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Gov. Jim Gilmore -- photographed in the greenhouse at Lewis Ginter Botanical Garden in Richmond -- is nurturing the state's high-tech sector.

photo by Mark Rhodes

It's been a fast climb up the learning curve. In his 1997 gubernatorial campaign, Gilmore pushed conservative issues like tax cuts, better schools and safer streets. Taking his message to Northern Virginia, he courted business leaders in the region's prosperous info-tech industry: 1,500-plus companies engaged in the Internet, telecommunications, software and systems integration. "It became crystal clear that this [info-tech industry] was a growing opportunity," Gilmore recalls. "This is a thoroughbred you have to develop and race."

Listing the achievements he's most proud of, Gilmore cites the establishment of the Secretariat of Technology. Virginia is the first state to create a cabinet-level position that combines control over the state's info-tech expenditures and responsibility for the state's broader technology initiatives. The tech sector now has one of its own, former Litton PRC executive Donald W. Upson, as an advocate of its interests -- something no other single industry can claim.

Gilmore also is using his bully pulpit to focus attention on issues crucial to the info-tech sector. His Commission on Information Technology, a 36-member panel drawn from business, government and higher education, has developed the nation's first comprehensive state-level blueprint for Internet-related law. The commission also plans to address the state's shortage of IT workers, explore ways to funnel info-tech investment to downstate communities, and recommend tax and regulatory reforms.

Meanwhile, Gilmore has directed Upson to re-engineer state purchasing and administrative procedures. The governor has doled out funds to George Mason University and Old Dominion University to enhance their high-tech training capabilities, and he has urged Congress not to tax Internet commerce.

In January, U.S. House of Representatives Speaker Newt Gingrich appointed Gilmore chairman of the Advisory Committee on Electronic Commerce. This committee will study federal, state, local and international taxation of electronic commerce and Internet access. It also will examine foreign barriers on U.S. providers of goods and services over the Internet.

Although Gilmore is generally pro-business, he is paying special attention to the info-tech sector. The governor believes it has the potential to elevate Virginia to a position of global leadership. He's laid out a plan that he hopes will make Virginia "the most fertile ground for intellectual growth within the field. I want to encourage info-tech companies to come here and create critical mass to make this the No. 1 state in America, if not the world."

Gilmore's macroeconomic policies of cutting taxes and throttling government spending don't please everyone. In Northern Virginia in particular, many business leaders are lobbying for more state funds to enhance higher education and alleviate the region's traffic congestion. Gilmore's reluctance to increase spending has prompted some bitter feelings north of the Rappahannock. Still, the governor has won widespread praise for his microeconomic policies promoting the technology sector.

"Gilmore and his administration have [taken] ... the farthest-reaching first step that any administration has ever taken to be supportive of high-tech industry and the info-com cluster," says Michael Daniels, chairman of Network Solutions, the world's leading registrar of Internet domain names. The policies, he says, will move Virginia "into the top ranks" of U.S. communications and information centers.

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One of Secretary Upson's top priorities has been to employ information technology to overhaul antiquated bureaucratic procedures in state government.

He is prodding state officials toward a system of electronic purchasing, perhaps by the end of the year. Upson hopes this initiative will stimulate greater price competition and accelerate delivery times to 24 hours or less. He also wants to move responsibility for the purchase of info-tech systems from the Department of General Services to the Department of Information Technology, which is better equipped, he says, to evaluate the complex proposals.

Currently, state agencies looking to buy high-tech equipment issue requests for proposals that specify every technical requirement for voice, data and video services. Upson is backing an approach that would encourage the private sector to suggest creative solutions instead. "We want the highest bandwidth available across government agencies, universities and public libraries," he explains. "We want to leverage our buying power in infrastructure where it isn't in place. And we want competitive pricing. We don't have to determine the technology. Let the industry do that."

In another shift, a Department of Transportation pilot project will offer state officials the option of leasing desktop computers as an alternative to purchasing them. "We have everything from 386s to Pentium computers," Upson says. "People aren't replacing their old computers for a number of reasons. [Leasing] keeps the technology current, and we can plan the budget accordingly."

Upson's proposals have attracted attention from across the country. In a national survey of state governments, academics at Syracuse University and journalists with Governing magazine listed Virginia as one of the top four states in management efficiency. Virginia received an A- in "information technology," one of the five categories cited; whereas 66 percent of the states received grades of C or worse. Virginia's information technology, stated the report, "is centrally coordinated by a powerful chief information officer who not only oversees the internal management efforts, but [who] also works to attract new technology businesses to the state."

Upson also is working closely with the General Assembly to update Virginia's laws for the electronic age. The legislature formed the Joint Commission on Technology and Science in 1997 to address Internet and electronic commerce issues. That decision "paid big returns on the opening day of the General Assembly" this January, says Robert J. Stolle, executive director of the Greater Richmond Technology Council. Despite leadership and organizational fights, Stolle says the commission reported "a slew of bills and joint resolutions."

The most notable bills in the 1999 session incorporated the Commission on Information Technology's recommendations for updating state Internet law. Bills tackled such issues as spam mail, use of encryption technology in criminal activity, and guidelines for schools, libraries and state employees in restricting access to pornography on the World Wide Web. Another raft of bills authorized the electronic submission of documents in uses as varied as campaign-finance disclosures, filings with the State Corporation Commission and applications for absentee ballots.

