Brainpower makes Austin an IBM crown jewel

Once a small outpost, city has become home to top high-tech innovators

By Kirk Ladendorf
Sunday, July 13, 2003

Last month, IBM Corp. gathered more than 400 of its biggest brains at the posh Westin Kierland Resort in Scottsdale, Ariz.

The workers played golf, rode horses and lounged by the swimming pools. They heard inspiring tales of challenge and triumph from Arctic explorers and enjoyed a private Lyle Lovett concert. Some collected bonus checks as big as $50,000 for their work on successful projects.

The event was IBM's annual recognition bash for the top engineers, software developers and chip designers who help Big Blue maintain its technological prowess and reputation for innovation.

IBM Austin was well-represented: The delegation of more than 70 people included two of the company's biggest stars, Ravi Arimilli and Jim Kahle. Both are key leaders of major chip design projects; Arimilli is also IBM's most prolific patent winner over the past decade.

They were among several Austin workers who collected about a fourth of the $2.9 million in bonuses IBM handed out in Scottsdale.

The event is just one measure of how crucial Austin has become to IBM, one of the world's pre-eminent technology companies.

Quietly over the past 15 years, a one-time manufacturing outpost that made typewriters and printed circuit boards has become a technology powerhouse for IBM, as well as home to a disproportionate number of its best technical minds and innovators.

Austin workers, for example, received 505 patents in 2002. That's one of every seven issued to IBM — an astounding share, considering that Austin has less than 3 percent of the company's worldwide technical work force. Austin also has a disproportionate share of the company's best technical talent, including five of the 56 IBM Fellows, the highest honor IBM bestows on its top technical workers.

And Austin plays a central role in the technologies that shape most of IBM's product lines. The designed-in-Austin Power 4 processor chips, for example, are among IBM's most important computer components, serving as the brains for computer systems ranging from network servers to scientific supercomputers.

Austin's prominence within IBM is as important to Central Texas as it is to the company. During the economic downturn, for example, IBM has had only a few layoffs here while other tech employers slashed thousands of jobs. IBM's brainpower is an important asset to the University of Texas and, to a lesser extent, the Austin entrepreneurial community.

IBM "is like a cradle of stability," said Angelos Angelou, an economic development consultant. "It's extremely important to have IBM as part of the Austin economy. The innovation going on there makes up a good part of what makes Austin a special place in the technology world."

Decades of growth

Dell Computer Corp. remains Austin's biggest home-grown success story. Its growth during the 1990s helped make Central Texas prosperous as it hired thousands of workers and its stock price soared.

But IBM's technical brainpower in Austin dwarfs that of Dell and almost every other company. In Central Texas, only Advanced Micro Devices Inc., with about 350 Austin-originated patents, came within shouting distance of IBM in 2002. Dell received 108 patents last year.

"Austin is one of the crown jewels within IBM," said Andi Handy, IBM's human relations manager for Austin. "Every business unit in the company has people here. We have some super-incredible minds here."

Local executives say IBM Austin benefited greatly from the cultural shifts that Louis Gerstner brought when he became chief executive in 1993 and revamped IBM's product lines, strategies and culture.

While IBM transformed itself, the Austin operation flowered. Manufacturing jobs went away, but they were replaced by higher-paying technical positions. Now, three-quarters of IBM's Austin workers are skilled technical workers: hardware engineers, chip designers, software developers and expert consultants for the services business.

IBM Austin is a vital research center and crucial to the company's software development and engineering design operations.

The transition, however, has been neither smooth nor easy.

Workers in Austin and elsewhere in the company endured wrenching changes in the 1990s as IBM slashed thousands of jobs and de-emphasized internal manufacturing.

But after the dust settled, IBM made some big investments in important new projects that brought waves of engineering and development jobs to Austin.

And Austin earned its higher standing within IBM with a string of successes that drew on the growing base of talent and brainpower at the Burnet Road campus.

The milestones included the Austin-designed RS/6000 family of Unix computers in 1990 and the Austin-based PowerPC alliance, which brought together engineering talent from IBM, Motorola and Apple Computer in the early 1990s.

In 1996, IBM brought a new influx of software talent to town when it transferred several hundred workers from its OS/2 operating system project in Boca Raton, Fla., to Austin.

Lori Larson, one of the transferees, was wary at first. The Canada native was convinced that she would not like Texas.

"I thought I would hate it here," said Larson, who is IBM Austin's newest Distinguished Engineer. "I love it here," she says now, because of the concentration of talent as well as Austin's attractions as a place to live, qualities that have helped IBM attract and keep other talented technical workers. "I'm not sure that IBM could offer me something now to make me go somewhere else."

There were some bumps on the road. Problems within the PowerPC alliance spurred an outflow of chip design talent in the mid-1990s, for example.

Austin, as an upstart within IBM, got caught up in the company's turf wars.

In 1997, for example, the executive in charge of the crucial Power4 chip design project tried to get the project based at IBM operations in upstate New York.

"I told senior management they were delusional," said Tom Whiteside, a former IBM chip design manager. "They thought that a bunch of advanced chip designers would move to New York."

