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Diversity and Depth

The Massachusetts technology economy is incredibly diverse, with 5,386 high-tech companies employing 459,424 people across the state, according to Mass High Tech, a weekly business journal. Software and Internet companies abound, with 2,963 firms employing 138,252 professionals. The remaining 2,423 companies employ 321,172 people who manufacture a vast array of primarily IT products -- from communications switches to computers, semiconductors, electronic components, and health-care technology.

In recent years, hundreds of Internet, software and telecommunications companies have sprouted in cities like Boston, Cambridge, Andover and Waltham. The IT fever has spread south to Hyannis on Cape Cod and west to Williamstown in the Berkshires. All along Rt. 128 minicomputer makers and defense giants have given way to third-generation networking hardware and software developers who make gigabit switches and customer billing software for telephone carriers and corporate customers.

Today, voice and data networking giants from around the globe are building their global R&D headquarters in the Telecom Corridor along I-495. During the past two years, Lucent Technologies has invested nearly $5 billion to acquire eight networking and software companies here, including Excel Switching for $1.7 billion, Nexabit Networks for $900 million, and Kenan Systems for $1.5 billion. Lucent employs more than 9,000 IT workers in Massachusetts. This spring, Germany's electronics giant, Siemens, acquired three Massachusetts startups -- Argon Networks, Redstone Communications and Castle Networks -- for more than $1 billion and combined them into a new networking subsidiary known as Unishphere Solutions, headquartered in Andover. Cisco, 3Com, Ericsson, Nortel and Nokia have all followed suit, investing billions to open a window on Massachusetts innovation.

"The world of business is divided into four groups -- attackers, defenders, arms merchants and customers," says Howard Anderson, president of the Yankee Group in Boston. "Massachusetts has always thrived on building attackers and arms merchants. That's why the telecom giants, which are all defenders, are investing here."

Indeed, when Siemens realized the convergence of voice and data networking would be ruled Internet Protocol (IP) technology, they scoured Europe and the US looking for the best IP innovators. They found them in Massachusetts. "They needed to fill some gaps," says Marty Clague, who was hired away from IBM's e-business unit to run the company. "Unishphere Solutions is not a startup," he says. "It's a jump up." By year-end the company will employ 600 people here.

By some estimates,  as many as 1,000 telecommunications companies employ 100,000 people in the commonwealth. Sales from their Massachusetts operations exceed $44 billion annually. Software companies and test equipment makers also abound. For example, Lightbridge, which employs 400 people in Massachusetts, sells fraud detection, risk management, customer acquisition and retention software to many of the world's largest communications carriers.

"The educational institutions create a wonderful workforce to draw from," says Lightbridge President Pamela Reeve, who points to 129 public and private 2-year and 4-year institutions that attract 412,000 students each year*. "We need smart people who will sometimes be flaky and creative who can focus on serving customers in entirely new ways. The labor environment and universities are key factors in our success."