Cisco: It's Boom Time in Beantown

Please come to Boston, Cisco says yes.

With all due apologies to the songwriter, the above rewrite of the 1970s pop song might make an appropriate soundtrack for the ongoing telecommunications equipment boom in the areas surrounding the largest city in Massachusetts.

By announcing plans in January to build a 5,000-employee facility along the Interstate 495 corridor outside of Boston, Cisco Systems lent significant credence to the consensus of industry observers that Boston is the center of the networking universe.

"I really believe this is the right place to be investing in data communications," says Sean Dalton, a general partner at Boston-based venture firm Highland Capital Partners. "Cisco is saying that if you're going to be a player in data communications, you're going to have to be in Boston."

In a sense, however, Cisco (www.cisco.com) had already heard the call of Boston. Recognizing the rich vein of networking talent in New England, the San Jose-based firm has spent close to $3.5 billion on nine acquisitions of Boston-area companies in the past few years. By establishing the New England Development Center, which is actually made up of three separate facilities, Cisco can centralize its operations and establish a base for recruiting networking talent that is not interested in relocating to Silicon Valley.

With an impressive campus facility to lure potential employees, Cisco will also make it easier for its Boston-based divisions to compete against the dozens of start-ups in the area, Dalton says. "It says that these divisions are an integral part of the company and not some beachhead 3,200 miles away from the main campus."

And while real estate is definitely much more affordable in Massachusetts than Silicon Valley, it is the immense amount of data networking expertise that makes it strategically vital for Cisco to expand its operations by breaking ground on the East Coast.

"There's a tremendous amount of technical and engineering talent in the Boston area," says Sally Bament, vice president of marketing at Convergent Networks (www.convergentnetworks.com), a next-generation telephone switch maker that set up shop in Wang Labs' old facilities in Lowell. "At the end of the day, that's what all these start-ups are being formed around."

While the ghosts of Wang, Digital Equipment and other computing pioneers evoke the spirit of Boston's rich technology history, it is the heritage of a more recent set of now-defunct companies that is resurrecting the area's golden era.

"The heart of the story is that you can't dismiss the importance that two companies had in the process," says Ian Mashiter, founder and senior vice president of marketing and business development at Ennovate Networks (www.ennovatenetworks.com), an edge router maker based in Boxboro. "Wellfleet and Cascade played a tremendous role in rejuvenating this area and making it a hot spot for networking."

In networking circles, Wellfleet Communications, which was eventually purchased by Bay Networks, and Cascade Communications, which was picked up by Ascend Communications, are the Romulus and Remus of the networking empire. While both companies were swallowed up by larger companies which were eventually swallowed by even larger companies, Nortel Networks and Lucent Technologies, respectively, talent from those two innovators has found its way into the dozens of Boston start-ups.

Perhaps the most prominent example of Cascade's influence is the stratospheric success of Sycamore Networks (www.sycamorenet.com), a Chelmsford-based optical networking company that is selling equipment to major carrier customers. Sycamore is led by former Cascade executives Desh Deshpande and Dan Smith.

Over in Westford, Sonus Networks (www.sonusnet.com), which also makes next-generation telephone switches, has been able to reach deployment with agreements Williams Communications and Global Crossing. Sonus is led by another ex-Cascade executive, Hassan Ahmed.

Drawing on the deep pool of experience, as well as new recruits from Boston's elite technical universities, such as Boston College, Harvard and MIT, start-ups in all sectors of the networking industry have set up shop in Boston. A partial list of recent start-ups includes Appian Networks and Sycamore in the optical space; Avici Systems, IronBridge Networks and Nexabit Networks in the terabit router space; and Ennovate and Spring Tide Networks from the edge router market.

In addition to U.S.-based start-ups, Boston seems to be the center of attraction for European telecommunications giants moving into the data networking space. Ericsson established its U.S. data networking headquarters in Boston, and Siemens set up its U.S. subsidiary, Unisphere Networks, in the Boston area. In addition to proximity to a large talent pool, an East Coast satellite makes more sense than a West Coast division because of the time differences between Europe and the U.S., Ennovate's Mashiter says.

In addition to solidifying the perception that Boston is the data networking Mecca, Cisco's move suggests to some that the area's chief rival for networking talent, Silicon Valley, is having a difficult time attracting top talent.

"Cisco's move is a sign that the talent pool in Silicon Valley could be running a bit thin at the moment," Mashiter says.

Lisa Allocca, vice president of strategies and solutions at Unisphere Solutions, agrees: "Part of what is happing is the Valley tapped out on talent, housing and quality of life."

Despite the near-legendary accounts of ponytailed programmers working around the clock, mainlining pizza and bringing cots to their Silicon Valley offices, Dalton, Mashiter and others say quality-of-life issues are a major consideration for most job applicants.

The more affordable housing and less congested highways of Boston appeal particularly to experienced engineers and technical workers, who are more coveted employees than college grads, Mashiter says.

"The 22-year-old graduate with no responsibilities will go for the money and is not that concerned where he lives," Mashiter says. "However, it's difficult to tell your family you're going to live in a two-bedroom house that's 100 miles away from your office."

Dalton, who spends about a third of his time in Northern California, says a major lifestyle advantage of the Boston area is that the get-rich, let's-make-a-deal culture of Silicon Valley is not as pervasive on the East Coast. "If you want a lot of traffic and strip malls, you can find that in Boston," Dalton says. "But if you want to go out for dinner and not hear about term sheets, we've got a lot to offer here."

A head-to-head comparison of Boston vs. Silicon Valley as a hotbed of networking activity is a difficult proposition. Notwithstanding that Price-waterhouseCoopers and a few other research firms chart venture capital activity, surveys tend not to record information specifically about the networking sector, most often grouping equipment makers together with chipmakers, component manufacturers and even electronic commerce firms.

Venture capital investments in the third quarter for the overall telecommunications industry exceeded $9 billion, according to a PricewaterhouseCoopers report. While there were 300 start-ups founded in the Silicon Valley area during that time period, only 113 got started in the New England area.

Although Silicon Valley is still the center of technology, unofficial evidence suggests that Boston is the preferred location to launch a data networking company. Of the five major terabit router start-ups that appeared on the scene in recent years, for example, four — Argon Networks, Avici, IronBridge and Nexabit — were based in the Boston area. Pluris was the only one to set up shop on the West Coast.

Boston, however, is far from paradise. "The flip side to the talent surplus is that everyone is fighting for the same employees," Dalton says, adding that the number of start-ups, all offering lucrative stock options, can make it difficult to retain coveted workers.

And while the congestion problem isn't nearly as serious as the one in Silicon Valley, Bament and others say it's increasing difficult to find space, which is constantly increasing in price. The boom has also had an impact on traffic. Interstate 495, which emerged as an alternative location to the already congested Route 128, is beginning to give some commuters headaches.

"In terms of infrastructure, the buildup is running behind the economy," Mashiter says, adding that towns surrounding Boston suffer from a shortage of restaurants and other facilities.

In the end, however, Mashiter says he'd rather be in Boston.

"If you want to build products for the service provider community," he says, "this is the place to be."