Rising Technology Diversifies Idaho Economy Small Companies Making A Big Impression From Coeur D’Alene To Ketchum

Almost everyone in Idaho is familiar with Micron Technology Inc., Hewlett-Packard Co. and Lockheed Martin Idaho Technologies Co., which runs the Idaho National Engineering and Environmental Laboratory.

But a new crop of smaller technology companies is quietly emerging in the shadow of the giants. They are the invisible force reshaping a state economy historically rooted in agriculture, mining and timber.

The new economy that will arise from this trend is one based not on raw materials, but primarily on knowledge.

“Lone Eagle” is what The Center for the New West calls this growing number of knowledge workers - people who can live and work anywhere, primarily because of the advances in telecomputing technology.

While it’s a national trend, there’s evidence that many of them are choosing Idaho. Look in any corner of the state - small communities like Grace, Sandpoint, Coeur d’Alene or Ketchum - and you’ll see clusters of thriving start-up companies writing software programs or developing Web sites.

The Idaho Department of Commerce estimates there are at least 1,000 of these smaller technology businesses, each employing anywhere from one to more than 100 people. Altogether, these largely unknown firms account for more than 5,000 jobs - the equivalent of another HP for Idaho.

“These smaller technology companies are key to the success of our changing economy, and they’re important in positioning ourselves to compete economically,” said Karl Tueller, deputy director of the Commerce Department.

They may pale in size compared with Micron, but these technology companies as a group have a sweeping effect on the economy. They create mainly high-skill jobs that pay an average of $41,000 a year.

Together, the companies account for at least $1 billion in annual sales. Most of that money is new dollars, imported from outside the state from clients spread around the globe. Not only that, most of these firms don’t tax the infrastructure or need government concessions to do business.

Perhaps most importantly, the rising technology industry helps diversify and stabilize Idaho’s economy.

“When Micron sneezes, Boise gets a cold,” said Philip Burgess, president of The Center for the New West, a Denver-based think tank. “The best industrial base is surrounded by hundreds of smaller and midsize enterprises, from a balanced growth point of view.”

Besides, you never know how many of these small high-tech firms may make it big, said Bob Potter, president of Jobs Plus, the economic development program for North Idaho.

“IBM was once a 10-man company,” Potter said. “It’s easier to recruit 100 small companies than a 700-person unit of Microsoft. There is a risk, because smaller companies are also the ones that go belly-up. But the good ones grow.”

Many of these companies are spinoffs started by entrepreneurs who’ve left bigger companies to break out on their own. Others are companies that started in the nation’s Silicon Valleys and uprooted to rural areas.

Take Agency One Corp. A year after starting a software company in Phoenix, Anthony and Gary Paquin decided to move the company to an ideal place to raise their children. The choices were wide open. They could write and market their insurance automation software from anywhere. The Paquin brothers chose Coeur d’Alene.

“We were in Spokane for business and took a drive to the mountains,” Anthony Paquin said. “We saw the lake and said, ‘this looks like a good place.”’ Today, Agency One employs about 125 workers and has sales of $10 million. The company, which was sold to a consortium of software companies called Agency Management Services, sells its accounting and management software to leading insurance companies across the United States.

While the growth of knowledge workers is a national phenomenon, the West is leading the trend. And Idaho is among the hottest spots, along with Colorado and Utah.

“My gut feeling is that this is happening more in Idaho than in other parts of the Rocky Mountain West,” Burgess said.

Confirming this, a new study by Cognetics Inc. ranked the Boise metropolitan area as the fourth most popular place for entrepreneurs to start a company. The reasons: These companies are fleeing larger metropolitan cities and heading back to small towns and rural areas.

Idaho also has a solid technology and science base spread throughout its four corners. Institutions such as the INEEL, University of Idaho, Boise State University and such companies as Micron help create spinoff businesses and make the state more attractive to outsiders.

The trend has been noticed as far away as Connecticut, where Al Harberg publishes a national mailing list of software developers for the computer industry.

“About three years ago, I started getting back a lot of address corrections for companies that had moved to Utah or Idaho,” Harberg said. “I talk to a lot of folks who say it’s just more peaceful to breathe the air in Idaho.”

That was the case for Steven Olson, who moved his software company from the Los Angeles area to Sandpoint in 1988. Now called Sandpoint Software Inc., it sells software that files 1099 and W-2 forms directly to the Internal Revenue Service over phone lines. Its clients are large companies like Citibank and Blue Cross of California.

“It’s a pretty good way to make a living in North Idaho,” Olson said. “Our burden on the infrastructure is minimal. We use the post office and Federal Express to ship our disks. We’re getting money out of L.A., Dallas and New York and bringing it into Sandpoint.”

Examples of burgeoning companies are found throughout the state. Three years ago, Fred Gatton Jr. and Dave Higgins seized an opportunity to buy out Morrison Knudsen Co.’s mining and environmental software division. They took the software and created a company called Integrated Software Systems in Boise.

“We didn’t want to stay working for other companies,” Higgins said. “We wanted to follow a dream.”

Today, the company has sales of $1 million with clients around the world.

What’s unique about the company is its ability to provide software that helps manage the mines as well as assess the environmental impact. It employs 12 engineers, programmers and sales people with average salaries of $40,000 a year.

“We think we can grow to $25 million to $50 million in the next three to five years and hire another 50 to 75 people,” Higgins said. “We’re not a household word like HP, MK or Simplot. But we’re gaining on them.”