Author Archives: Steven G. Zylstra

About Steven G. Zylstra

Steven G. Zylstra is president and CEO if the Arizona Technology Council, www.aztechcouncil.org.

Arizona SciTech Festival - AZ Business Magazine January/February 2012

Critical trends shape the technology landscape in Arizona

Unless partisan politics in Washington drives the economy back into a recession, there are critical trends in the technology industry that are pointing to continued slow but steady growth for Arizona.

Most recently, the Semiconductor Industry Associated reported that U.S. semiconductor sales in August increased by 23.3 percent compared with August 2012, and global August sales were 1.3 percent higher than the previous month’s total of $25.53 billion. This makes the sixth consecutive month of growth globally.

The news is positive for the Phoenix area, which employs close to 20,000 workers in the industry at companies like Intel Corp., Microchip Technology and ON Semiconductor. The ability to sustain growth in this sector will hang in part on whether or not consumers open up their wallets and spend on electronics during the critical holiday period.

Particularly vulnerable to austerity measures out of Washington, our Aerospace & Defense industry could certainly feel the impact in terms of lost jobs. The long-term outlook remains strong, however, as Arizona remains home to the some of the most renowned names in aerospace and aviation with local presence that dates back to WWII.

A technology trend that is giving Arizona a big boost, as highlighted by new research from Savvis, is the major shift in IT infrastructure models. Nearly 90 percent of enterprises are using cloud services today according to a Savvis report, but only five percent of enterprises depend on the outsourced cloud for the bulk of their IT resources. The report goes on to predict that scenario will change dramatically over the next five years, leading to the outsourced cloud as the dominant model.

With our low catastrophic risk and predictable climate, Greater Phoenix has long been a popular location for datacenter companies and the numbers will most certainly increase. This is especially predictable given our modestly priced power costs and a package of incentives which became law this year. Cited as “a quantum leap forward” by Jim Grice, a partner with Lathrop & Gage LLP and a primary architect of the bill, this important legislation was advanced by the Arizona Technology Council in partnership with the Arizona Data Center Coalition.

The rise of the innovation economy is another important trend. A report from the Kaufmann Foundation showed Arizona had the highest entrepreneurial activity rate of any state in 2012. A white paper released by the same Foundation in September of this year ranks Phoenix as 13th among the top twenty large metropolitan areas and metropolitan divisions by high-tech startup density in 2010.

Entrepreneurs make Arizona’s economy stronger by creating jobs and with new players emerging every day, the innovation ecosystem in Arizona will continue to grow and improve. The area of healthcare innovation is a great example. Arizona is fast becoming a hub with top research institutions like TGen, world-class healthcare brands such as Blue Cross Blue Shield AZ, Cancer Treatment Centers of America and Mayo Clinic, and well-funded startups like WebPT, GlobalMed and others.

One trend not in Arizona’s favor has to be the continued loss of rebates and other incentives in the Renewable Energy sector. The economics given this point of time has made it particular difficult. As a result, residential solar will continue to struggle in 2014, with utility scale solar suffering less.

Arizona needs to continue to prepare for these trends and possible disruptions – externally and internally generated. Our focus needs to remain on ensuring that our workforce is prepared for the opportunities to come by updating the skills they need now. We also need to keep our lawmakers and community informed of the importance of technology to the growth of our state so that Arizona can build an economy based on high growth industries with higher than average wages. Let’s hope Washington comes along for the ride.
Steven G. Zylstra is president and CEO of the Arizona Technology Council.

boeing-phantom-ray

It takes fuel to win tech race

Many of us can relate to thinking of Arizona’s economy as an automobile race. To win, you need a smooth race course, a fast car, a winning driver and high-powered fuel.
Carrying that analogy into Arizona’s technology sector, it’s clear that a lot of resources have been invested and progress has been made in building a world-class race course.  We’ve made tremendous strides in creating a business climate and technology environment for facilitating both private and public sector support to address the needs of Arizona’s technology businesses.

