-Tool Industry

In February 2001, Stephen Gass strode to the podium in a conference room at Caesars Palace in Las Vegas and began the video presentation for SawStop, his new invention. The 75 attendees watched the screen closely as a woodworker fed a sheet of plywood into a power-saw blade spinning at 4,000 rpm. Then a hot dog was placed in the path of the blade. Miraculously, the instant the blade made contact with the wiener, the saw shut down and the blade retracted. The dog escaped with only a small nick — substitute a finger and it’s the difference between a cut and an amputation. Gass had given the same dog-and-pony show a dozen times, mostly for woodworkers, contractors, and a few industry executives. But this audience was different. It consisted of lawyers for the Defense Research Industry, a trade group for attorneys representing the power-tool industry. SawStop could help prevent thousands of serious injuries caused by power tools each year, Gass believed — if the industry would license it. He returned to his seat thinking he had made his case. Then Dan Lanier, national coordinating counsel for Black & Decker, stepped to the podium. His topic: “Evidentiary Issues Relating to SawStop Technology for Power Saws.” Lanier spent the next 30 minutes discussing a hypothetical lawsuit — in which a plaintiff suing a power-saw manufacturer contended the saw was defective because it did not incorporate SawStop’s technology — and suggesting ways defense counsel might respond. Lanier recalls it as a rather dry exploration of legal issues. Gass heard something different. To his ears, Lanier’s message was this: If we all stick together and don’t license this product, the industry can argue that everybody rejected it so it obviously wasn’t viable, thereby limiting any legal liability the industry might face as a result of the new technology. (Lanier denies this was his point.) Gass was stunned. His tiny start-up, run by three guys out of a barn in Wilsonville, Oreg., had captured the attention of the entire power-tool industry. For months, he had been negotiating with major players such as Ryobi, Delta, Black & Decker, Emerson, and Craftsman about licensing his invention. Instead, they seemed intent on trying to make him and his product go away. Some 32,000 Americans are rushed to emergency rooms with table-saw-related injuries each year, according to the Consumer Product Safety Commission; more than 3,000 of those visits result in amputations, usually of fingers or hands. The medical bill to reattach a severed finger runs from about $10,000 for a clean wound to more than $25,000 if there’s nerve damage, infection, or other complications, according to James W. Greer, president of the Association of Property and Casualty Claims Professionals, a trade group in Tampa. Factor in rehabilitation and lost time at work, and the cost per injury can easily reach six figures. Indeed, in 2002, the CPSC estimated the annual economic cost of table-saw injuries to be $2 billion. That’s more than 10 times the size of the entire $175 million table-saw market. Clearly, this is an industry that could use a better mousetrap. That’s what Gass figured he had in the summer of 2000, when SawStop’s technology made its debut. A year later, the Consumer Products Safety Commission awarded the device its Chairman’s Commendation for product safety. Popular Science magazine named it one of 100 Best New Innovations. Tool industry bigwigs seemed impressed too. “It is probably one of the most major developments in the area of product safety applicable for table saws,” said Peter Domeny, director of product safety for S-B Power Tool, which makes Skil and Bosch tools. So, four years later, why isn’t SawStop on every table saw on the market? That’s the funny thing about better mousetraps. Build one, and the other mousetrap makers will probably hate your guts. They might even try to squeeze you out of the mousetrap business altogether. Just ask the inventors of air bags, safer cigarette lighters, and automatic shutoffs for electrical appliances — all of which encountered resistance from the status quo. Ultimately they prevailed and their innovations became standard. Gass still has a long way to go. Gass didn’t set out to take on the power-tool industry. Nor did he ever see himself as an entrepreneur. The amateur woodworker was standing in his workshop one day in 1999, staring at his idle table saw. “The idea came to me that it might be possible to stop the blade quickly enough to avoid serious injury,” he says. A patent attorney who also holds a doctorate in physics, Gass loves nothing more than solving complex technical problems. He got out pencil, paper, and calculator and got to work. Stopping the blade, he figured, would require a two-part process. First, he needed a brake that would work quickly enough when it came into contact with a woodworker’s hand. Next, he had to design a triggering system that could differentiate between finger and wood. Given the speed of the blade, it would have to stop in about 1/100 of a second — or at about an eighth of an inch of rotation after making contact. Any further, and the cut would be so deep that the device would be useless. To stop the blade this quickly would require about 1,000 pounds of force to decelerate the blade in 10 milliseconds. That calculation took Gass about 30 minutes. The trigger problem was a little more complicated, but Gass came up with the idea of running a small electrical charge through the blade. The system would sense when the blade hit flesh because the body would absorb some of the charge. The resulting drop in voltage would be enough to trigger the brake and stop the blade almost instantly. Gass spent two weeks designing the technology and, using a $200 secondhand table saw, an additional week building a prototype. Then he began to experiment. With the blade whirring, he touched his hand to its smooth side. It stopped immediately. The same thing happened when he ran a hot dog into the blade’s teeth. Gass repeated the experiment dozens of times — and each time the blade stopped immediately. Convinced his invention would be embraced by the industry, he videotaped a demonstration, registered the patent, and set out to convince manufacturers to license the technology, which he had dubbed SawStop. He sent a video demo to Delta Machinery in Jackson, Tenn., one of the largest table-saw manufacturers, and waited. Gass was pleased with his results, but he also knew there was something else to be done: He had to test SawStop on a real finger. “There’s not a lot of demand for a saw that’s safe for hot dogs,” he says with a laugh. And so, on a spring afternoon in 2000, Gass stood in his workshop and tried to summon the moxie to stick his left ring finger into the teeth of a whirring saw blade. He had rubbed the digit with Novocain cream, hoping to dull the pain of the cut. On the first try, his heart beating furiously, he eased in close but recoiled before making contact. A few minutes later, he tried again. This time, he rolled his finger close enough to get a faint red mark, but panicked and pulled back before the brake triggered. By now, his forearm was cramping from the tension. It was difficult to keep his hand steady. Still, on his third attempt, he kept his nerve — and the blade stopped, just as he knew it would. “It hurt like the dickens and bled a lot,” he says. But the finger remained intact. Several months later, Gass finally heard back from Delta. “No, thanks. Safety doesn’t sell,” he says he was told over the phone. (Delta, now known as Delta Porter Cable, is now owned by Black & Decker. A Delta spokesperson who asked not to be identified denies that a Delta employee made the comment.) Gass could not believe his ears. “Everybody in woodworking knows somebody who’s lost a finger or had an accident,” he says. How could a major manufacturer not be interested? “These guys would walk up to us and say, ‘I wanna shake your hand.’ A lot of them were shaking with two or three fingers missing.” Gass refused to give up. Working with three other lawyers from his Portland law firm, David Fanning, David Fulmer, and David D’asenzo, he raised $150,000, built a more sophisticated prototype, and signed up for the International Woodworking Fair in August 2000 in Atlanta. The reaction there was phenomenal. SawStop’s booth was packed with spectators who stood riveted as Gass and his partners fed wiener after wiener into the table saw. “Afterward, these guys would walk up to us and say, ‘I wanna shake your hand for doing this,” recalls Fanning. “A lot of them were shaking with two or three fingers missing.” It was all the validation the four men needed. A month later, Gass and Fanning walked away from law partnerships to pursue SawStop full-time. Fulmer, an associate at the firm, followed a few months later. D’asenzo invested in the venture but kept his day job. The fall of 2000 was hardly an auspicious time to launch a start-up. The Internet boom had just gone bust, the Nasdaq was in free fall, and investors were gun-shy. Yet SawStop was so practical and easy to understand, the trio had little trouble raising $1.2 million in angel funding from several different investors. They invested in more R&D, better prototypes, and small salaries for the three principals. “It was a no-brainer,” says Grant Simmons, a New Orleans urologist who invested an undisclosed amount in SawStop after reading about the company and seeing a video demonstration in 2004. It was Simmons’s first experience as an angel investor, and his interest was more than just financial: His father was a lifelong woodworker who had lost a finger in a table-saw accident. “This is revolutionary,” Simmons says. “They are applying basic physics in a practical way to address a very important issue that people in the industry have totally ignored — safety.” Gass, Fanning, and Fulmer, meanwhile, filed more than 50 patent applications to protect their invention. The only thing they lacked was industry cooperation — but that seemed inevitable. After all, they believed, common sense and consumer demand ultimately would win out. What’s more, the technology had implications far beyond table saws. It could potentially boost the safety of all power saws, including band saws and circular saws, as well as nail guns, lawn mowers, and other products. For the next two years, the partners engaged in what seemed to be promising talks with high-level executives at Emerson, Black & Decker, and Ryobi. In January 2002, they appeared to have turned the corner when Ryobi agreed to license SawStop’s technology. Under the terms of the deal, there would be no up-front fee; Ryobi would pay a 3% royalty based on the wholesale price of all saws sold with SawStop’s technology. The number would increase to 8% if the majority of the industry also licensed the technology. It was not a get-rich-quick deal, but Gass believed it was a vital first step. When the contract arrived, Gass noticed a typo and called Ryobi’s attorney, Bob Bugos, to make the correction. Gass says Bugos apologized and promised to take care of it right away. (Ryobi representatives declined to comment for this story.) When a week passed and the revised contract still had not arrived, Gass called back. He says Bugos was very apologetic and assured him the contract was on its way. Again, it didn’t come. Gass says he called every two weeks and each time Bugos made the same promise. After about six months of going back and forth, it finally dawned on Gass that the Ryobi deal, like all the others, was going nowhere. Indeed, the major power-tool manufacturers have professed to be somewhat less than impressed with SawStop. “The device has not been field-tested for results, durability, and reliability,” said a representative from Delta Porter Cable. “It’s an experimental system, not yet field-proven.” According to Dan Lanier, the Defense Research Industry attorney, all of the manufacturers approached by Gass independently tested and evaluated the technology. And each one, Lanier said in an e-mail, encountered “sign injury even when it works, Gass asks the following question: Isn’t it better to walk away with a cut, even a deep one, than to lose a finger or a hand? “I think they were looking for reasons not to implement it,” he says. Gass sees the objections as a smoke screen for the industry’s real concern: the increased risk of product-liability litigation. In most cases, when people sue power-tool manufacturers because they’ve lost a finger or hand in an accident, they’re unsuccessful — because it’s tough to prove that the manufacturer did anything wrong. Add SawStop to the mix, however, and the picture changes. Suddenly, the industry is promising an injury-proof saw. What if someone got hurt? “The manufacturer would be at a deeper risk and more vulnerable because it had made a promise of what the technology could do,” says Jim O’Reilley, a product-liability expert at the University of Cincinnati. “Companies are going to be reluctant to expose themselves to that higher risk.” Indeed, precisely who would assume that risk turned out to be a major sticking point in SawStop’s licensing negotiations. The manufacturers believed Gass should indemnify them against any lawsuit if SawStop malfunctioned. Gass, however, says that he could not possibly make such a guarantee since he would not actually be manufacturing the saws. And there is another facet to the liability issue. If SawStop did come to market and was proved effective in preventing accidents, it might be easier for plaintiffs to win lawsuits against manufacturers of traditional saws, because juries might be more likely to return a verdict against a manufacturer that chose not to implement SawStop. That’s the main reason, Gass believes, that the big tool makers are refusing to deal with him. They want his product to go away. After the deal with Ryobi fell apart in mid-2002, Gass, Fanning, and Fulmer faced a tough choice: Abandon the company and return to practicing law or build the saws themselves. None of the men had ever run a company, but they all understood that it’s one thing to be an inventor and another to be an entrepreneur. They would be responsible for designing, manufacturing, marketing, and sales along with the day-to-day operations of a business. It was a tough prospect — but not a tough decision. All three agreed that if they didn’t act, their technology would never see the light of day. “It seemed like the right thing to do,” says Fanning. “There aren’t very many opportunities to make money and do something good.” With wives and kids to support, Gass and his partners have found that the decision has not always been easy to stand by. Gass fondly recalls the six-figure salary he earned as a patent lawyer. At one point, he was so close to returning to his legal career that he got quotes for renewing the legal-malpractice insurance policy he dropped when he devoted himself to SawStop. “I never doubted my invention or wanted to give up, but I’ve wondered if we would be able to keep going,” he says. “It’s been touch-and-go several times with money, and we always manage to pull through at the last minute.” SawStop now operates with eight people out of a two-story barn Gass built himself. Filled with electronics, high-tech machinery, and every tool imaginable, the first floor is a handyman’s paradise. In the corner is a large stack of woodworking timber left untouched since Gass launched his venture. Gass logs 12- to 14-hour days running the business upstairs. Desks, computers, and filing cabinets fill the second-floor office space. A map of the United States hangs above the conference table. It’s dotted with colored pushpins, each one representing a city where someone has purchased a SawStop table saw. The first one rolled off the assembly line of a Taiwanese manufacturing plant in November 2004. SawStop has since sold about 600 and has 300 more on back order. A basic contractor saw retails for $799; the professional-level cabinet saw goes for $2,500. The company relies on trade shows, news stories, word of mouth, and ads in woodworking magazines for marketing. Selling online and direct-to-consumer is an acceptable way to get started, but Gass knows that to reach the larger market he will need to get into home improvement stores, where competition for shelf space is fierce. He’s had discussions with Home Depot and Lowe’s, but neither has committed to carrying the product. “Accidents are usually caused by human error, but this saw grants you forgiveness,” says one contractor. So for now, Gass is banking on people like Sharon and Don Biers, owners of Collins Custom Cabinets. After one of the employees at their Lowell, Ark., shop lost a finger in a power-saw accident in February, the Biers bought a $2,500 SawStop cabinet saw and have since ordered two more. It didn’t take long for the purchase to pay off. Within two weeks, another employee, John Stroud, inadvertently shifted his hand into the path of the blade and the saw shut down when it hit his fingernail. “We made the calculation that it’s worth it for the safety of our guys,” says Sharon Biers. “The accidents are usually caused by human error, but this saw grants you forgiveness.” And not just for professionals. In May, Gass received an e-mail from a high school shop teacher in Princeton, Wis. “I have a sophomore who still has two thumbs thanks to your saw,” the man wrote. The company knows of at least five other amputations that have been averted. With the big tool companies declining to participate, SawStop is seeking other ways to make sure its technology is adopted. In April 2003, the company filed a petition with the Consumer Product Safety Commission to make SawStop-like technology standard on all table saws. Six months later, the Power Tool Institute, a consortium of 17 power-tool makers, filed an opposing brief in which it argued that SawStop is a “speculative and untested technology. In addition, the cost to consumers and manufacturers of granting the petition would far outweigh any benefits that may be realized.” The industry also claims to be developing its own safety systems. The CPSC is expected to release its findings this summer. If it states, as Gass hopes and expects, that the technology is effective, it will be the first step in a long process of making SawStop — or a similar injury-prevention system — mandatory. Meanwhile, the industry’s product-liability fears appear to be coming to life. In 2003, a construction worker walked into the Wellesley, Mass., office of attorney Richard J. Sullivan. He was looking for someone to represent him in a case against Chicago-based S-B Power Tool. The worker had lost his thumb and four fingers while using a table saw. Doctors were able to reattach them, but even after six surgeries and $150,000 in medical bills, he still had no real functionality in the hand. Living on workers’ comp, he fell behind financially and was forced to sell his home. Sullivan turned the case down twice because he didn’t see a way to hold the manufacturer accountable. Then a colleague told him about SawStop. “His injury occurred on a saw manufactured in April 2003 and sold in May 2003,” Sullivan says. “The industry has known about this technology since 2001. That gave the manufacturer plenty of time to react.” The lawsuit, filed in Massachusetts state court in the summer of 2004, alleges that the manufacturer was negligent for not implementing the technology and seeks compensation for lost wages, future lost wages, and pain and suffering. (Attorneys for S-B Power Tool responded in January, denying all claims.) “If Gass can figure this out by tinkering around in his backyard, what has this industry been doing for the past 20 years?” asks Sullivan, who has since taken on five similar cases. “They’re like the auto industry, which had to be dragged kicking and screaming to install air bags.” Gass believes that Sullivan’s cases are only the tip of the iceberg. “The legal standard says you have to make a product as safe as you reasonably can, and if you fail to do that, you’re going to be responsible,” he says. While Gass wants SawStop to be successful financially, he also admits that what began as an interesting physics problem in his workshop has become something of a crusade. “This is important to society and that responsibility weighs on me,” he says. “It would have been so much easier if the manufacturers had just licensed this. Then, having SawStop would be just like having a stereo with Dolby or running shorts with Gore-Tex.” Indeed, Gass still dreams of getting out of manufacturing altogether. He really doesn’t want to make the power tools we buy. He just wants to make the power tools we buy better. Melba Newsome is a freelance writer in Charlotte, N.C.

