MPR: The High-Tech Fall

The High-Tech Fall
By Bill Catlin
November 29, 1999
Part of MPR's "Minnesota in the .Com Age" special

Minnesota gave rise to computing powerhouses like Control Data and Cray Research, companies that made the fastest computers in the world. But Minnesota has clearly lost that leadership role. One recent report ranked the Twin Cities 32nd in high-tech output.

Minnesota's computer industry got its start here in a two-block-long glider factory on St. Paul's Minnehaha Avenue.
Photo: Bill Catlin

MINNESOTA HAS by no means fallen into technological obscurity. Medtronic remains a towering and expanding presence in medical technology. 3M churns out hundreds of patents a year. IBM has a major facility in Rochester.

But the state, which played a lead role in the birth of the digital age, now has more of a bit part. University of Minnesota President Mark Yudof puts it this way.

Yudof: I think it's pretty clear if you had been guessing in 1955 where the "Silicon Revolution" would have taken place, it would have been in the Twin Cities, in Minnesota. It's pretty clear that's not where it took place.

Why did some of the seeds of the early computer industry fall in Minnesota? Ask Bill Norris, founder of Control Data.

Norris: Well, it was a matter of last resort.

After World War II, Norris and a group of Navy colleagues were having trouble finding a partner to help them continue developing calculating machines they used for codebreaking during the war. But the Navy wanted the project to succeed.

It's Not All Bad News MN. Software Industry Surging

According to MN Dept. of Economic Security statistics, employment in Minnesota's software industry doubled from 1993 to 1998, and is closing in on the level at which employment in the computer hardware industry peaked. See chart.

According to MN Dept. of Economic Security statistics, employment in Minnesota's software industry is growing considerably faster than in the US as a whole. See chart.

See note.

Norris: Just happened there was a guy by the name of John Parker who had a glider factory, in St. Paul. And you know, there's not much demand in peace time for gliders. And he was looking desperately to keep his business going. And the secretary of the Navy knew John Parker, John used to be in the Navy, and the secretary of the Navy said maybe this was the answer.

Minnesota's computer industry got its start here in Parker's two-block-long factory on St. Paul's Minnehaha Avenue. In 1947, Bill Drake, joined the new company, Engineering Research Associates. Sitting in the cavernous space decades later, Drake recalls the factory's other occupants.

Drake: There were pigeons and birds flying around in there and frequently there was more than one expletive deleted that resulted from an assault from above.

Drake and former colleague Edward Zimmer recall E.R.A.'s early days as exhilarating, with the satisfaction of pushing the frontiers of science.

Drake: There was a lot of freedom, a lot of ability, really bright people, and all playing on the same team.
Zimmer: I'd work till midnight, come home, and back again at six in the morning.
Drake: There must have been a lot of this at microsoft in the early days--just a zooming!

Engineering Research Associates did not become the first Microsoft. In 1951, the company was sold to Connecticut-based Remington Rand, later Sperry Rand, which continued to build computers in Minnesota. But E.R.A. assembled the central building blocks of Minnesota's industry. One of them was Seymour Cray, a University of Minnesota-trained electrical engineer. Cray's ability to design the world's fastest computers established Minnesota as a leading force in computing, and made him a legend. John Rollwagen is the former CEO of Cray Research, the company Cray started in 1972.

Rollwagen: Well, Seymour was fundamental to what happened, because he was a true genius, and in our field, the computing field, he's like a Thomas Edison, or an Edwin Land in photography, he's just a monumental figure.

Earbytes

Charles J. Murray, author of "The Supermen: The Story of Seymour Cray and the Technical Wizards behind the Supercomputer" describes Cray's effort to build the 1604 computer in the Minneapolis newspaper warehouse where Control Data got its start. Listen (28.8)

Arthur Norberg, director of The Charles Babbage Institute of Computer History at the University of Minnesota, says the Navy's initial support for Engineering Research Associates was crucial, both in helping the company get started, and in providing business for the new firm. Listen (28.8)

In the late '50s, Cray followed Bill Norris and other E.R.A. employees to the new Control Data. Cray used rejected transistors to build key parts of the company's blockbuster first product, the 1604. By 1965, Control Data was the third-largest computer maker in the country, with more than 9,000 employees. But if Cray's genius played a key role, so did the taxpayer. Gary Smaby is a longtime analyst of Minnesota's computer industry.

