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The story of IBM in Austin is the story of a tech company that is constantly re-inventing itself.

July 28th, 2017

On a sizzling summer day on July 31, 1967, a small crowd of Austin politicians and news media ducked inside a brand-new IBM manufacturing plant in far North Austin to watch a Selectric Composer typewriter roll down the assembly line for the first time.

This $4,400 machine and the 100,000 square-foot plant that produced it was a big deal for the sleepy college town of Austin.

When the plant was announced in December of 1966, it was front-page news with a screaming headline “IBM Will Build Here.” It was considered a significant win for the city’s fledgling economic development efforts.

The plant, which eventually grew to 200,000 square feet and was part of the company’s Office Products Division, technically wasn’t IBM’s first presence in Austin. The tech company had opened a sales office here in 1937, according to Austin History Center records.

But IBM’s selection of Austin as the site for its typewriter manufacturing plant was crucial in the early development of Austin as a tech hub.

“It was a significant validation of Austin being a great place for technology manufacturing,” said Angelos Angelou, an economic development consultant who lives in Austin.

IBMAustin's Mayor Pro Tem Emma Long tours the IBM Selectric Composer assembly line on the opening of the first section of the Office Products Division's Austin plant. With her, from the left are Austin General Manager Charles Muller, Austin City Councilman Richard Nichols and George Page, architect of the plant.

Austin’s tech industry is now a vital part of Austin’s economy, and employs 120,000 people here. Companies like Dell Technologies, HomeAway, Advanced Micro Devices, Apple and Samsung are either headquartered here or have significant operations in Central Texas.

Today, IBM’s operations in Austin bear little resemblance to a typewriter manufacturing plant, which no longer exists. That plant was torn down years ago, and the land it sat on is now home to a Nordstrom department store at the Domain development in North Austin.

But the Selectric Composer was the start of IBM’s commitment to Austin, where it built an enormous presence over the past 50 years. IBM’s Austin workforce grew from 500 people working at a typewriter plant in 1967 to an estimated 6,000 today. What they do is a microcosm of IBM’s global operations, and a testament to how much the company has changed from its days as a computer and electronics manufacturer.

RELATED: Check out our photo gallery of IBM in Austin

IBM’s 50th anniversary in Austin comes as the company is struggling to reinvent itself, as growth in IBM’s legacy businesses selling hardware, software and services is slowing amid the shift to cloud computing. IBM has made big investments in key areas like cybersecurity, artificial intelligence and the cloud. But these bets aren’t helping the company make more money yet and the patience of some investors and analysts is wearing thin.

“The new businesses aren’t growing fast enough to fill in the gaps made by the old businesses’ decline,” said Roger Kay, an industry analyst with Endpoint Technologies Associates. “These things aren’t easy and in some cases aren’t even possible.”

‘New kid on the block’

When IBM picked Austin for a manufacturing plant in 1966, purchasing 544 acres where the Domain is now, city leaders hoped it marked a turning point in Austin’s efforts to distinguish itself as a suitable home for technology companies.

Civic leaders had grown jealous of neighbors Dallas and Houston, who had cultivated thriving private sectors. An American-Statesman editorial from December 1966 calls the IBM decision a potential “windfall” for the city and notes that the “technological industry is largely limited to the Houston and Dallas areas.”

City officials knew in the fall of 1966 that a company code-named “XYZ” wanted to come here, but they didn’t know it was IBM until December.

RELATED: What was Austin like before the tech industry? Michael Barnes explains.

The city had started an effort to lure more tech-oriented manufacturing to Austin years before, and in fact IBM was not the first tech company in Austin. Defense electronics company Tracor is considered the first traditional “tech” company in Austin, and it was founded in the mid 1950s as Associated Consultants and Engineers by four University of Texas graduates.

Even with Tracor blazing a trail, finding people to work at the new IBM plant was not easy, recalls Jim Grant, who was one of two hiring managers brought to Austin to find the hundreds of people needed to get the IBM typewriter plant up and running.

Grant, who has since retired from IBM but still lives in the Austin area, said he recruited people who had training on mechanics and electronics. “We were basically looking for someone who could do repetitive work in a manufacturing environment,” Grant said.

But IBM was the “new kid on the block,” Grant said. “IBM was a foreign word in the Austin market. They didn’t even know what the letters stood for.”

He remembers interviewing one man who worked as a gas station attendant. “He came in, and said, first of all, what is IBM?” Grant said. “He then proceeded to ask me: Are you expecting to be here for awhile?”