Five Ideas to Watch

The Hooters of Hair Care Bikini Cuts, a hair salon in Sandy, Utah, is changing the way men view their barber. Following a strategy that recalls a certain chicken wing chain, the shop’s (very male) clientele can look forward to a clip or trim from (very female) stylists who are clad only in bikinis. Despite criticism from city officials and some local residents, owner Bethany Prince has said the shop simply celebrates “summer all year round,” and that she has plans to open a second location soon. Clients can also watch sports on a flat screen TV or get a chair massage while waiting for their appointment. Labels Learn a New Language In yet another indication of the growing respect marketers have for Hispanic consumers, several California wine producers have begun distributing Spanish-label bottles. Beringer Blass Vineyards now ships cases of white Zinfandel bearing Spanish labels to Texas, Arizona, and California. Those states account for nearly a quarter of the company’s sales, says Beringer marketing director Sharon Goldman. A Black Box for Ambulances A concept common to air travel is gaining traction on highways. American Medical Response, the Colorado-based ambulance giant, is installing devices in roughly half of its 3,200 vehicles. AMR’s recently retooled box sounds an alarm when a driver speeds or rounds a corner recklessly. After 10 seconds, if the driving doesn’t improve, a second alarm sounds and the box records the incident. Now, a California company called Road Safety International has begun marketing black boxes to the parents of teen drivers. Put an iPod in the Jukebox, Baby Ecast’s MP3-playing digital jukeboxes now raise the roof at some 3,000 bars, and the San Francisco firm is deploying 150 new consoles every month. For $1, you can choose a song from 300 albums programmed on a local hard drive, or for $2, you can pick a tune from 11,000 albums hosted on corporate servers. Ecast’s quick success is due in part to record labels looking to make money from digital distribution. Replacing Passwords With Pictures A new password encryption program replaces letters and numbers with pictures of hearts and dogs. Images scroll on the screen of a PDA or laptop as they might on a slot machine. From a grid of mixed pictures, users select their sequence by tapping the screen or keypad ATM-style. Developer PointSec Mobile Technologies of Mokena, Ill., says the passwords are harder to hack.

