GRID COMPUTING AND AN OPTICAL FIBER NETWORK: HOW THEY CAN BOLSTER THE TEXAS ECONOMY By Bernard L. Weinstein, Ph.D. and Terry L. Clower, Ph.D. University of North Texas Denton, Texas April 2004 EXECUTIVE SUMMARY Information technology (IT) has become a major driver of both the national and Texas economies. Education, healthcare, logistics, and financial services are but a few of the many Texas industries that have embraced IT to boost their productivity and competitiveness. But continued expansion of Texas’ IT sector, with its spillover benefits, will depend heavily on our ability to upgrade the supporting infrastructure. Unfortunately, several recent studies find that Texas is losing ground in the science and technology arena. To remain competitive in the quest for research dollars, as well as new industry, Texas must develop the infrastructure to support “grid computing,” a distributed network where there is no longer a mainframe or centralized computer. Connected by high-speed fiber optics, the grid provides enhanced computer power to individual researchers and projects. Many states, including Ohio, North Carolina, Indiana and Virginia, have already recognized the potential of grid computing—not only to assist researchers at universities and corporate R&D shops but also as a stimulus to economic development and job creation—and they are investing public dollars to acquire dark fiber and web service software. What’s more, these states have initiated programs to connect their state networks to two emerging national grids—National LambdaRail and TeraGrid. Thirty Texas institutions of higher education have expressed a desire to participate in a statewide grid computing network and have pledged $8.5 million for this purpose. These institutions have also requested a $10 million commitment from the Texas Enterprise Fund in order to get the Texas optical fiber network up and running. ii Studies conducted in North Carolina and California have identified significant increases in productivity, income, and job creation resulting from grid computing. Texas industries that could benefit from access to grid computing include oil and gas production, biomedicine, education, aerospace, automobile manufacturing, and financial services. We estimate the adoption of grid computing by Texas’ automobile, aerospace, and financial services companies alone will generate a net gain of more than 21,000 jobs paying $486 million in annual wages and salaries. In addition, Texas universities should be able to increase their federal R&D funding by at least 10 percent, which will boost personal income by $32 million and create over 900 new jobs. Failure to develop a high-speed fiber optic network and grid in Texas will put our businesses at a competitive disadvantage and diminish our ability to grow and attract new industry. Furthermore, our colleges and universities will have difficulty recruiting superior faculty and students, pushing Texas even further behind California, New York, Illinois, Massachusetts and other states in attracting the best and the brightest. iii A. Introduction The Texas economy is in constant flux. Twenty-five years ago, energy and agriculture—along with defense-related manufacturing—were the state’s primary economic engines. In the 1980s, electronics, telecommunications, computers and other “hi-tech” industries grew rapidly, transforming Texas’ economic landscape and making the state a center for research and development in a number of emerging technologies. With the Internet as a catalyst, by the mid-1990s computer hardware, software, and data processing were merging into a new industrial sector dubbed “information technology” (IT). Importantly, the growth of IT helped boost the productivity of a wide range of producer and service industries. Education, healthcare, logistics, and financial services are but a few of the industries that continue to thrive in Texas because of the state’s growing IT sector. Between 2000 and 2003, the state—as the rest of the nation—endured a recession, with the IT sector hit especially hard. However, with the national economy into the third year of an economic expansion, and business profits and planned investment picking up smartly, the IT sector is starting to revive. IT should continue to be a major driver of economic activity in Texas, both directly and indirectly. According to the American Electronics Association, nearly 500,000 Texans are employed in the IT sector, and this number is projected to grow smartly in the years ahead.1 But continued expansion of Texas’ IT sector, with its spillover benefits, will be contingent on (1) a continued upskilling of the state’s human 1 American Electronics Association, Cyberstates 2003, 2003. 