Grant promised that IBM was in Austin for the long haul.

Ricardo Brazziell/AMERICAN-STATESMAN STAFFJim Grant poses with the second edition IBM typewriters that was built in Austin at his home in Georgetown on Friday, July 21, 2017.

Middle of nowhere

In the year following the opening of Austin’s IBM typewriter plant, the company added 150,000 square feet of space to its Austin operations, culminating in a series of low-slung rust-colored buildings with names only an engineer could love: “Building 001, 002 and 003.”

What happened inside these buildings was mostly development and manufacturing of various types of word processing equipment, though there was some research and development work, Grant said.

The Austin plant was built because IBM had outgrown its typewriter plant in Lexington, Ky., he said. “We had approximately 3,500 employees in (Kentucky),” Grant said. “The tech base for recruiting future talent was not as strong up there. Austin was starting to make their mark and they had a lot of good educational facilities and opportunities for a good quality of life.”

IBMA view of IBM’s new typewriter manufacturing plant

IBM executives said the University of Texas, and its engineering and computer science graduates, were part of Austin’s allure, and remains a reason why IBM is in Austin.

In the 1960s, IBM’s plant was set in the proverbial “middle of nowhere,” and Burnet Road was just a country road surrounded by open fields. Austin’s population in 1967 was 220,000, according to Census data.

Former IBM administrative manager Lillian Davis said IBM had to put a cafeteria on site for its workers because its location was so remote. “We all ate together, everybody on the site. There was no other place on Burnet Road to eat,” she said.

In the late 1960s and 1970s, the IBM Austin plant churned out ever-more sophisticated word processing equipment.

The company was also bursting at the seams, adding hundreds of workers, and by the late 1970s, IBM added more capacity to its Austin operations with two more buildings called “Building 045 and 060.”

Larry Kolvoord/AMERICAN-STATESMAN STAFFThis building was also known as “Building 60,” and was used for electronic circuit board manufacturing.

The PC revolution

In the early 1980s, IBM was at the forefront of the personal computer revolution, sparring with competitors like Compaq over who could build the fastest, most powerful personal computers. And that meant big changes for IBM’s Austin operations.

Although Austin wasn’t the headquarters of IBM’s PC division, the Central Texas workforce helped design and manufacture several IBM PC products.

In 1984, IBM Austin workers helped develop and manufacture IBM’s first portable personal computer. Though it was called “portable,” it wasn’t like today’s laptops. This computer weighed 30 pounds and wasn’t meant to be lugged around.

Two years later, Austin began developing and manufacturing IBM’s PC Convertible, which was its first foldable laptop.

Davis, the former IBM worker, remembers the PC days as heady times at IBM. She was hired in Austin in 1983. “When I first moved back to Austin there was a lot of personal computer work going on in addition to the manufacturing,” she said. “We had a lot of PC sales people and developers.”

But Angelou, the economic development expert, says that Austin startups like Dell “quickly eclipsed” IBM in terms of local interest.

“IBM was never really seen as a significant player,” he said, “probably because everyone was rooting for the underdog.”

In 1986, IBM chose Austin as the headquarters of its Power Systems products, which are the computer systems and chips that perform muscular computing tasks, such as running supercomputers and servers. “Microprocessor development requires some very specialized skills and they are highly sought-after in the industry,” said Tony Befi, a former senior executive for IBM. “We were able to find those skills in Austin.”

This group started rolling out its first new products in 1990. Power Systems was key in transforming IBM Austin from a manufacturing hub to an engineering and technology development center.

By about 1990, IBM’s Austin workforce had reached its peak of 8,000. IBM was the biggest private employer in the Austin metro area for a time in the late 1980s and early 1990s — until Dell’s ongoing growth surpassed Big Blue.

David Kennedy/AMERICAN-STATESMAN STAFFThe entrance to IBM’s new buildings off Burnet Road, which still exist today. This photo was taken in 1991.

‘Made a huge difference’

The tech industry would have sprouted in Austin regardless of IBM’s decision to build a plant here, local tech industry experts agree. But they do credit IBM for playing a significant role in nurturing the city’s tech ecosystem, especially in its early fragile years of the 1970s and 1980s.

After IBM came to Austin, Texas Instruments chose to build a plant in Austin two years later. National Instruments was founded in 1976, and then in the 1970s companies like Motorola and AMD built chip design and manufacturing hubs here. (AMD is still here and Motorola became Freescale, which is now owned by NXP Semiconductor.)