Five Ideas to Watch

Jeff Bezos

Jeff Bezos Amazon.com because “optimism is essential” Few entrepreneurs have taken as many lumps in the court of public opinion as Jeff Bezos has since his famous cross-country drive to Seattle in 1994 to found Amazon.com. Even as recently as June 2000, Lehman Brothers analyst Ravi Suria was memorably predicting that Amazon, based on Suria’s analysis of the company’s cash flow, would be unable to service its debt by the first quarter of 2001–and a lot of people believed him. As a result, Bezos had to spend quite a bit of time fending off speculation that bankruptcy was around the corner and explaining why he’d chosen, at least initially, to stress growth over profitability. (The fact that the company’s most famous Wall Street booster had been Henry Blodget only made matters worse, as Blodget sank into infamy even faster than the market declined.) But even fewer entrepreneurs have had the satisfaction of succeeding despite such skepticism. Not long after Amazon announced its first-ever full-year profit, we invited Bezos to talk about how he beat the odds and what the future holds–not just for him and for Amazon but for the entrepreneurial spirit. I’ve joked that in the case of Amazon.com, half of it was good timing, half of it was luck, and the rest of it was brains. And there’s a lot of truth in that. The fact of the matter is, the odds are stacked against any start-up. Heavily so. There’s a huge amount of luck and timing involved. Amazon.com’s most vulnerable moment was when we were trying to raise a million dollars of angel financing–there was a moment there, back in 1995, where the company very easily could have not continued to exist. We probably had meetings with over 60 people, the process took several months to close, and we ultimately raised the money from about 22 different angel investors. And by the way, that’s completely normal: There was a period in the late 1990s when people could, with a single phone call, raise $60 million, but that’s abnormal. If you go out to raise a million dollars for an untested idea–that’s supposed to be hard. And it was. But I am very optimistic. I’m generally a very happy person. My wife says, “If Jeff is unhappy, wait three minutes.” I believe that optimism is an essential quality for doing anything hard–entrepreneurial endeavors or anything else. That doesn’t mean that you’re blind or unrealistic, it means that you keep focused on eliminating your risks, modifying your strategy, until it is a strategy about which you can be genuinely optimistic. People think entrepreneurs are risk-loving. Really what you find is successful entrepreneurs hate risk, because the founding of the enterprise is already so risky that what they do is take their early resources, the small amounts of capital that they have, whatever assets they have, and they deploy those resources systematically, eliminating the largest risk first, the second-largest risk, and so on, and so on. “You don’t choose your passions, your passions choose you.” Entrepreneurship is really more about a state of mind than it is about working for yourself. It’s about being resourceful, it’s about problem solving. If you meet people who seem like really good problem solvers, step back, and you’ll see that they are self-reliant. I spent summers on my grandfather’s ranch, in a small town in Texas; from age four to 16 I probably missed only two summers. One of the things that you learn in a rural area like that is self-reliance. People do everything themselves. My grandfather bought a used D6 Caterpillar bulldozer, and it had a stripped transmission. He had to get a big gear out of this thing and that one gear probably weighed 500 pounds–so he had to build a small crane! That kind of self-reliance is something you can learn, and my grandfather was a huge role model for me: If something is broken, let’s fix it. To get something new done you have to be stubborn and focused, to the point where it might seem unreasonable. But at a certain point, you have to be flexible and change. The hard part, of course, is knowing when to be stubborn and when to be flexible. So we do a lot of experiments. Some of the experiments succeed and some fail, but all of them are designed to improve the customer experience. Look at something like free super saver shipping–our free shipping on orders over $25. That is something we very methodically experimented with for a full year. At first, orders over $99 would ship free, and then orders over $49 would ship free, and then orders over $25 would ship free. We knew that customers would like that, so it was a question of, would it drive enough sales to make it worthwhile? We compared it with a television advertising campaign: We picked two markets, Minneapolis and Portland, Oreg., and for a year we did television advertising just in those markets. We wanted to see if we would get a sufficient lift in sales to justify television advertising, and to compare that with giving the money directly to the customers in the form of free shipping instead of to the television networks. That’s a very customer-experience-focused experiment, and when we were done we decided we would make the $25 free shipping indefinite. It’s been in place now for almost two years. On the other hand, we invested in a number of dot-com companies–Pets.com, Living.com, Kozmo.com, and Homegrocer. Our strategy was to create placeholders for these categories that seemed interesting to us. But ultimately all the businesses I mentioned failed. Of course, if I knew everything I know now, I would have invested the money differently. But that’s hindsight. When you do experiments you have to expect a certain fraction of them not to succeed. Even once you have a strategy that makes sense and holds together from different angles, optimism is essential when trying to do anything difficult because difficult things often take a long time. That optimism can carry you through the various stages as the long term unfolds. And it’s the long term that matters. If you look at the online space over the next 20 years, you’re going to continue to see innovation. Certainly things are different from nine years ago, but there are still going to be thousands and thousands of successful companies. This is a big industry, and it’s going to have lots and lots of winners, of all sizes. Amazon itself has a kind of ecosystem of people involved in entrepreneurial activities. We have 600,000 active seller accounts now, and over 900,000 associates–the websites that link to us–and a lot of those are small businesses with multiple employees. We recently started making available software kits that let people use the basic building blocks of Amazon.com to build their own websites and e-commerce applications and so on, and we’ve had over 50,000 downloads. That’s beyond what we would have expected. If I were just setting out today to make that drive to the West Coast to start a new business, I would be looking at biotechnology and nanotechnology. I also think about data security–every time you read about the next computer virus, you wonder if there aren’t entrepreneurial solutions to that. These are fundamental technologies, things that are going to change the world. But the truth is, I probably wouldn’t do any of those things because I grew up programming computers. So maybe I’d think about data security, but I’m sure I’d do something with software and computer science and software engineering. Certainly, in the spring of 1994, the thing that motivated the formation of Amazon.com was noticing that Web usage was growing at 2,300% a year. One of the huge mistakes people make is that they try to force an interest on themselves. If you’re really interested in software and computer science, you should focus on that. But if you’re really interested in medicine, and you decide you’re going to become an Internet entrepreneur because it looks like everybody else is doing well, then that’s probably not going to work. You don’t choose your passions, your passions choose you. One of the reasons you saw so many companies that were formed in 1998 or 1999 fail is that they were chasing the wave. And that usually doesn’t work. Find that area that you are interested in and passionate about–and wait for the wave to find you.–Rob Walker Rob Walker is a contributing editor. Jeff Bezos, Amazon.com because “optimism is essential” Betsey Johnson, Betsey Johnson for her stylish life Russell Simmons, Rush Communications for his powerful example Scott Cook, Intuit because he learns, and teaches Sergey Brin & Larry Page, Google for their integrity. And, well, for Google David Neeleman, JetBlue for creating an airline fit for humans Tom Stemberg, Staples for doing it exactly right Jack Stack, SRC Holdings for going naked Judy Wicks, White Dog Enterprises because she’s put in place more progressive business practices per square foot than any other entrepreneur Davin Wedel, Global Protection because he’s a lifesaver Pat McGovern, International Data Group for knowing the power of respect Steve Jobs, Apple Computer, Pixar because we like to be seduced Lance Morgan, Ho-Chunk because a man must make his own arrows–Winnebago proverb James Goodnight, SAS for saying no to Wall Street (repeatedly) and yes to the people who really matter Stella Ogiale, Chesterfield Health Services for doing good while doing well Rhonda Kallman, New Century Brewing for seizing opportunity– again and again Laima Tazmin, LAVT because she’s a lot like other kids–and then again… Laura & Pete Wakeman, Great Harvest Bread for living a little –no, a lot Andra Rush, Rush Trucking for rolling up her sleeves Kathleen Wehner, Cirrus Aviation for refusing to quit Frank Venegas, Ideal Group because he parlayed a little bit of luck into a lot of good fortune for others Dan Wieden, Wieden + Kennedy because he’s a true independent John Sperling, Apollo Group because he stirs the pot, and apparently always will John Stollenwerk, Allen-Edmonds for his commitment to U.S. workers. We also love the shoes Mel Zuckerman, Canyon Ranch for showing the way