It took several weeks for Austin engineering managers to convince management that Austin, already emerging as one of IBM's biggest brainpower centers, was the right place for the job.

The chip project had a dramatic effect on the Austin campus, bringing in more IBM investment, more projects and more talent.

In IBM's $81 billion business, Austin had become a key center of innovation.

A few years ago, Austin was involved in a single IBM computer line, said Bill Zeitler, a senior executive at IBM headquarters in Armonk, N.Y.

"The difference now is that people (in Austin) are in the mainstream of IBM's business," he said. "Rather than being an important market, they're important to all our markets. It makes this place, and the people in this place, critically important to what we do."

Growing up IBM

For all its brainpower, only a relative few successful startups have sprung from IBM in Austin. By far the most successful was Tivoli Systems Inc., a software company founded by former IBM employees in 1989.

After Tivoli went public in 1995, IBM bought it for $743 million and set about expanding it dramatically. Tivoli is now a $2 billion subsidiary of IBM, with more than 4,000 employees worldwide, including 1,200 at IBM's North Austin campus.

Tivoli co-founder Bob Fabbio went on to start four other companies and become a venture capitalist. Fabbio is now chief executive of Vieo Inc., a software company founded by former IBM engineers.

Fabbio says IBM is not a natural breeding ground for entrepreneurs.

"IBM has bright, hardworking people, but they are often a different kind of cat than is found working in an early stage startup company," he said.

But several other Austin companies have IBM roots. Centaur Technology Inc., a chip company, and ClearCube Technology Inc. were launched by Glenn Henry and Andrew Heller, respectively. Both are former IBM Fellows.

Three years ago, Phil Hester left IBM after 23 years to start Newisys Inc., which develops advanced server designs based on AMD chips. The company has raised a healthy $25 million in venture capital in the last year. Six of the nine top executives are IBM veterans.

IBM's presence helps bolster Austin's stature as a high-tech hub, said John Thornton, a general partner in the Austin Ventures venture capital firm.

"IBM helps put Austin on the map in the technology world," he said. "I wouldn't have much to do in Austin if IBM weren't here. It really is that important to the software community."

IBM's Austin prominence has also brought a considerable payoff for the University of Texas, which benefits from research ties with the company's computer experts.

IBM's help for UT arrives in several forms: research grants to professors, gifts of equipment for research projects, summer jobs for graduate students and feedback on research ideas. IBM and UT professors help each other on federal research grants. UT researchers commonly subcontract part of their research to IBM. IBM does the same with UT.

Last week, for example, the IBM Austin Research Lab won a $53.3 million contract to develop technology for more adaptable high-performance computers. UT researchers will share in that project.

"There is a flow of knowledge and people in both directions that has been enormously valuable for the university," said Doug Burger, an assistant computer science professor at UT. "There is an enormous synergy. It is taking off, and it is wonderful."

'Happy times'

These days, workers at IBM Austin talk with the optimism and confidence of players on a winning team.

"These are happy times on Burnet Road," said Jonathan Eunice, president of Illuminata Inc., a computer consulting company in Nashua, N.H. "Dell Computer is definitely a competitor. Sun Microsystems and Hewlett-Packard are out there. But IBM is recognized as a full-bore industry leader, one that is running as fast or faster than all the other majors."

Former IBM workers say they gain a new perspective on Big Blue's strengths, including its world-class army of technical experts, once they leave the company.

At Newisys, Hester said running a startup is exciting. But, he said: "The technical depth that IBM has is something you don't see elsewhere. Any issue you have is something that IBM has a world expert for. The breadth and depth of technical talent is absolutely incredible."

In Austin, one of the biggest stars on the technical team is Arimilli, a chip design manager who is IBM's single most prolific winner of patents over the past decade.

Arimilli was awarded 78 patents in 2002 and has received 191 patents during his IBM career. He is the inventor in 100 additional pending applications.

The 40-year-old native of India grew up in Baton Rouge, La., and graduated from Louisiana State University. He was hired at IBM Austin right out of college in 1984. Two years ago, he was named an IBM Fellow, a lifetime honor.

He was the lead engineer on the Power4 project that helped put Austin on the IBM map.

Arimilli recalls the pride he felt in Scottsdale, standing at a hotel bar, a glass of scotch in one hand and a cigar in the other, and sharing war stories with his comrades about the four-year effort to build the Power4 chip.

"We were talking about how no one believed we could do this," he said. "We stayed with it and stayed with it, and we just did it. It blew away many peoples' view of what was the best we could do."

Until the next project.

Arimilli heads the team developing the even more powerful Power5 chip. Other ambitious hardware and software development projects are under way at IBM Austin.

"The road ahead is so stellar that I don't see innovation slowing down anytime soon," he said.

And Austin is right in the middle of it.; 512-445-3622

IBM brainpower in Austin

Austin has less than 3 percent of IBM's worldwide technical work force but a disproportionate share of its brainpower:

• Five of the 56 IBM Fellows, the highest rank for elite technical workers.

• 33 of the 296 Distinguished Engineers, the second-highest rank.

• Austin workers were awarded 505 patents last year, almost 15 percent of the IBM total.