Smaby: The origins, and the sustenance for the industry came from the U.S. Government.

Control Data and Cray Research took off by selling "big iron," super-fast computers for engineering and science. Smaby says the Cold War was the key factor in the rise of Minnesota's computer industry.

Smaby: It was good news, bad news; it did, in fact, provide the basis, the foundation for the industry that prospered for a couple of decades, so that was the good news. But, like any industry, once you get dependent on a certain model, it's difficult to change and adapt to a new model.

Former Cray Research CEO John Rollwagen disputes that view. He says early on, the company saw only 86 customers for Cray supercomptuers, mostly government labs. But the private sector discovered the machines' value for designing cars, airliners, even plastic Coke bottles.

Rollwagen: Those are pretty fancy devices, because they have to hold that pressure and a lot of the design work was done on Crays. We got into the commercial sector, and instead of having 86 customers, we had 860 and we sold 100 machines a year, and we bulked up to do that.

Rollwagen contends much of the original government market remains, But by the early '90s, the accelerating power of the microprocessor gave commercial customers comparable computing power on ever cheaper machines.

Rollwagen: Work stations, even PC's could do the same calculations that the original Crays could do. In fact, I've bought my kids computers that have way more power than the computers I sold 10 years ago for millions of dollars.

Ultimately, the companies bred in Minnesota failed to adapt to the rapid, fundamental changes in technology that were taking place. Cray Research eventually lost its independence. Three years ago, Silicon Graphics of California bought the company.

Control Data, for its part, got hammered by more than the microprocessor. The company lost its focus on computers, its bureaucracy resisted change, and the mid '80s brought an industry recession. By 1989, the company's five-year losses totaled nearly $1.5 billion. Three years later, it split in two.

But the loss to Minneota can't be measured simply in the thousands of jobs the industry shed. The personal computer and Internet revolutions took place elsewhere. Minnesota lost critical mass.

This Web site promotes one of the products of Macromedia, a leading Internet company now based in San Francisco. The company began in Minnesota, under the name Authorware. Founder Michael Allen says despite the company's early success here, officials worried about the depth of Minnesota's software talent.

Allen: Our advisors and board felt that it would be smartest for us, now that we appeared to be becoming mainstream software, for us to move into the mainstream of the culture, and decided we should move to California, where they felt that the talent pool was much much larger.

Macromedia now has more than 600 employees and is one of 50 firms in a new Fortune magazine index designed to track the growth and impact of the Internet economy. None of the 50 firms is based in Minnesota.

But the news is not all bleak. State job statistics suggest Minnesota's software industry has doubled in the last five years, and is approaching the number of jobs at which the hardware industry peaked.

John Riedl, chief scientist for Net Perceptions, a Minnesota-bred e-commerce company gaining national attention, says his company, and a few other Internet-related software firms are putting Minnesota back on the map as a high-tech center.

Riedl: Instead of having a half-dozen real shining examples of Minnesota high-technology success, I'd rather us have two-dozen examples of that. Because once you get that critical mass, you just get to where anyone says, "You're going to have to move out of Minnesota to be successful," you know, just sounds stupid. Where right now they still sometimes get away with it.

While new shoots are clearly emerging from the ashes of the mainframe-computer industry, Minnesota still has much to prove before it will be known as a hotbed of the new economy.

Note on charts:
State statistics do not offer an exact count of software and hardware jobs. In the computer hardware category, "Computer and Office Equipment," the statistics include jobs related to the manufacture of cash machines, for example. The software category, "Computer Programming, Data Processing, and Other Computer Related Rervices" includes jobs related to computer rentals.

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