Special Technology Report: Inside Story

Special Technology Report The Internet promised to drastically change your business. Now state-of-the-art small-company intranets are actually delivering on that promise. Instant word-association test: What comes to mind when you hear the terms intranet and extranet? Chances are, it’s something like this: Big-company stuff. Internal Web sites with multimillion-dollar price tags at places like Hewlett-Packard and GE and Charles Schwab. Hotshot technology that my small business wouldn’t use and doesn’t need. And even if we did need it, we couldn’t afford it. Right? Guess again. True, intranets come to the party with a big-company, big-bucks reputation — and deservedly so. The earliest private Web-based networks began at Fortune 500 giants like Ford Motor Co. and Sun Microsystems. The best, in some cases, save more money than many small businesses make in a year. And true, they’ve typically involved large-scale initiatives, such as linking thousands of workers worldwide or putting millions of documents online. But here’s some news that is just as true: private Web sites are changing small business, big time. Small and midsize companies are turning to intranets (and their external cousins, extranets) in much the same way they turned to the public Web a few years ago. And in some cases, they’re getting far more favorable results with the private sites. Many are using them to fundamentally change some aspect of their business. A pioneering few are using the sites to drive their company’s entire strategy. And they’re doing it using technology once viewed as strictly a big-company tool. We’re not talking about companies’ using internal networks as electronic filing cabinets for human-resources forms or bulletin boards where Joe in accounting can advertise a used Jeep for sale. We’re talking about entrepreneurs’ strategically using a broad range of intranet-extranet efforts to gain a competitive foothold in a tight economy, typically by nurturing existing relationships or creating conduits for new ones. On one end of that spectrum are the rare companies run primarily, or entirely, on private Web sites that let them easily connect with employees, partners, or customers. One of those companies is 1-800-GOT-JUNK, a Vancouver, B.C., trash-removal business whose intranet for its franchisees, called JunkNet, helped to fuel the company’s growth from $2 million in revenues in 1999 to $10 million last year. Another is Boston-based SeniorLink, a fledgling company that will launch an extranet later this year to help baby-boomer customers nationwide find care-management services for their aging parents. On the opposite end are traditional companies that are using intranets to transform one practice, with effects that ripple through the rest of their culture. A sterling example: Extreme Logic Inc., an Atlanta-based technology consulting firm. Like many growing companies, Extreme Logic handles job-performance reviews online. What’s unusual is that the company encourages its corporate clients to log on and evaluate the employees who serve them. As a result, company officials say, Extreme Logic has deepened relationships with customers by letting them know they’re trusted partners whose opinions count. In the middle of the spectrum are companies with the most intriguing stories: those whose private sites create unprecedented opportunities. At TemPositions Group, a New York City-based staffing company, an intranet instantly matches customers’ requests for temporary employees with contractors who best fit the bill, allowing the 125-employee business to successfully bid against giant national staffing companies for major contracts. Eckert Seamans Cherin & Mellott, a Pittsburgh-based law firm, now coordinates hundreds of product-liability claims filed nationwide against one of its major clients, thanks to sophisticated technology that makes it possible for the firm’s lawyers to share court documents with other lawyers in 50 states, Puerto Rico, and the U.S. Virgin Islands. And Eminent Research Systems, in Minneapolis, uses an intranet to dramatically speed up its ability to coordinate protocol documents for medical-device tests, thereby helping the company to increase its business capacity tenfold. It’s impossible to find hard numbers on how many companies are jumping onto the private Web. The few studies done to date confirm only that a growing number of small companies have either launched a private network or expect to do so soon. Most, it appears, still use the technology for pedestrian purposes: storing documents, sharing files, ordering supplies. But we’ve found a handful of cutting-edge entrepreneurs who are using intranets and extranets to transform their business strategies, in most cases by helping their companies forge new relationships. OPEN BOOK: Dennis L. Veraldi says that his law firm’s extranet improves services for clients. What’s propelling this small-business intranet revolution? Experts tick off a number of drivers: the migration of big-business practices to small-business scale, recession-driven pressure to find new ways to get new customers or better serve existing ones, and increased comfort with doing business online. “All the things that the major corporations were doing two or three years ago are trickling down to the small-business realm,” says Ryan Bernard, president of Wordmark Associates Inc., a Houston consulting firm, and author of The Corporate Intranet. “The larger corporations were the proving ground.” Web-usability consultant Jakob Nielsen, whose Nielsen Norman Group, in Fremont, Calif., annually honors 10 outstanding intranets, has recently noticed that more small companies are making the list. Says Nielsen, “That proves it’s possible to get good effect out of an intranet without being a huge corporation.” Other experts call the trend evolutionary, saying that it is picking up speed as companies conduct more and more business online. Nearly everyone can use a Web browser, which means that nearly everyone can adapt almost instantly to a Web-based network. And small companies can now choose from a broad range of intranet options, from cut-rate do-it-yourself models to cutting-edge, custom-designed systems. Admittedly, the trend’s leaders tend to spend freely to launch, staff, and maintain their private Web sites. Initial five- or six-figure investments aren’t unusual, and some ambitious companies may well spend more. But there are plenty of less pricey options, ranging from having a savvy staffer do the job in-house to renting the service. (See ” Spin Your Own,” below.) Perhaps the most remarkable cultural change is how many entrepreneurs are overcoming their natural reticence to share information, inside the company or out. Brian Chavis, CEO of ARGroup, a Web and intranet developer based in Leesburg, Va., says that he used to have to pitch the idea of private networks to his customers. “I don’t have to do that anymore,” he says. “Our clients are telling me that they want this.” What they want, as the leading examples show, are new and better ways to connect with customers, employees, and partners. Rather than blindly following the late-1990s mantra to endlessly hurl money at their public Web sites in hopes of expanding their reach, many companies now look inward for ways to better serve customers they’ve already got. “Companies are saying, ‘Let’s really strengthen those relationships as much as possible,” says Ray Boggs, vice-president of small-business and home-office research at IDC, in Framingham, Mass. Randy J. Hinrichs couldn’t agree more. Hinrichs, group research manager in learning sciences and technology for Microsoft Research and author of Intranets: What’s the Bottom Line?, says intranets and extranets provide the perfect environment for small companies to create and nurture the partnerships they need to thrive. He makes the goal sound almost romantic. “You make long-term, meaningful relationships by saying, ‘We can share each other’s data,’ and knowing that it’s going to be consistent and trustworthy,” he says. Executives at Atlanta IT-consulting firm Extreme Logic consider it critical to forge long-term commitments with both employees and customers. So the company sends both to its combo intranet-extranet for performance reviews. The system hasn’t directly affected Extreme Logic’s revenues, which topped $30 million last year. But it’s improved the company’s own showing in two top-priority areas: retaining star performers and nurturing all employees. When workers leave — whether they’re hired away by competitors or fired for poor performance — the company spends as much as three times an employee’s annual salary to find and train a replacement. Getting quick online feedback directly from customers lets Extreme Logic reward its stars and provide specific improvement goals for everyone else. The approach seems to work. Mike Williams, who oversees human resources, says the company’s turnover rate is 5% to 10% lower than the IT industry standard. And since the company added the performance-evaluation feature to its intranet, 18 months ago, about 80% of its employees and managers feel that they’re working toward the same goals, compared with 52% before, according to an internal study. For TemPositions, making connections quickly is what counts. The company, one of 350 temporary-staffing agencies in New York City, has begun bidding against the big boys — including $4.1-billion Kelly Services — for major contracts. To compete against the industry giants, TemPositions focuses on what CEO and president James Essey calls its core strength: delivering the perfect worker faster. And to do that, TemPositions relies on an intranet that, much like a dating service, instantly matches customer requests with the best available contract employees. If, for instance, a client company needs a registered nurse with pediatric experience, the TemPositions intranet automatically E-mails the job offer to the best-qualified candidates. The system excludes temps who are already on assignments or unavailable because of vacation or illness. When contractors accept gigs, the intranet automatically E-mails them a link to their own personal job bank sites, where they find assignment sheets with dates, prices, a map, and supervisor contact information. When temps reject offers or don’t respond, the intranet solicits the next person in line. Corporate customers can even make their own temp requests online. Essey says the do-it-yourself convenience “cements us to the customer in a big way because once they get into the system and see all the information there, they’re less likely to go to a competitor.” That’s a far cry from the traditional temp-placement process, which typically requires hours of telephone tag. (Customers call the agency with a personnel request, and then agency employees dig through paper files, call candidates, and wait for return calls.) And the streamlined process, in turn, has allowed the 40-year-old company to go after huge long-term contracts it couldn’t even have considered before. At press time, TemPositions was competing for a contract to supply the New York City schools with more than 1,000 temps in a variety of areas, including curriculum and course development and counseling. “We couldn’t bid on it if we didn’t have these tools,” says Essey. “We’d need enough employees to fill a football-field-size call center.” TemPositions, which had about $30 million in revenues in 2001, spent $250,000 building its intranet in 1998 — primarily, Essey says, on Web design and for the salaries of a chief information officer, a programmer, and a technology troubleshooter — and it continues to spend liberally on salaries, equipment upgrades, and maintenance. “It’s not free,” he acknowledges. At the same time, he expects the intranet to reduce the company’s head count — eliminating, for instance, the need for data-entry staffers. Essey says those savings are well worth the investment. GRAND SCALE: James Parks credits his firm’s extranet for letting Eckert Seamans go national. Speed was the issue at Eminent Research Systems, in Minneapolis, where clogged procedural arteries were stunting the company’s growth. The $7-million, 22-employee company specializes in coordinating trials for heart and blood-vessel devices such as stents — products that typically have a market life span of only 18 months before they’re replaced by newer models. Previously, Eminent sent 150- to 500-page study-protocol documents to participating physicians and regulators, who marked them up and mailed them back. Sometimes the hefty hard copies made several round trips before everybody agreed on protocols — a process that typically took at least two months. The lengthy procedure caused some customers to forgo putting their devices on the market altogether, which meant less work for Eminent. “Turnaround time is key,” says Linda Laak, vice-president and chief operating officer. “Our competition is not necessarily another company but whether or not the client will do the study at all.” That changed in February 2001, when Eminent launched an extranet that allows doctors nationwide to collaborate on protocols electronically. The system sliced the approval process from two months to two weeks. Meanwhile, although Eminent spent $50,000 to launch its private Web site, Laak estimates that the company saves 10 times that amount by eliminating the “heavy lifting”: shipping, storage, and paying the salaries of two administrative people who handled all the documents. And the company can handle 10 times as many projects at once as it could before, resulting in a 40% increase in revenues. At Eckert Seamans Cherin & Mellott, the Pittsburgh law firm, an extranet became the key to going national without opening any additional offices. The 44-year-old firm wanted to serve as the national coordinator for thousands of product-liability claims against a major client. But the firm couldn’t possibly set up shop in all the affected jurisdictions: 50 states, Puerto Rico, and the Virgin Islands. Instead, the firm’s executive team decided it needed two things: a network of partners and a network connecting them. Those partners were, and are, “local counsel” — dozens of far-flung law firms that Eckert Seamans hired to handle claims in their own states. The network that connects them is Eckert Seamans’s extranet, which contains all related documents, including briefs, transcripts, interviews, research, medical and scientific information, and correspondence. Obviously, storing paperwork in one location helps everybody access documents faster. But Eckert Seamans argues that the extranet provides two more important benefits. First, it’s an unprecedented way to provide clients with a consistent nationwide defense by making sure that all the lawyers are literally on the same page. In addition, it saves time and money by providing those far-flung partners with research to strengthen the cases in their states. And the extranet lets the firm’s 215 lawyers coordinate cases in a way they couldn’t have before. “There is no way we could have managed and provided oversight to claims in Texas or California,” says the firm’s executive director, James Parks, citing the time and cost of constant travel, telephone calls, and shipping tons of hard copies cross-country. The system, part of a firmwide technology overhaul, didn’t come cheap: Parks estimates that Eckert Seamans has invested nearly $1.3 million so far, including construction costs to create a separate technology center. But chief operating officer Dennis L. Veraldi is philosophical about the cost. “Sophisticated, larger clients just expect that you’re going to be able to do those things, that you have the capability to service them,” he says. The firm doesn’t even worry much about tracking the system’s return on investment. “It’s part of the infrastructure, part of the overhead,” Parks says. “You have to manage it the same way you manage supplies or telephones or receptionists or libraries or anything else.” But he credits the technology with cutting legal-work costs by 6% to 7% annually and allowing the firm to take on more clients. But Eckert Seamans does worry about security breaches — and not just those involving hackers. The firm must also protect itself against possible security breaches involving the very partners for whom it established the intranet: those local-counsel firms. “Yes, we’re working with them, but they’re still competitors,” Veraldi says. So the firm relies on a combination of firewalls, multiple passwords, and encryption to make sure those faraway lawyers get access only to the appropriate cases — and only for the length of their contracts. For Eckert Seamans and other early adopters, the challenge now is staying ahead of the curve while not getting too far out in front. As Parks puts it: “We’re going to be very judicious about what we implement. We have to ask, ‘Are we letting the technology drag us? Or are we dragging the technology in a way that’s beneficial to us and our clients?’ “ But intranet evangelists believe the potential drawbacks — security concerns, cost, and the constant challenge of keeping current — pale when compared with the rewards gained from creating new partnerships and strengthening existing ones. Especially in a tough economy, the ability to forge new and stronger links offers small companies the best kind of competitive advantage. Anne Stuart is a senior writer at Inc. Jill Hecht Maxwell is a staff writer. Send your comments to editors@inc.com. Spin Your Own Why not? It’s getting cheaper. The companies mentioned here got transformational results from their intranets, but they spent a bundle. You don’t have to pay your way into intranet nirvana. There are less costly ways to get a little closer to the light. As more small businesses have started using private Web sites, software vendors and application service providers (ASPs) have found ways to reduce the pain of building them. Their offerings range from robust software packages to cheap, basic ones that a monkey can set up online in minutes. So how do you decide which path to follow? James Parks, who led the intranet project at Eckert Seamans, offers a few suggestions. BEEF UP SECURITY. Parks won’t touch a system that doesn’t force users to pass through three electronic checkpoints to enter. But if you don’t run a law firm, you may not need security worthy of the CIA. CREATE MULTIPLE LEVELS OF USER ACCESS. Some users need to read files; others need to edit them. Only a few should be allowed to delete them. So you should be able to determine whom you’ll allow into each part of your intranet and what they can do once they get there. DO AN INVENTORY OF YOUR EXISTING DATA. Can you easily move information from your company databases onto the intranet? When Parks started his firm’s project, Eckert Seamans already had 40-plus years’ worth of data living on its systems. CONSIDER STORAGE. If you’ve got 40 dedicated databases on seven mammoth servers, as Eckert Seamans does, don’t even consider the intranets that you can rent for a few dollars per user monthly. They won’t provide anywhere near the storage space you need. So if you need high security and have lots of users and mountains of information, you should start by looking at midpriced software packages — and perhaps talking with a consultant who’s built at least a few intranets before. For less than $6,000, you’ll find software from more than a dozen vendors, like Planet Intra, in Mountain View, Calif. Planet Intra’s software lets regular nontechie people create multiple levels of security access. All employees can use it to publish Web-ready content on a site, even if they don’t know HTML from TCBY. Of course, if you have a decent techie on staff, you can build your own simple intranet with a program like Microsoft FrontPage. You won’t need a firewall if you’re not letting anyone outside your office log on. Finally, if your needs are simple — say, you want a group to share a calendar, swap documents, and hold online discussions — you can set up an intranet for practically nothing. Intranets.com, the King Kong of off-the-shelf intranet ASPs, charges between $3 and $6 per user per month. Competitor InfoStreet charges $3 per user per month. Or try Microsoft’s SharePoint Team Services, which comes free with Office XP Professional Special Edition. Intranet gurus say that no matter which method you elect, there’s at least one thing you should do to ensure that your intranet doesn’t turn into the electronic equivalent of Euro Disney. Find out what would make your employees’ lives easier. People won’t use the intranet if it doesn’t help them. “Think about human needs as opposed to technology,” says Jakob Nielsen of the Nielsen Norman Group. –Jill Hecht Maxwell Still want more information on building your private Web site? Visit www.inc.com/keyword/intranet. Please E-mail your comments to editors@inc.com. Related Links: TemPositions Intranet Make Your Intranet Click Intranet Shortfalls

