Magnificent Mile

Chicago is home to a growing number of high-tech companies

SINATRA sang it first, but “My Kind of Town” is taking on a whole new meaning to those involved in Chicago’s new economy. The Windy City is rapidly bridging the nation’s gap between California’s Silicon Valley and New York’s Silicon Alley, with their growing Internet and technology sectors.

There’s plenty to sing about.

Chicago is touted as the third-largest technology market by employment, while being ranked among the most wired cities in the nation. There are still desirable business locations available at affordable prices and an educated work force to staff the offices.

And with state and city efforts supporting the influx and growth, it doesn’t look like things will be changing anytime soon.

The new economy will be one of the focuses of the Chicago Association of Direct Marketing’s (CADM) Annual DM Days & Expo this month.

On the state level, the Illinois VentureTech agenda, launched by Gov. George H. Ryan in March 2000, committed $1.9 billion to technology growth over five years. Other programs luring companies to lay down roots in Illinois and the Windy City include an industrial training program that reimburses companies a percentage for employee training, and a tax credit for making a $5 million business investment while creating at least 25 jobs.

“A lot of this focuses on moving people toward the new economy,” says Pam McDonough, director of the Illinois Department of Commerce and Community Affairs (DCCA), who also serves as a board member of the Mayor’s Council of Technology Advisers. And the employment sector for new economy is growing. The number of high-tech employees statewide hovers at about 366,000, while in the Chicago metro area there are 180,425 high-tech jobs.

An influx of venture capital throughout the state also supports the sector. According to numbers McDonough cites from the National Venture Capital Association, between the first quarter of 1999 and the first quarter of 2000, venture capital invested in Illinois increased from $63 million to $600 million.

“I think we got into this a little slower because we’re a more conservative financial market,” McDonough says. “But with this kind of increase, the financial community has figured out that these investments really do pay off. They’re willing to take calculated risks.”

But those risks may more calculated than risky since the city’s as well as the state’s commitment to technology is evident.

Several initiatives attract e-commerce and Internet businesses to Chicago, says Katherine Gehl, special assistant to the mayor for technology. One of those initiatives is Civic Net, a fiber-optic network that will provide all areas of Chicago with high-speed voice and data transmission, allowing e-commerce and Internet businesses to locate in areas throughout the city. There’s also a focus on developing high-tech real estate, says Gehl, citing the renovation of the R.R. Donnelley Lakeside Press Building into Lakeside Technology Center, a 1.1-million-square-foot carrier hotel housing communications equipment and Internet servers.

Other initiatives include the establishment of World Business Chicago, a public/private partnership for assisting businesses in expansion or location in Chicago, and the development of a technology division within the Department of Planning and Development.

These initiatives seem to be paying off. According to the May 29, 2000 issue of Forbes ASAP, a 97% surge in high-tech/Internet investment in the preceding year moved Chicago past Boston as America’s fourth-largest technology region, says Gehl. And the 1999 gross metropolitan product (GMP) for high-tech industry in Chicago was $34.68 billion, making it the fifth-largest metro in the country by high-tech GMP.

In 1999, Mayor Richard M. Daley formed the Mayor’s Council of Technology Advisers (MCTA), a public/private entity made up of Chicago’s top technology and entrepreneurial leaders. “The MCTA is developing and implementing initiatives to make Chicago an attractive location for technology businesses,” said Daley.

One of those initiatives focuses on educating tomorrow’s high-tech work force today. Last year, the MCTA made technology in Chicago’s public schools a top priority for its first-year plan. The Education Technology Integration Plan is dedicated to increasing Chicago’s technologically literate work force through the implementation and integration of technology, starting in kindergarten.

“Providing a quality education for all Chicago children is of extreme importance to preparing the work force for technology and other businesses,” said Daley. He added that Chicago has several strategic advantages over other regions seeking to attract high-tech businesses, quoting the Nov. 27, 2000 issue of Fortune Magazine, which ranked Chicago as the third-best city for doing business in the nation. “The bottom line,” he said, “is that the city of Chicago is a great location for growing technology businesses because we understand that technology sector growth is a crucial component to Chicago’s economic future.”

Tony DeNunzio, president and CEO of D7 Consulting, notes the definite focus on bringing and improving upon e-commerce capabilities within the Chicago market. And although Chicago’s e-commerce businesses are playing catch-up with their East and West Coast counterparts, DeNunzio sees benefits from that position.

“Because of the lag time with our market getting up to speed in this area, it seems there’s an opportunity for Chicago to leverage some pure-play mistakes that were made on both coasts,” he says.

Those “mistakes,” suggests DeNunzio, were based on what he calls “technology for the sake of technology” and not necessarily putting the customer or consumer in center stage.

In an effort to help businesses avoid those mistakes, DeNunzio, who is also the chair of CADM’s E-commerce Special Interest Group, is in the planning stages of producing seminars dealing with leveraging e-commerce throughout customer relations management strategies and driving e-commerce with e-mail marketing.

“The market seems to be incorporating a new approach to e-commerce that leverages the appropriate technology or the appropriate solutions,” he says. “We’re trying to drive home the point that e-commerce is more than just technology. It’s about relationship management with customers and realizing that it’s a channel of distribution that needs to be incorporated into the overall mix of what a company offers to consumers.”

Many thriving e-commerce companies in Chicago have gotten the message. UBid.com, a business-to-consumer auction site, established headquarters in Chicago during 1997, and the location has served it well. In its first full year of operation, the company reached approximately $50 million in revenue, and for the year ending December 1999, revenue exceeded $200 million.

“Right now we’re at nearly $500 million in revenue,” says Alan Cohen, uBid.com’s vice president of marketing and a Chicago native. Cohen notes that Media Metrix rated uBid.com as the second-most-visited Internet auction site and the largest business-to-consumer site.

UBid.com has approximately 2 million registered users and closes an average of 10,000 auctions per day. “During the most recent quarter, over a million products were auctioned on our site, and that’s an increase of 160% over the prior year quarter,” says Cohen.

“Chicago,” he adds, “is a terrific market with a well-educated work force and we felt it was the perfect place to establish this business.”