Small state uses software prowess to cope with hard realities

As the economic crisis in the U.S. expands from Wall Street to main street, one small state is pinning its hopes on a burgeoning software industry to help it weather the storm.

Vermont, which borders New York, often shares the state’s weather patterns – and is now also likely to also share in its economic turmoil.

But Vermont’s 600,000 (it’s the second least-populated state in the U.S.) is getting ready to batten down the hatches and deal with whatever challenges present themselves.


Vermont governor Jim Douglas talks about the state’s tech sector.

And a key resource in this struggle is a surprisingly strong software industry. There are at least 250 software companies in Vermont – many of them confident they will not only survive tough economic times, but actually grow.

State governor Jim Douglas (Rep.) agrees.

“The state that positions itself for recovery from the current slowdown is [the one] that’s going to succeed,” Douglas says. Vermont’s singularly strong software sector will play a pivotal role in getting the state through these rough times, he suggested.

The governor announced a US$200,000 investment to stimulate the tech sector – of which $150,000 will be used to offer three very low-interest loans to help young entrepreneurs start a tech business, while the other $47,500 went to the Vermont Software Developers Alliance.

The Alliance was started up by a couple of local software companies tired of not being taken seriously. Many scoffed at the notion of a tech alliance in Vermont – a state typically associated with dairy cows and ski tourism.

No one’s laughing now.

Alliance members say they’re well-positioned to deal head on with the challenges spawned by the current crisis.

“We’ve already seen one economic downturn,” notes Gregory Brand, co-chair on the Alliance’s board. “We survived the dot-com bust, so we’re prepared to ride this out pretty well.”

Brand is also president of Richmond, Vt.-based Bluehouse Group, a company founded in 1998 that specializes in Web site design, Internet marketing and database development.

He reminisces how his eight-person team of graphic designers, programmers, and search engine optimizers weathered the tech downturn in the year 2000 – and lessons learned as a result.

“Stick to sound fundamentals,” is a key lesson. While for younger companies there’s great eagerness to seize growth opportunities, he says this has “to be tempered by the realities of having all the pieces working together.”

Vermont’s economy is in trouble. The State is facing its highest jobless rate in 15 years (5.2 per cent), according to statistics from the State Labor Department. An economist projects the State could lose another 6,000 jobs during a recession.

“Given the size of the Vermont economy and its reliance on forces outside the state, there is little any governor or group of law makers can do to buck the larger currents of the region and the nation,” is the stark assessment given by the Burlington Free Press.

“When virtually the entire world is looking at a recession, there is no reason to think Vermont will be spared.”

Despite the doom and gloom, Michael Rooney isn’t worried. A former board member of the alliance and the executive vice-president of Burlington, Vt.-based Ringmaster Software, he is still confident in his company’s product.

Ringmaster creates software that automatically updates Oracle E-business Suite. It helps 150 clients keep up to compliance standards by having the most up-to-date patches.

This can be a big time saver, Rooney says.

If you need to get the job done, but are restricted in the number of people you can use, Ringmaster’s offering is useful, he says.

Companies still have to follow the law and meet compliance standards in a tough economy, Rooney adds.

“When maintaining e-business suite, there is no way to fulfill all the compliance requirements without using our products,” he says.

The focus on tailoring one’s offering to respond to a specific challenge or opportunity is a common element shared by many Vermont firms.

For instance, Epik One Inc., a Burlington, Vt.-based digital marketing company that helps clients to ensure their marketing dollars are being put to good use.

An authorized Google analytics consultant, Epik One says it believes in eating its own cooking, and has used its analytics tools on its own business just to ensure it stays efficient in tough times.

“We track everything from P.R. campaigns to traditional TV spots, just to see what’s resonating with people and what’s converting to a sale,”
says co-founder Dave Winslow.

He says advertisers aren’t pulling their money out of Internet marketing. In fact, “some companies are now saying they want to advertise more,” Winslow says. “They want to get their message out there and make sure it is effective and working.”

As a proof point of sustained interest in Internet marketing, he cited Google’s better-than-expected third quarter earnings. Google’s 26 per cent rise in profits surpassed analyst expectations.

Epik One also discovered its blog was popular and now the company uses it to generate leads. There are around 1,200 subscribers to the free content the company can draw on to generate business.

Of course, the Vermont tech sector is not free from challenges. While the state government’s investment in the industry is welcomed by the Alliance, it’s hardly a windfall.

“We’re a small state and there’s a limit to what we can do,” Douglas says. He says public-private partnerships is crucial to success.

Economic woes are troubling many clients of digital marketing and software companies in Vermont. Some are tightening their belts and cutting back on new projects in these times of uncertainty. Others are going out of business entirely.

“We got a letter in the mail asking us to send any final invoices because the company was being put out of business,” Winslow says. “You see it more and more. There are a lot of layoffs right now, a lot of staffing cuts.”

Clients of Bluehouse Group are approaching projects more cautiously and taking more time to make decisions, Brand says. A diverse portfolio helps keep the revenue flowing.

“We have to make sure we are very clear about our value proposition,” he says. The company sells clients on looking at a Web site as an investment – putting money into one will mean more money coming back in sales.

There aren’t unrealistic expectations that the tech sector might save Vermont from a recession. But it is viewed as a good place to be putting resources in times of economic uncertainty.

“The software [sector] is going to grow at faster rate than other industries,” the governor says. “So it makes sense for a state to position itself for growth in that sector.”

Aside from support for the software development industry through the Alliance, the state has also invested in some educational programs. Conferences are planned to help attract outside investment to the industry and a camp to interest young people in tech is also slated.

Tax incentives have been designed to encourage growth in the sector, and some workforce training funds will be doled out to those training on tech skills.

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