Rent a Phone, Lose a Headache

Bulletin Board Matthew Upchurch travels a lot — a lot. As CEO of Virtuoso Travel, which provides marketing and technical-support services to luxury-travel agencies in North and South America, he roams the world to cut deals with hotels, cruise lines, and resorts. Upchurch, who has a heavy schedule of clients at every stop and must keep in touch with his 125 employees as well as his family back home in Fort Worth, needs a portable phone. What he doesn’t need is the headache of finding local providers in the tangled web of overlapping cellular networks around the world. His solution? Rent phones from IMC WorldCell, a Silver Spring, Md., company that maintains contracts and roaming agreements with service providers in more than 120 countries around the world. Like its British competitor CellHire, which offers similar services in nearly 100 countries, IMC WorldCell offers the convenience of operating in many places with one phone and one number. However, if Upchurch is traveling to Japan, Korea, Mexico, or Brazil, each of which has a cellular platform incompatible with the platforms in the rest of the world, he needs to order a separate phone for that country. IMC WorldCell delivers the phone in advance, so Upchurch knows his phone numbers in Seoul or Tokyo before he leaves Texas. After renting phones for about four years, Upchurch purchased an IMC WorldCell phone with a permanent number in countries running the GSM (which stands for “global system for mobile”) platform, the operating system used throughout Europe. IMC WorldCell’s prices are sometimes steep: calls to the United States range from 55Â¢ a minute for preferred customers in the United Kingdom to $5 or more a minute in Kosovo. But the company can give travelers reliable access in countries like Russia, Kazakhstan, and China, where service is otherwise hard to arrange. Bulletin Board See Bot Run Rent a Phone, Lose a Headache No Receptionist Necessary Things We Love: Home-Phone-Line Networking Log On, Turn Off, Spend Less Acronym Watch A Network for Networkers A ‘Black Box’ for Your Car Please e-mail your comments to editors@inc.com.