The Arizona Technology Council has worked collaboratively with many different technology champions to build this course. Technology issues are supported by the Governor’s office, the state’s legislature, the Arizona Commerce Authority, the Arizona Chamber of Commerce and Industry, and more.

Technology incubators and shared space facilities such as Gangplank in Chandler, Avondale and Tucson; Hackspace and Venture Catalyst at ASU’s SkySong in Scottsdale; BioInspire in Peoria; Innovation Incubator in Chandler; AzCI in Tucson; and AZ Disruptors in Scottsdale are making sure that today’s innovators are being given the right support, tools and environment to create the next big thing.

Collectively, our wins have included the passage of a tax credit for qualified research and development that is the best in the nation, the creation of the first statewide Arizona SciTech Festival and the birth of the Arizona Innovation Institute, to name a few.
Arizona’s technology industry also has great race cars. These are the technologies and intellectual property that create wealth and jobs driven by both Fortune 500 companies and entrepreneurs.  Companies such as Intel, Microchip Technologies, Freescale, ON Semiconductor and Avnet can all be found here.  Nearly all of the largest aerospace and defense prime contractors in the nation are located in Arizona, including Boeing, Honeywell, Lockheed Martin, Northrop Grumman and General Dynamics.

The state’s entrepreneurial spirit is reflected in companies such as WebPT, Infusionsoft, Axosoft, iLinc and Go Daddy that were founded in Arizona along with the many innovators that are coming to the table every day with new ideas rich in technology.

These companies large and small are driven by some of the greatest race car drivers the nation has produced.

But when it comes to fuel, Arizona’s economy has always been running close to empty. We lack the vital capital needed to win the race. Having access to angel investors, venture capital and private equity as well as debt instruments is critical to Arizona’s success.
The situation has not been improving on the equity side of the fuel equation. To offer some relief, the Arizona Technology Council is proposing legislation that would create a system of contingent tax credits to incentivize both in-state and out-of-state investors to capitalize Arizona companies.  This program, called the Arizona Fund of Funds, would allow the state to offer $100 million in tax incentives to minimize the risk for those seeking to invest in high-growth companies.  The state government’s role would be to serve as a guarantor through these contingent tax credits in case the investments don’t yield the projected results.  Expect more information on this important piece of legislation as it advances.

On the debt side of the fuel equation, there are encouraging signs that the worst of the credit crunch may be over. Early-stage companies need access to debt instruments, or loans. Capital is needed for equipment and expansion. A line of credit can help early-stage companies through ongoing cash-flow issues. But loan activity is still modest in Arizona for small companies. It remains heavily weighted toward the strongest corporate and consumer borrowers.

Capital goes hand in hand with innovation, high-paying jobs and cutting-edge technology, products and services. Before Arizona’s economy can win the race, we will need to become more self-sufficient at providing the fuel necessary to be a winner.

Steven G. Zylstra is president and CEO of the Arizona Technology Council.

energy supply - AZ Business Magazine May/June 2012

Energy Supply And Demand – A Holistic Approach To Energy Independence

Energy is the lifeblood of the economy. Arizona’s population and energy use are projected to grow for the foreseeable future and our economic prosperity is closely tied to the availability of reliable and affordable supplies of energy. While energy supply, energy demand and the natural environment are at a significant point of conflict, the effect of this tension can be mitigated through a collaborative effort among all stakeholders which can help create balance.

The need for collaboration is at the heart of why the Arizona Technology Council accepted the responsibility of leadership for the Arizona Energy Consortium (AEC) in July, 2011. The effort was established under the auspices of the City of Phoenix related to a grant from the Federal Department of Labor to establish strategies for integrating the workforce needs of targeted green energy industries in Arizona. The City, as part of the central region, was awarded a large portion of the Arizona State Energy Sector Partnership (SESP) grant that agreed to establish an energy consortium to define the workforce needs in the energy arena. Thus, the Arizona Energy Consortium was founded.

City leaders quickly realized they were addressing issues that went well beyond city borders and the workforce. When the City of Phoenix approached the Council about taking AEC under its wing, it made perfect sense to us. The Council has members from every side of the energy equation, from traditional production to renewable and energy conservation. We represent a statewide neutral ground that’s not tied to a particular technology, and can embody the entire energy industry.