Glenn West, who led the Austin Chamber of Commerce from 1987 to 2000, said IBM was always willing to talk to new companies about relocating to Austin.

“It made a huge difference to be able to say IBM was here,” he said. “It was very common for local IBM execs to sit down with companies considering coming to Austin and talk about their experience here.”

IBM also provided high-paying jobs to thousands of Central Texas workers over the years, notes Bill Stotesbery, who was previously a spokesman for tech research consortium MCC and is now general manager of KLRU-TV in Austin. (IBM was not a member of MCC.)

RELATED: Key moments in IBM history

“The number of people they employed and the creativity of that group of employees immediately drew attention to Austin,” Stotesbery said. “Obviously, other companies move here to be close to IBM. Anytime you have a facility that large, you have a supplier community.”

IBM also helped pump money into the local economy through acquisitions. One of the key ways IBM built up its software talent in the 1990s and 2000s was through snapping up Austin software companies. One of its biggest acquisitions was in 1996, when it purchased Austin-based Tivoli Software for $743 million. Tivoli makes software that helps businesses manage computer networks.

Having IBM in Austin has also led to more entrepreneurial activity, Angelou said. A number of Austin companies were started by former IBM engineers or executives, such as Austin-based artificial intelligence software company Cognitive Scale and computer systems manufacturer ClearCube.

IBM also has a reputation of encouraging its employees to become civically engaged and for donating to local causes, according to former IBM Austin workers and outside observers.

“A lot of the big corporate guys moving to town, like IBM, weren’t headquartered here,” Stotesbery said, and tended to direct their philanthropy outside of Austin. IBM, he said, was a “community player.”

A top IBM Austin executive, Jerry Carlson, once was vice president of the board of trustees for the Austin Independent School District. And a current Austin City Council member, Sabino “Pio” Renteria, is a former IBM worker.

Mike Boroff/AMERICAN-STATESMAN STAFFIBM employees test the print for the IBM Displaywriter built at the Austin plant.

IBM Austin today

Though IBM has trimmed its Austin workforce from its peak in the 1990s, the Austin site remains one of its three biggest locations in the United States. Most employees work out of a cluster of nine buildings off Burnet Road that were built in 1991.

The company still has Building 45, which contains its Power Systems group. But its other manufacturing-oriented buildings were sold and torn down in 1999 to make room for the Domain. The company hasn’t done any Austin manufacturing since 1997.

“You know, I think people may think of IBM and think of a computer company,” said Befi, the former IBM Austin executive. “And therefore IBM Austin must be a group of people developing computers. But IBM is so much more.”

Like a lot of older tech companies, IBM is trying to keep up with the next wave of technological innovation. Every piece of IBM’s business — both its legacy operations and its bets on fast-growing areas like artificial intelligence — is represented at its Austin campus, IBM executives say.

“It’s the only place in the world where if you wanted to talk to a person working, not just an executive, but somebody working in a part of IBM’s business, Austin is the place you can come and find that person,” said Phil Gilbert, head of IBM’s Global Design team, which is headquartered in Austin.

Deborah Cannon/AMERICAN-STATESMAN STAFFPhil Gilbert, General Manager of IBM's design studio on Wednesday, April 12, 2017.

It’s a good thing that IBM’s Austin operations are so diversified, says Kay, the industry analyst, rather than having a concentration in one part of the business. “There will still be plenty of opportunity for IBM workers in Austin,” he said.

IBM Austin is also one of only 12 research labs that IBM runs globally. People who work at an IBM research lab are tasked with tinkering with ideas that align with IBM’s long-term mission.

RELATED: IBM produces more patents than any other Austin company

“Researchers are not sitting there actively developing a product today,” Befi said. “They are looking to the future.”

IBM also decided in 2012 to make Austin the headquarters for the company’s Global Design Group. Gilbert, who heads up the design group, came to IBM when his Austin company, Lombardi Software, was acquired in 2009.

The design group’s mission is to orient product development around design thinking, which is focused on thinking about the user’s needs, not just creating eye-pleasing designs. There are about 1,000 people who do design work for IBM, and about 400 of those are in Austin.

Gilbert said it made perfect sense to put the design group in Austin because every piece of the company’s business is represented here.

“Austin,” he said, “is a very unique place inside IBM.”

Deborah Cannon/AMERICAN-STATESMAN STAFFRene Rodriguez, a design lead at IBM, talks with a coworker (not seen) in the company's design studio on Wednesday, April 12, 2017.


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