The changing face of high tech in Minnesota

For more than a generation, Minnesota's high-tech universe could be measured by the distance between the University of Minnesota and a relative handful of companies that for a time made some of the most powerful computers in the world — Cray, Control Data, Honeywell.

Today, the number of high-tech companies and workers in Minnesota is greater than ever, and they stretch across the state. But the decline of the companies that anchored the supercomputing era has masked to a degree the emergence of a bigger, more diverse tech industry.

Old warehouses in downtown Minneapolis and St. Paul are filled with smaller tech firms. On the former trading floor of the Minneapolis Grain Exchange, dozens of freelance software writers and app designers share a co-working space called CoCo. Meanwhile, bigger tech firms fill suburban office parks from Arden Hills to Eden Prairie.

Jeff Liebl noticed the change when he moved back to the area from Silicon Valley last year. Liebl, the chief marketing officer at Minnetonka-based Digi International, started his career two decades ago at a supercomputing consulting firm in the Foshay Tower in downtown Minneapolis.

"The local industry has moved way beyond that time," Liebl said.

The scope of Minnesota's high-tech scene is visible in two events this week. In Rochester, Mayo Clinic is hosting its annual conference on health technology, drawing executives from some of the biggest tech companies around the world. Separately on Tuesday, it will play a role in the one of the biggest events of the year in high-tech anywhere — the unveiling by Apple Inc. of new products, including a health-related app created by Mayo's Rochester-based programmers.

Meanwhile, it's also Twin Cities Startup Week, when new tech companies and investors are holding workshops and social events throughout the metro area to develop their work. The week is anchored Thursday night by the latest MinneDemo, an event routinely attended by several hundred people where local companies show off new products and software in presentations limited to just seven minutes.

Technology has become pervasive, of course, with most large and midsize companies employing their own programmers and networking specialists to customize systems. At the same time, Minnesota's techiness is largely invisible, mentioned far less often than other industries like food, medical devices and financial services when people talk about the state's economy.

The recent rise of Smart Things, a developer of technology to connect more household products to the Internet that started in Minneapolis and was recently sold to Samsung Electronics Co., happened without the participation of Twin Cities investors. The firm was closely followed by the local tech community, though, and participated at a MinneDemo event in 2012.

Though the firm's leaders moved to a Samsung office in Silicon Valley, a development team remains in Minneapolis and founder Alex Hawkinson says there is plenty of overlap between the work of historic, well-known Twin Cities companies and the new industry his company is helping to create.

"Going back to companies like Medtronic, Honeywell, and Digi International, there's these fairly big companies that touch the physical world with devices," Hawkinson said. "The idea that you can do it is in the ecosystem."

Here's a broad overview of Minnesota's tech scene today:

The biggest tech company in the state isn't a stand-alone company or a household name. It's Optum, the data services subsidiary of UnitedHealth Group Inc., the nation's largest health insurer.

"We're sometimes known as the biggest company in health care that nobody knows," says Bill Miller, chief executive of OptumInsight, the health information and technology business within Optum.

Its revenue will surpass $40 billion this year, about one-third of UnitedHealth's overall revenue. On its own, Optum is bigger than any company in the state except Cargill, Target and Best Buy. Its legions of programmers and specialists are spread in offices throughout the western suburbs, but the firm will soon open a new headquarters building in Eden Prairie, a short distance from UnitedHealth's main campus in Minnetonka.

"We're creating our own front door," Miller says.

Optum and UnitedHealth employ thousands of tech professionals in the Twin Cities in almost every discipline, even game designers. It runs the data systems for UnitedHealth, hundreds of other health plan providers and several thousand hospitals and clinics. Over the past year, it was called on to help fix the insurance exchanges of the federal government and some states, including Minnesota, set up to implement the U.S. health reform law.

Another reason Minnesota's tech scene is so low-key is that the biggest group of companies provides services to other businesses, rather than to consumers. Many of these companies are connected to the industries in which the best-known companies in the state are leaders, such as agriculture and retailing.

One of the most closely-watched such companies is fast-growing SPS Commerce, a Minneapolis firm that is helping retailers manage their inventory more efficiently for online and in-store deliveries. Insite Software, also in downtown Minneapolis, develops e-commerce platforms for manufacturers and distributors. Kidblog of Minneapolis provides teachers with a blogging system that can be controlled to a limited audience that a teacher defines.

The list is far longer. Even some older business-to-business firms in the state have refashioned as tech companies. Deluxe Corp., the Shoreview company once best known for printing checks for corporate HR departments, now gets the majority of its revenue from personnel- and sales-related tech services.

Seagate Technology still makes hard drives in Bloomington and Hutchinson Technology makes electronic components in Hutchinson and Plymouth. But the real action in Minnesota these days revolves around 3-D printing and robotics. The biggest company in 3-D printing globally is Eden Prairie-based Stratasys, a company becoming more widely known because its MakerBot consumer products are starting to enter stores like Home Depot. PaR Systems of Shoreview makes robots used in factories and even in the cleanup of Japan's Fukushima nuclear plant.

Dozens of companies in Minnesota are involved in the same megatrend as Smart Things, which is the placement of wireless technology into many kinds of goods beyond smartphones and tablets. Though Honeywell's headquarters is no longer here, much of the development of its automation products is and many of those are becoming connected to the Internet.

And Digi International, which started as provider of networking equipment for telecom companies, now offers wireless modules that can be used to hook up almost anything to the Internet. One of its engineering teams works in an office overlooking Target Field in downtown Minneapolis to customize the modules for clients.

"Their motto is, 'We can stick a radio in it,' " Liebl said.

Adam Belz contributed to this report.

Evan Ramstad • 612-673-4241