Today, the AEC is comprised of more than 250 members from the state’s diverse energy sectors and is co-chaired by Michelle De Blasi, a partner with the law firm of Quarles & Brady LLP and chair of its Solar Energy Law Team, and Christopher Davey, executive director of EnviroMission. Constituents from city and state governments, utilities, law firms, conservation groups, private industry and universities are all working together to get real work done and break down the silos that have long existed in Arizona.

One of the charters of AEC is to serve as a supportive venue for current and new members locating or expanding their businesses within the state, as well as a repository for reliable information related to the energy industry. In addition, AEC is providing meaningful input towards the development of a long-term Energy Roadmap to strongly promote both economic development initiatives and continued technological innovation across the state. The end result will be similar to the long-term bioscience roadmap initiated by the Flinn Foundation designed to make the state’s life sciences sector globally competitive.

Can we achieve energy independence in our lifetime? Given Arizona’s unique abundance of sunshine, we certainly have an advantage on the production side of the equation in the renewable energy sector and are well positioned to become an exporter of energy. Arizona possesses many of the essential elements necessary to become a global leader in energy, but must strengthen its will, focus, collaboration and messaging, to achieve this goal. With everyone working together to raise all boats, AEC is taking this holistic approach.

For more information, visit aztechcouncil.org/committees/aec.


Steven G. Zylstra is president and chief executive officer of the Arizona Technology Council.

Arizona Business Magazine May/June 2012

Aerospace and defense industry - AZ Business Magazine March/April 2012

Aerospace And Defense Industry – Critical To Expanding Economy

Aerospace and defense industry is critical to expanding economy

When I’m asked to name one sector of Arizona’s technology community that is critical to expanding the strength of the economic recovery, I always sum it up in two letters: A&D  — the aerospace and defense industry. It’s a cornerstone industry for Arizona, as our state has seen groundbreaking innovation in this arena for decades.

Boeing, General Dynamics, Honeywell, Raytheon, Lockheed Martin, Northup Grumman and Orbital Sciences are just a handful of the state’s major industry players contributing to Arizona’s impressive resume. An Arizona economic impact study conducted in 2010 reported that compensation per employee in the Arizona aerospace and defense industry is approximately $109,000. This is 2.3 times the statewide average for all employed individuals. The study also reported when accounting for multiplier effects, the Arizona A&D industry in 2009 can account for a total of 93,800 jobs, labor income of $6.9 billion, and gross state product of $8.8 billion.

But keeping Arizona’s aerospace and defense industry healthy and at pace with the ever-changing knowledge-based economy requires competitive business policies and a coordinated effort among state and federal leaders. Recognizing the critical importance of this imperative, there has been a resurgent statewide support for A&D over the last few years.

A big step was taken when Gov. Jan Brewer created the Arizona A&D Commission. Its active members develop industry goals, offer technical support, recommend legislation and provide overall direction. Another milestone occurred when the Arizona Commerce Authority formed and designated the aerospace and defense industry as one of its foundational pillars. Through the efforts of these two organizations, a request for proposal was issued for the first ever Aerospace, Aviation & Defense Requirements Conference in Arizona. Hosted by the Arizona Technology Council in late January, this successful historic event offered a major opportunity for the A&D community to connect with potential new partners. Attendees also heard a multitude of informative speakers, including a gripping keynote address delivered by Gen. Philip M. Breedlove, the Vice Chief of Staff of the U.S. Air Force.

A new chapter in the state’s expanding role in A&D research also recently began when the Arizona A&D Research Collaboratory was formed. The organization brings leaders from Arizona’s A&D industries together with researchers from the University of Arizona, Arizona State University and Embry-Riddle Aeronautical University to work together to gain insight into future technological needs for A&D.

Although these initiatives and programs indicate that there’s a resurgence of attention on A&D in Arizona, there are several key elements upon which the industry leaders within the state must still focus. The industry can’t do it alone. We need a unified congressional delegation employing strategies focused on promoting the desirable, high-wage jobs that A&D bring to their constituents.