1 capital, most especially in engineering and science, and (2) our ability to upgrade IT’s supporting infrastructure. The importance of IT to economic development is perhaps best summarized in a recent report from the Milken Institute: The engines that propel state and regional economies forward today differ dramatically from the engines of the past. The old engines of economic success were the accumulation of physical assets, proximity to waterways, railways, raw materials and the manufacturing infrastructure that developed around them, such as cheap labor. The new engine of regional economic prosperity is based upon how successful a given location is in attracting and expanding technology and science assets and leveraging them for economic development. States succeeding in technology-based growth will push income per capita higher, especially relative to those states that falter.2 Unfortunately, this same Milken study finds that Texas is losing ground. For example, Texas’ per capita income of $28,401 ranked 30th nationally in 2002, a drop from its rank of 24th in 2000. More seriously, Texas fell from 14th to 23rd in the Institute’s National State Technology & Science Index between 2002 and 2004 (see Table 1).3 Worse yet, Texas recorded the largest negative rank change among the 50 states. Though part of the drop can be attributed to the shakeout in telecommunications and other IT industries over the past several years, the lower ranking also reflects a drop in research and development (R&D) activity in the state along with below-average investment in human capital. 2 Ross Devol and Rob Koepp, State Technology and Science Index, Milken Institute, March 2004. 3 The index is composed of five equally weighted major composites: research and development inputs, risk capital and infrastructure, human capital investment, technology and science workforce, and technology concentration and dynamism. 2 Table 1 State Technology and Science Index and Findings Source: Milken Institute “State Technology and Science Index,” March 2004. Another recent survey also indicates Texas may be losing ground in the science and technology arena. Robert Huggins Associates, a consultancy based in the United Kingdom, prepares an annual index comparing metropolitan regions across the globe using a variety of measures deemed to influence competitiveness.4 These indicators range from per capita outlays for primary, secondary, and higher education to the level of broadband access in each region. Not surprisingly, San Francisco/Silicon Valley has ranked number one in the world for the past two years. Austin-San Marcos was ranked number two in 2003 but fell 4 World Knowledge Competitiveness Index 2004, Robert Huggins Associates, 2004. 3 to 9th in 2004. Dallas-Fort Worth’s ranking dropped from 13th in 2003 to 21st in 2004. On the plus side, Houston-Galveston-Brazoria moved up the chart from 32nd to 25th. Like it or not, Texas is competing in a global marketplace for products, services, ideas, capital, and people. As the Milken and Huggins studies stress, technology-driven growth will separate the future winners from the losers. The implications for Texas are clear: We must enhance our commitment to science and technology if we wish to remain a serious contender for high wage jobs, new investment, and a higher quality of life for all our citizens. The following report does not directly address Texas’ human capital issues. The Texas Legislature, the Coordinating Board for Higher Education, the Texas Education Agency, and other private, public, and non-profit organizations focus constantly on the need to improve the state’s educational outcomes. Rather, we examine the investment in hard infrastructure that will be required to keep Texas a vibrant and expanding part of the global economy—most especially a grid computing network connected by fiber optic cable. B. Grid computing: The next big thing in information technology Simply put, grid computing is a distributed network of computing, storage, and input-output systems where there is no longer a mainframe or centralized computer establishing a hierarchy. Instead, software provides a division of tasks so they are processed in parallel. This, in turn, makes possible using inexpensive computers from different manufacturers, and in different locations, to address a complex computational task that might otherwise require a supercomputer. In short, establishing a grid provides 4 enhanced computer power to individual researchers with no requirement they be close to each other. Creation of a grid, of course, requires “web service software” as well as high performance networks to connect these dispersed machines. Web services are computer programs capable of interoperating over networks to deliver a specific result to a user. For large and complex problems, grids require high performance networks running over optical fiber cable.5 Hundreds of major corporations have started to use grids and web services, and a study by IBM projects that grid computing will develop into a $50 billion industry. 1. State networks Many states have recognized the potential of grid computing, not only to assist researchers at universities and corporate R&D shops but also as a stimulus to economic development and job creation. A few examples follow. a. Ohio The State of Ohio has just launched a “Third Frontier Network” (TFN) that will eventually connect nearly 100 institutions of higher education and thousands of primary and secondary schools in a computing grid.