Legislators also introduced a bill to spur investment in start-up info-tech and biotech companies. The measure would create a research-and-development tax credit for start-up technology companies, says Diane Horvath, director of the Joint Commission. "If they invest in themselves, they can get a tax credit, and the bill would also allow individual taxpayers and corporations to invest and gain the same tax credit." As proposed, it's the broadest tax credit in the state, she says.

But for cash-strapped entrepreneurs, a tax credit doesn't put bread on the table. So the bill goes a step further. "It allows the companies to sell their tax credits to other corporate taxpayers for at least 75 cents on the dollar," Horvath says. "That gets them immediate capital."

The transfer-of-tax-credits bill is based on similar legislation that passed in New Jersey and Ohio. But circumstances here are different, so no one is sure what the fiscal impact would be on Virginia's finances. "It's hard to find a legislator who doesn't want to help fledgling industries, but we have to figure out how to do it," says Horvath. She acknowledges that the bill might not pass this year.

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This year's burst of legislative activity, unprecedented as it is for Virginia, is only a down payment on what's to come. Lawmakers are only tinkering on the margins of Virginia's legal system, while the state's economy and society are undergoing seismic changes that still aren't fully understood.

"The world is on the verge of a revolution as significant as the Copernican revolution," says Douglas Poretz, an investor relations consultant who focuses on info-tech companies. "We've just entered the horse-and-buggy stage of this. ... Whatever is done isn't enough." Virginians need to rethink everything, Poretz says.

"If you think about how cities, societies and nations were developed, it was around trade routes, seaports, railroads, airports," says Poretz. "The port of the 21st century is the modem. ... I make the analogy of a Model T. When people first saw it coming off the assembly line, they could say, 'This is going to change the world.' But no one could have said, "Someday, there's going to be a computer screen on the dashboard that will tell you to turn left at the next light, thanks to information it had received from a satellite put into space by a rocket.'"

Still, the visionaries of info-tech are better equipped to do that kind of thinking than anyone else. And Secretary Upson wants to encourage it by sponsoring a series of forums on the most pressing issues of the day.

Last December, a state-sponsored conference on the Internet drew CEOs and other senior executives from some of the leading companies in the industry. The line-up of speakers included William Schrader, CEO of PSINet; Mark Spagnolo, CEO of UUNet; and George Vradenburg, senior vice president of America Online. They made attendees -- including senior legislators -- face the reality that the Internet is creating radically new models for business organizations, for government, for society. Lawmakers, the executives agreed, needed to grapple with a wide range of Internet issues: from privacy and security to gambling, pornography and taxation. The forum created the impetus for much of the legislative activity that followed in January.

Upson plans to repeat the format of the Internet conference with a symposium this summer that will discuss how to bring low-cost bandwidth and high-tech jobs to downstate Virginia. The info-tech commission also will ponder how the state can leverage its investments in computing and telecommunications to encourage info-tech companies to invest throughout the state, not in just a few favored regions.

In the fall, another summit will focus on work force development for the info-tech industry. Estimates of unfilled technology jobs, most of them in Northern Virginia, range as high as 30,000. The shortage of technical skills is perhaps the greatest hindrance to growth of the info-tech industry in Virginia, as it is in every high-tech community in the country. If Virginia wants to vie for a world-leadership role, Upson contends, it must tackle the skills gap.

Work force development may be the most talked-about business issue in Virginia today. Although legislators have put forward a variety of proposals -- increasing technology grants to schools, funding tech scholarships, expanding training programs -- no comprehensive policy exists. No one knows precisely how many jobs are going unfilled, and where they are. No one has inventoried all the education and training resources, public and private, that exist. No one knows precisely what skills will be needed, and where the greatest imbalances are between supply and demand.

Throwing more money at new programs may not solve the problem. The Commission on Information Technology hopes to move the discussion to a more profound level. Previously, people have asked how many vacant jobs there are, says Maxine Lunn, director of information services and technology policy for Virginia's Center for Innovative Technology. Now the commission wants details: What specific information-technology skills are companies looking for? What programming languages should employees know? What training programs exist, and are they delivering the info-tech skills that industry requires?

Whatever the commission recommends, it will feel pressure to act quickly and decisively. The Virginia tradition of studying contentious issues for two or three years before acting on them just won't hack it for an industry that measures business in Internet years. Executives like Network Solutions' Daniels want action now. "We're closing the gap only slowly," Daniels says. "We need to lure more high-quality employees into the state and retrain others. There should be state, private and federal funding going into high-tech training areas, and Virginia should get its share of federal funding."

Following the summit on work force development, the info-tech commission will ask how to create a business climate attractive to high-tech companies and their employees. The commission will scrutinize the state's tax and regulatory environment, and will explore ways to web-enable state government for the purpose of untangling red tape, cutting costs and making the bureaucracy more responsive.

"We need every proactive measure at the state level to encourage companies that are involved in the Internet and electronic-commerce business to establish facilities in Virginia," says Daniels. "If the state government can help with work force, higher education funding and technical infrastructure that we need, we have the opportunity in five years to be the undisputed leader globally."

Upson thinks Virginia can make it happen. While Silicon Valley is ground zero for desktop computing, the Internet age will be 10 times more powerful, he says. And Virginia is an undisputed leader in the Internet. "We have amassed tremendous attention in just eight months. Every communications company, every Internet company, is paying attention to the governor. ... We have a world-class university and community college system. We need to get that down to the K-12 level. If we are able to address the issues of work force, bring technology to the rural counties, use the government's buying power to get an infrastructure in place, we can create a competitive advantage for Virginia."