We also need states leaders to take the lead in advocating for federal A&D projects that are critical to the existence of the state’s industrial base. These efforts not only reap benefits to the large manufacturers but they are hugely significant to building a robust small business supplier base in the state.

Indeed there are great needs still to be met for achieving newly conceived and exciting goals for manned space flight, homeland security and connecting the world with ever-evolving modern communications technologies. With the proper support, Arizona’s aerospace and defense industry can be critical to meeting those needs.

Steven G. Zylstra is president and chief executive officer of the Arizona Technology Council.

Arizona Business Magazine March/April 2012

Technology

Arizona’s High-Tech Sector Has Grown And Diversified Over The Years

Intel. Boeing. The Mayo Clinic. Try finding anyone who hasn’t heard these renowned names. Fortunately for Arizona, they and other companies like them have been key to our state’s technology scene growing dramatically over the past quarter century.

There is one name, however, many may have forgotten. Although no longer a huge presence here, one company paved the way for others, as well as gave birth to offspring that garnered their own recognition. Its name? Motorola.

After World War II, the Signal Corps asked officials at radio communications pioneer Galvin Manufacturing Corp. to move parts of their operations out of Chicago for fear an atomic bomb could wreck needed production capabilities. Following the Windy City’s snowbirds, Motorola headed West and eventually built its landmark 56th Street facility in Phoenix, signaling the start of phenomenal growth. Eventually creating other electronics as well as semiconductors, the company grew to more than 20,000 Arizona employees at locations across Phoenix and the East Valley. You could argue that our high tech golden era began a little more than 25 years ago, when Motorola unveiled a device that changed the world forever: the portable cellular phone for commercial use.

Another significant presence began when the Valley proudly proclaimed “Intel Inside” and the company’s “fab” plants and related campuses became part of Chandler’s landscape. Now using the innovative 45nm technology, Intel is the city’s largest employer and has about 10,000 employees in the state.

Also in the mid-80s, biotechnology research started with the opening of Sun Health Research Institute in Sun City. The following year, the Mayo Clinic opened its campus in Scottsdale. The next year, Arizona State University granted master’s and doctorate degrees in bioengineering.

When it came to getting the United States and other nations into orbit and keeping them secure, the world already had discovered Arizona. Key to that reputation is Honeywell. In 1986, it purchased Sperry Aerospace and became the world’s leading integrator of avionics systems. At the end of the 1990s, Honeywell made major headlines again when it merged with AlliedSignal. When the dust settled, Honeywell Aerospace called Phoenix its home.

Tucson-based Raytheon Missile Systems also claimed a piece of history when its Patriot missile became the star of the Persian Gulf War.

By the end of the 20th century, Boeing was ready for the next conflict, as its Apache Longbow helicopter took off.

The new millennium brought a new order and the beginning of the end for Motorola as we knew it. After ON Semiconductor was spun off, the company sold its Scottsdale-based government IT division to General Dynamics, and its life-sciences arm to Britain’s Amersham. Motorola spun off its Freescale Semiconductor operation in 2003, shrinking Motorola’s Arizona payroll to 3,500. Some observers now put that number at 500 after Emerson Network Power acquired the Embedded Communications Computing group in Tempe last year.

The real growth was happening in biotechnology. One of the biggest coups occurred when the International Genomics Consortium announced it was moving to Phoenix to create the Translational Genomics Research Institute. Also in 2002, Arizona’s Bioscience Roadmap, commissioned by the Flinn Foundation, began outlining recommendations for the state to become a national biosciences leader.

ASU and the University of Arizona joined the effort. The first building of ASU’s acclaimed Biodesign Institute opened in late 2004, followed by the facility’s completion two years later. UA’s BIO5 Institute was launched to pursue life sciences research.

As you can see, the infrastructure is in place for the future to bring even more. Everyone has a chance to share the rewards. The technology industry is viewed as the bright spot of what has been a dismal economy. Arizona companies already are reporting new hires to help serve new contracts. There’s no doubt we live in a top-tier technology state.