The Price of Ignorance

The Bottom Line How much should you pay for a premium Web site? If only there were a simple answer When Tom Miller wanted a Web site for his $1-million health-care consultancy, in Clifton, N.J., he turned to the advertising agency he’d worked with for two years. “We were looking to get a discount price,” he recalls. It took the agency, which Miller refuses to name, more than six months to launch a site, at a cost of more than $3,000. Since then, he’s scrapped the site, which he disparaged for having poor graphic design (he wanted more color, less copy) and for not illustrating the company’s purpose accurately. In the end he hired another Web shop to create a new site for $15,000. At first glance, Miller’s lesson seems like a blend of two clichÃs: “buyer, beware” and “penny-wise, pound-foolish.” But in the world of Web-site design, only the first is always true. Take the case of John Ahrens. He also spent $3,000 on a site, but he came away pleased. His company, Zetet, a personal-digital-assistant-software developer in Plano, Tex., needed a no-frills Web presence on a start-up budget. So Ahrens searched for a freelance site designer. He posted a job request on eLance.com, a Web site on which contract workers bid for jobs. He indicated he’d pay $3,000 for a “simple 10- to 15-page site, no E-commerce, no database.” An independent designer, Jordan Dossett, won the bid and in three weeks produced a site that the Zetet founder calls “crisp and professional.” What does it mean if for $3,000 one customer feels ripped off and another rewarded? It means that when it comes to designing and building Web sites, rates are not the only way to judge vendor quality. In fact, they may be the worst way to gauge it. Getting What You Pay For Web-shop owners agree that site pricing generally falls into three broad categories. For the sake of clarity, let’s call them “basic,” “intermediate,” and “complex.” (See “Charting a Course of Web-Site Costs,” below.) Do you want your site to perform online transactions? And do you want your site to electronically interact with your software systems? If the answer to both questions is no, you most likely need a basic site and should spend anywhere from $500 to $30,000 for the site’s initial design (what it looks like) and development (how it works). But if the answer to either is yes, then the price ranges from $2,000 to $3 million, depending on how technologically elaborate and tailor-made you want the site to be. If at most you want your site to perform straightforward online transactions, you’re in the intermediate category and should not pay more than $100,000. But if you want your site to electronically pump those transactions into a custom-built, one-of-a-kind accounting system, you’re in the complex category, and the sky’s the limit on what you might pay. Ahrens knew that he’d need a basic site: no more than 15 Web pages and little high-tech work. That alone saved him a bundle. Intermediate and complex sites cost more because, among other reasons, they require the labor of software engineers and computer programmers. Because Ahrens didn’t want to re-create Amazon.com, that labor wasn’t necessary for Zetet.com. Ahrens also trimmed expenses by turning to an independent designer like Dossett rather than a professional Web shop. Whereas large Web shops have to set their rates to cover corporate overhead costs, independent Web pros and small shops — strapped with far less overhead — can afford to charge lower rates. By the same token, small shops and independents sometimes have more meager track records. They also might struggle to help you after they’ve built the Web site, whereas larger Web shops should have support staffs available if the site falters or simply needs to be updated. Since Ahrens screened Dossett’s portfolio and built a site that didn’t need much ongoing support, those concerns didn’t trouble him. But anyone building a new Web presence on a budget needs to keep such issues in mind. Building an intermediate or complex site engenders different cost concerns. The pricier sites, besides having sophisticated E-commerce features, often have detailed databases that mesh with a company’s back-end systems (including inventory, fulfillment, and accounting). As a result, building the sites requires lots of costly technical labor. The precise cost of that labor — both what the Web shop pays its employees and what it in turn charges its customers — varies widely not just from Web shop to Web shop but sometimes from client to client. Most Web developers — be they small, large, or independent — charge a flat fee (as opposed to an hourly rate) for designing and developing a Web site. However, to calculate the flat fee, the shops first determine how much a site will cost them to produce in hourly labor. Then they charge their customers a multiple of that amount. Most shop owners that Inc. Technology spoke with charge about double their labor costs. One way to avoid getting ripped off is to learn precisely which labor costs are involved in the construction of your site. Has the shop employed database programmers in your service? Java programmers? HTML writers? CGI scripters? The labor costs associated with each of those technical functions depends on the skill of the techies and the pay scale of the shop. And because, say, Java programmers are more expensive than HTML writers, the cost of your site will be determined by how much of each type of technical expertise your site needs and how long it takes the shop’s techies to finish a job. While a few shops are loath to reveal their labor costs, most of them will gladly show you what’s known as a “rate card,” a listing of hourly rates that the shop charges its customers for particular tasks. (According to Advertising Age, those rates vary with stunning amplitude. For instance, copywriting typically ranges from $85 to $235 an hour; database programming costs $115 to $250 an hour; graphic design starts at about $105 an hour and can skyrocket to $280 an hour.) Shops have the rate cards just in case customers — after agreeing to a quoted flat fee — suddenly want to add new bells and whistles to their sites. All of that means that if you take your Web-project specifications to multiple vendors for a price comparison, there is a lot more to compare than just their quoted flat fees. Get rate sheets and itemized labor costs from each vendor. See whether one shop has you down for more hours of, say, HTML writing than another. Check whether those additional hours are costing you more per hour. Determine whether the project will take longer as a result. And establish early on how flexible the shop will be when it comes to modifying the site blueprint for which it gave you a flat estimate. Money Madness Among the many factors that influence Web-design rates are region, shop overhead (like rent and employees), and level of service provided. (Some shops offer phone tech support; others offer additional services, such as marketing, public relations, and logo design, to complement Web pages.) There’s also a bevy of less tangible factors. Some Web-design outfits lower their prices out of desperation for customers or to add an impressive client to a portfolio. Others raise prices when they think a client might willingly pay a higher fee. Matt Francis, CEO of InterScape, a $750,000 shop in Marietta, Ga., admits that he might quote the same basic project at two different amounts for two different customers. A customer who is likely to stick to a project’s initial blueprint usually gets a cheaper quote than a customer who seems likely to request alterations at every stage of the project. Francis gauges a customer’s likeliness to amend the project mostly by instinct, based on the customer’s seeming skittishness. Depending on how many changes Francis anticipates the customer will make, he can modify his flat fee by hundreds or thousands of dollars. Francis, Dossett, and several other Web pros all say they have encountered small-business owners who are shocked to learn that professional Web-site building usually costs more than $1,000. They attribute the sticker shock to two factors: first, there is a proliferation of Web-design freelancers and moonlighters who offer their services at bargain prices on job exchanges like eLance.com; second, some huge companies have run ad campaigns claiming they can build a legit Web presence for a low starting cost. Both Dell and IBM, for example, have run offers to build functional small-business sites for less than $500. Not enough attention is paid to what you actually get for those offers, the Web pros claim. At Dell, it was one year of hosting, a domain name, and three Web pages. At IBM, it was the same thing but with only six months of hosting. In short, both offers were an affordable way to publish a pamphlet in cyberspace. But neither included the technology needed for conducting online credit-card transactions or for building a database of site visitors. Tim Donahue, CEO of WebProsNow.com, an online project exchange for Web shops, cautions that costly as it can be to build a site, you must avoid the mind-set that once you launch it, you’re done. Keeping a site current — making sure the links are live and the content is fresh — isn’t cheap. Sometimes it requires one dedicated employee, the proverbial Webmaster. Other times it might even require replacing the shop that built your site with another that better suits your needs. Laura O’Keefe, co-owner of start-up manufacturer California Solutions, in Los Angeles, learned that lesson firsthand. She paid WebMetro, a $5-million Internet consultancy in Pasadena, Calif., more than $5,000 to produce a site for her company at www.Petaromatics.com. Not long ago, WebMetro proudly listed the site in its online portfolio. But O’Keefe is no longer one of WebMetro’s clients. She regrets the expenditure, since her company, she says, has already outgrown the site. When WebMetro developed the site, in November 1999, California Solutions sold only one product. Today it sells 38. But because she forced WebMetro to work within certain technical and budgetary constraints, adding products and features to the site hasn’t been simple. She admits that she made rigid demands on WebMetro and that she could have better communicated her goals. Still, she’s turning to another, less expensive Web shop to rebuild her site into one that can easily grow as her company expands. Her story epitomizes a moral of Web-site building that more small-business owners learn every day: Getting it right the first time is important. But it’s only the beginning. Ilan Mochari is a staff writer at Inc. Charting a Course of Web-Site Costs Boiling down the cost of building a Web site is like boiling down the cost of commissioning a portrait: prices vary widely, depending on who’s doing the painting and who’s doing the paying. Still, here’s our best effort to sum things up: Site type Cost What you get Make sure to ask … Basic $500 to $30,000 5 to 20 pages and a contact form Will this look original? Intermediate $2,000 to $100,000 E-commerce Will this support a rash of orders? Complex $20,000 to $3,000,000 Interacts with your software systems Will this investment ever pay off? How to Find an Ace Web Designer Web-site pricing may be a knotty issue, but choosing a quality designer shouldn’t be. Most designers display portfolios of their work on their own Web sites. But how can you inspect a portfolio for quality if you know nothing about the art or science of producing Web sites? Here’s how several experienced Web designers answered that question: Compare the designer’s work with highly polished sites. “Go to Apple.com, IBM.com, CNET.com, or EddieBauer.com,” suggests industry veteran Tim Donahue, who sees the best and worst of Web work each day as CEO of WebProsNow.com, a job board for Web shops. “Ask yourself, ‘Does the shop’s portfolio look as professional or navigate as easily?’ “ Determine whether the shop can create a unique look for you. Inspect the layouts in the designer’s portfolio. Do they look similar, or has the shop shown variety? Contact the businesses whose Web sites are part of the shop’s portfolio. Ask them how satisfied they are with their sites. Ask them whether the shop provided high-quality, consistent support once it finished building the site. Assess whether the sites in the portfolio have been updated. Dead links and slowly loading images are a bad sign. They show that either the shop or the client has neglected the site. They also show that the shop hasn’t thought twice about including a defective site in its portfolio. Scrutinize the shop’s client list. Check to see whether the shop has worked for a business or two you’ve actually heard of. Also examine whether any of the clients’ sites have features you’d want (or detest) on yours. Please e-mail your comments to editors@inc.com.

A Network EKG

Techniques: Microcases Infrastructure Problem: Stalled Web site, crashing E-mail Solution: Software that monitors an entire network Payoff: Faster troubleshooting, less downtime When the network goes down even briefly at Homebytes.com, CEO David Clark considers it a disaster — for his customers and his employees. Homebytes, a $2.5-million start-up in Richmond, Va., provides a portal for homeowners to list their for-sale properties on various real estate Web sites. The 150-employee organization maintains a wide area network linking more than 100 machines in Texas, Washington, D.C., and California, as well as Richmond. Since Homebytes’ site is the primary way customers come to the company, hiccups in the site’s service can drive away potential business. And if the E-mail system fails, Clark’s employees feel hamstrung, unable to do their work. At one point during the company’s two-year existence, it wasn’t unusual for the Web site to crash more than once a week. In recent months, a bigger problem has been keeping the company’s E-mail system up and running. “About two months ago our E-mail went down for an afternoon,” recalls Clark. “Not only was I frustrated by my own inability to get things done, but I was presented with employees’ wanting to take the rest of the day off because they felt they were spinning their wheels sitting at their desks without E-mail. I told my tech people that in the future I wanted to know that a problem was going to happen before it happened.” The person who fielded Clark’s directive was Rich Mulrain, a network engineer. A friend suggested that Mulrain take a look at a new software application designed to monitor network performance. The software, which sells under the clunky name WhatsUp Gold, is made by Ipswitch Inc., in Lexington, Mass. Every 60 seconds the software polls all the machines that make up a company’s network. If a server or a router fails to respond adequately, the software alerts network administrators to the location and nature of the problem. The warning can come by E-mail or beeper, depending on which systems are functioning. “WhatsUp paints a picture of what my network looks like,” Mulrain explains. “I can use that picture to monitor everything, and when something goes down, our response is faster.” When Mulrain installed the software, in July, his grandest desire was to arrange an E-mail-notification protocol that would prioritize which information-systems staffers would be notified — and in what order — if part of the network failed. Using this system, he assigned a point person for each device. When trouble occurs in a particular device, the system quickly alerts the point person assigned to it as well as the company’s help desk, so they can anticipate incoming complaints. The system also warns other technicians that the network is malfunctioning. “When we know where problems are minute by minute, we can call up the person who owns that device and say, ‘We see that you have this situation over there,” Mulrain says. “It gives us control.” Mulrain can also track mishaps that occur on the off-site servers that host some of the company’s data. “We know if our Web site is down before our ISP does,” he says. “In fact, we can call them and tell them when there’s something wrong in their building.” That remote-monitoring functionality is particularly helpful in documenting the level of service Homebytes receives from its vendors. “We can verify if they’re complying with service-level agreements or not,” he says. CEO Clark is very relieved that Mulrain’s research turned up the Ipswitch software. And he’s especially happy that the program cost only about $1,000 — significantly less than other, older network-monitoring software sold by the likes of Computer Associates and Hewlett-Packard. But for Clark the most important thing is that his IS team can now respond much faster to potential problems. “We can’t afford to lose any network time,” he explains. “If our Web site is down for only a few minutes while customers are inputting their personal information into our site, their confidence in us wavers. That can create the reputation that your technology is not so solid — and that’s my greatest concern.” Please e-mail your comments to editors@inc.com.

On the Wired Front

Cover Story Blue-collar communities are designing their own high-tech networks to attract business Tacoma, Wash. Stand on a street corner and you can feel it. Not the unstoppable rush that hits you when you emerge from a New York City subway station. Not the charged air hovering about MIT in Cambridge, Mass., or the relentless new-day vibe of a Silicon Valley morning. But there’s something brewing in Tacoma, this city on the south shore of Puget Sound. Young men and women on their lunch breaks dot the sidewalks. Men in hard hats pop in and out of boarded-up, abandoned warehouses and mills that they’re renovating into San Francisco-style loft offices. Cranes swing around the waterfront, where new buildings are going up. “I can’t say I’ve ever seen that before in 20 years,” says Rob Grenley, an area native who cofounded two companies in downtown Tacoma: Grenley Stewart Resources Inc. and ID Micro Inc. How is it that after decades of stagnation the city of Tacoma is sputtering back to life? For starters, it’s only about 30 miles south of Seattle, where the high-tech growth spurt has gobbled up almost all the available space and ratcheted up real estate prices to twice what they are in Tacoma. And there’s another ace up the smaller city’s plaid-flannel sleeve: a state-of-the- art, high-speed fiber-optic network that covers the city. Tacoma — rich with small-city business perks like a sane commute, ample parking, and a start-up-friendly permitting process — is now technologically equipped to play ball with the big kids. Two or three years ago, says commercial real estate broker Eric Cederstrand of Colliers International, corporate clients refused to even drive past Tacoma and look out the car window. Seattle was the city they wanted on their business cards. Now, he says, the Tacoma warehouses he’s renovating are filling up faster than he can sandblast the timbers and hang the reproduction windows. “It’s like Tacoma was put in a time capsule,” he says. “All of a sudden we’ve broken open the time capsule, and we are literally creating a brand-new city.” The new network in Tacoma represents another chance at economic viability — perhaps even boomtown success. As is true with many small cities, all this might not have happened if Tacomans had waited for the local cable or phone company to install the high-speed networks that businesses now demand. Frustrated with the inattention of big cable and phone companies, publicly owned utilities in tiny towns and small cities in states all over the country have taken matters into their own hands. They’ve dug up streets, laid fiber-optic cable, and connected residents and businesses to new high-speed lines. Service providers are rushing in to sell Internet access through the new infrastructure. (In some cities, the utilities are even selling the services themselves.) The introduction of choices has made life easier for the businesses already in place and made the cities more attractive to start-ups. For Tacoma, the new network is much more than a tangle of glass threads. It represents another chance at economic viability — perhaps even boomtown success. City of Destiny Nearly surrounded by water, with preposterously huge Mount Rainier looming in and out of the clouds to the southeast, Tacoma tends to hang back behind its sexier sister, Seattle, just up Interstate 5. In 1873 the Northern Pacific railroad chose Tacoma over Seattle for its western terminus, and ecstatic Tacomans tagged their town the “City of Destiny.” For many years paper mills choked the air with an acrid stench that came to be known as “Tacoma’s aroma.” In the 1960s a shopping mall was built in Tacoma. Almost immediately, the downtown retail district started to collapse. Buildings stood abandoned for decades. Crime rose; street gangs moved in. To business owners in those days Tacoma’s nickname must have sounded ironic. “We were the corner business on both corners,” says Steph Farber, whose family’s LeRoy custom-jewelry shop has occupied a storefront in the middle of a downtown block since 1942. For years buildings on both sides were blighted all the way to the end of the block. By the 1980s, Tacoma was standing still as Seattle flourished. Thousands of people from the Tacoma area clogged I-5 every morning on their way to jobs in Seattle and surrounding King County. When Rob Grenley left for college, Tacoma had “a postapocalyptic look,” he recalls. “You didn’t want to do business there unless you had to.” Grenley worked first on Wall Street and then in Seattle, but returned to Tacoma in 1990 to start a truck-fueling business with Greg Stewart, a childhood friend. Things were just beginning to turn around then. City officials were working hard to clean the place up. They threw all their resources at improving public safety. They ripped down offending buildings and put grassy parks in their place. And they clung tightly to Tacoma’s marquee business, the Frank Russell Co., a multimillion-dollar international investment-services firm that is headquartered on Tacoma’s waterfront. But in the early 1990s the city’s communications infrastructure was still stuck in a technological tar pit. “You’d get on the phone and it would be, ‘All circuits are busy,’ ” recalls Steve Klein, superintendent of Tacoma Power, the municipally owned electric utility. The cable service was equally poor. “They had a monopoly, with no incentive to improve the infrastructure,” Klein says. The Energy Policy Act of 1992 had deregulated the wholesale side of the power business. To stay competitive, Tacoma Power was planning a fancy digital network that would allow it to operate switches, read meters, and manage power loads from remote locations. Klein calls this type of service electricom, from electricity and telecom. “Microprocessors are in everything,” he says. “They need electricity to power them, and they need telecom to interact.” The SRI International consultants Klein hired to review the plan told him that while he was at it, it made sense to install a bit more fiber than was called for, to wire the city for high-speed Internet access and other applications. The city surely needed it; its franchise office had been negotiating with cable provider TCI Inc. for service upgrades, but TCI representatives were stonewalling. Klein approached TCI and phone company US West about teaming up to share the cost of the new network. “They told us to get lost,” he says. In 1997 the city council approved Tacoma Power’s plan to spend $100 million on a fiber-optic network. (The money came from the utility’s wholesale revenues; residential and business customers saw no rate increase. Tacoma Power customers have the second-lowest rates per kilowatt hour in the state, according to the company’s government and community-relations manager, Diane Lachel.) Construction of the network began in January 1998, and by July the power company had its first cable customer. Today the Click Network, as it is called, covers 180 square miles. Tacomans now have choices, which forces better customer service. The city’s marketing people claim that 100 start-up companies have located in Tacoma since Click went live; some have relocated from Seattle. Those businesses (and city residents) can choose from five different Internet service providers that the network supports. But the real surprise came along in the same month that Tacoma Power broke ground on Click. TCI suddenly announced a decision to invest $30 million to upgrade its own infrastructure. “When they finally woke up to the fact that we were a reality, they tried to stomp us,” Klein says. But, he adds, Tacoma residents and businesses now have choices, which forces better customer service. Tacomans also have seen hundreds more jobs, more venture capital, and better workforce training in their hometown. Dublin transplant Bill Towey runs a high-tech incubator through his private-investment firm Tacoma Venture Partners LLC. “A lot of these workers were already here,” he says. “They just don’t drive north to Seattle or Redmond anymore.” Towey plans to raise $15 million for his incubator. He and various local companies are involved in a technology boot camp for Tacoma high school teachers. Giddy with the first signs of success, and eager to tout its prospects, Tacoma has retained the New York City marketing firm Development Counsellors International for $127,000. Tacoma’s economic-development director, Juli Wilkerson, is touring the country, promoting “America’s #1 Wired City” to site-selection companies. City employees now have E-mail addresses that end in wiredcityusa.com. And broker Eric Cederstrand is hot on the idea of changing the names of Broadway and Commerce Street to Broadway.com and E-Commerce Street. “There’s a positive-multiplier effect,” Rob Grenley observes. “More people come, which means businesses will grow and flourish, as opposed to people not wanting to come here on a bet. It’s nice to be heading toward that in your hometown.” Naturally, AT&T, which bought TCI in March 1999, says the company had planned to modernize its services all along. “Regardless of whether Click Network was in place or not, TCI would have upgraded Tacoma because plans had always been in place to upgrade at that time,” says Steve Kipp, executive director of communications for AT&T Broadband’s Northwest division in Seattle. Yet the Tacoma experience with TCI was echoed in Cedar Falls, Iowa, and Boulder, Colo. In fact, some 65 municipalities have made end runs around their cable or phone monopolies to offer telecom services, says Martin Gidron, managing editor of UT Digest, a newsletter in Silver Spring, Md., that has chronicled the phenomenon. The trend will continue, Gidron says, since “the demand for telecom services seems to be insatiable.” Heart of the Commonwealth Some 3,000 miles east of Tacoma, nestled among seven green hills far less dramatic than Mount Rainier, lies the city of Worcester, Mass. Worcester — birthplace of Abbie Hoffman, the diner restaurant, the smiley face, and the Pill — has long been known as the Heart of the Commonwealth. The name fits: the city’s central location and highway and rail infrastructure make it a natural for commerce. Worcester has also been known as New England’s utility closet, because it was a manufacturing center for many years. Most of Worcester’s industrial powerhouses have moved on to cheaper pastures, leaving the city with an assortment of old, abandoned buildings, including a cold-storage warehouse that burned catastrophically last December, killing six firefighters. In the 1960s, Worcester replaced a massive piece of its core with a suburban-style mall. The shopping center never really caught on, but like the one in Tacoma, it sparked the collapse of the city’s formerly thriving downtown retail base. In the past few years Worcester officials have staked the downtown’s future on another huge, single-use project — a mammoth medical facility — and have restored the 90-year-old Union Station, a beaux arts train depot that had been left to rot for decades. (Tacoma also recently restored its own Union Station, which is being used as a courthouse.) Worcester residents have always suffered from a bit of an inferiority complex, partly because their town, like Tacoma, is within the shadow of a larger, more vibrant city (in this case, Boston). Even the restoration of Union Station, the pride of the city, came only after years of contentious intracity squabbling and institutional paralysis. Now, nearly a year after the project was completed, its beckoning retail space is almost entirely unoccupied. Like Tacomans, Worcester, Mass., residents have always suffered from a bit of an inferiority complex, partly due to their proximity to a larger, more vibrant city. Another part of the problem may be Worcester’s form of government. The chief executive is not the mayor but rather the city manager, who is appointed by the city council instead of being elected by residents. Worcester has had only three city managers since 1953 (when business leaders succeeded in instituting this “professionalized” municipal structure), and none of them has been directly accountable to voters in the way elected officials are. That can make it difficult to create real change. “Worcester has gotten a little bit behind the curve,” says Arthur Couture, an entrepreneur who eyed neighboring towns before choosing Worcester and its easy commute for his software and computer-services company, ICAL Systems. Now, Couture says, Worcester officials are being pressured to leapfrog ahead. A new fiber-optic network has been installed in the city, and local businesspeople are relying on it to lure new companies to their hometown. A marketing brochure only slightly less effusive in tone than Tacoma’s PR avalanche labels Worcester “America’s #1 Cyber City.” Worcester’s network differs from Tacoma’s in one fundamental way: a private-sector builder of fiber-optic networks called NEESCom, which was established as the telecom subsidiary of the electric utility formerly known as New England Electric System, installed it at no expense to the city. Gidron of UT Digest says that more than 150 private electric utilities have similarly entered the telecom market. Tom Wharton, a former bankruptcy-turnaround consultant, is the man who turned NEESCom’s head. In 1998, Wharton bought a bankrupt Internet service provider. Bell Atlantic was going to charge him $6,000 a month for connectivity in Worcester. So he drove 45 minutes to Providence, R.I., where he could colocate his servers with another provider for $250 a month. On the drive back to Worcester, he mused that it was unfortunate he couldn’t locate his business in the city where he lived. Why, he wondered, was Worcester’s technology infrastructure so far behind that of other New England cities? Wharton wrote a letter to the editor of the city’s daily newspaper. “The next thing I knew,” Wharton says, “I was heading a task force.” He began working with the Worcester Area Chamber of Commerce to bring the city’s technology infrastructure up to speed. Hearing about Wharton’s efforts, NEESCom figured that Worcester would make a great hub for its new regional fiber-optic network and offered to wire the city at its own expense. About half a dozen competitive telecom companies have since moved in and started selling services on the new network, and Wharton estimates that the influx of providers has drawn at least 10 start-ups to Worcester. That includes a new venture for native entrepreneur Steven Rothschild, who, after having run a family furniture business for 16 years, had started Furniture.com in Worcester. In 1997, Rothschild’s high-speed T1 line was costing him $1,800 a month. He was having trouble finding tech-savvy executives who were willing to work in Worcester, and venture capitalists weren’t breaking down the door to fund a company in the former mill town. All of that, combined with the tough time he was having in getting tax credits, prompted him to move the company to Framingham, halfway between Worcester and Boston. But earlier this year Rothschild launched an online lightbulb store, called Bulbs.com, in Worcester. High-speed Internet service costs him $168 a month — less than a tenth of what he was paying three years ago. He’s also having an easier time recruiting managers. And there’s even a new $15-million fund for early-stage Worcester businesses. “The technology infrastructure is taking out some of the roadblocks to staying in the city,” Rothschild says. Wharton’s task force — the Worcester InfoTech Project — has taken on the mantle of marketer for the city’s new high-tech offerings. But the NEESCom network hasn’t been a panacea. “This isn’t Field of Dreams — ‘If you build it, they will come,” says Couture, who hasn’t even been able to connect his business to the network yet. Another prominent local company, Tatnuck Bookseller, is situated just a few hundred feet away from one of the city’s three network rings, which cover the downtown business district, a biomedical park, and Worcester Polytechnic Institute. “We are betting our company’s future on giving our customers access to us and having access to them,” says Tatnuck owner Larry Abramoff. “Not being wired is hurting my business right now.” (Until the network reaches him, he’s making do with leased T1 lines and a wireless service.) Still, Worcester’s model — in which a private company, rather than a public utility, installs the network — may prevail in future business-community resurrections. Tacoma’s model has goosed some big privately owned phone companies. In Washington state, GTE Northwest sued the Douglas County Public Utility District to stop it from expanding its fiber-optic network (the suit was later withdrawn following changes in state law), and the Washington Independent Telephone Association took Pacific County Public Utility District to court to stop it from providing Internet service to customers. So far, Texas, Missouri, and Virginia have passed laws limiting publicly owned electric utilities from offering telecommunications services. AT&T’s Kipp views the public companies’ inroads in this area as a conflict of interest. “We’re beholden to our shareholders,” he says. “Then we have to go in and compete with the government, who’s also the regulator. That could have a chilling effect on competition.” Steve Klein of Tacoma Power doesn’t really care if Click loses residential customers to the new AT&T offerings; he built the network for the power company’s own purposes, and the Internet-access stuff is just gravy. The mayor’s office doesn’t mind if some Tacoma residents think “Wired City” sounds as if a bunch of caffeine addicts have staged a coup. Some of the new start-ups may not even survive. But 100% success is not the point. The point is to get things going. The more that entrepreneurs hear about Tacoma, the more seriously they will consider starting or relocating a business there. For the first time the people of Tacoma — and Worcester and other old-economy communities like them — are leveraging their technological assets to promote entrepreneurial businesses. They’re grabbing the reins and kissing destiny good-bye. Jill Hecht Maxwell is a reporter at Inc. Technology . Question Authority Small cities want their zip codes on your letterhead, and they’ll try their darnedest to convince you that their technology is state-of-the-art. Don’t believe the hype. Here are some key questions you should ask regarding tech infrastructure before you relocate: Can I connect to a fiber-optic network in your city? How much will it cost to plug in? How long will it take? Who’s competing to provide me with service? What are the rates? Is the network connected to major cities nearby? How many other companies are there? Do they use the network? Can residents connect to the high-speed network and telecommute? Are wireless services available? Up to Date in Kapolei Remember when every burg across the nation was billing itself as the next Silicon Whatever? Well, now several cities and at least one state want to be known for their wired wonders. Here’s a sampling of the claims: The Wired City Kapolei, Hawaii America’s Most Wired City Louisville, Ky. The Most Wired City in America Stillwater, Okla. America’s #1 Wired City Tacoma, Wash. America’s #1 Cyber City Worcester, Mass. The Internet Capital The state of Virginia Please e-mail your comments to editors@inc.com.

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