Testimony from June 15, 1999

Prepared Testimony from Jeremy Jaech, Visio Corporation

Visio Corporation, headquartered in Seattle, Washington, develops, markets and supports drawing and
diagramming software for enterprise- wide use by businesses, governments and other organizations.
Founded in 1990 with just a handful of employees, Visio currently employs over 600 people and is
pioneering the business-drawing category in personal computer software. Our products are sold in more
than 45 countries and sales outside of the U.S. represent approximately 40 percent of Visio Corporation's
total revenue. Our mission today is to become the single worldwide standard for creating, storing and
exchanging drawings and diagrams in business. I am pleased to report that we are steadily achieving this
goal.Technology and innovation are clearly critical to Visio's business. What is less obvious, however, is
the critical role that federal science policy has played and will continue to play in our nation's continued
technological achievements and the corresponding economic rewards that all Americans will enjoy.
For that reason, I want to thank the members of the Committee for sponsoring these hearings that focus
on the critical role that technology plays in today's economy. I would like to use this opportunity to
highlight what I believe is one of the most fundamental policy issues supporting our nation's continued
technological and economic leadership: an enhanced national commitment to research and development.
The history of Visio and of our industry perfectly illustrates the critical role of federal policy in supporting
and empowering technological advancements that result in new companies and industries with enormous
impacts on the U.S. economy.

Most Americans probably don't realize that many of today's most exciting technological breakthroughs are
the result of federally sponsored research, much of it conducted at our nation's universities. During the
past decade, federal investments in information technologies enabled fundamental advances that have
been a major factor in the continued leadership of the United States. For example, the Defense Advanced
Research Projects Agency (DARPA) fueled the development of the computer-aided design software
industry by supporting early university-based research in integrated circuit layout, simulation and synthesis
tools.

Visio has built upon computer-aided design software programs to create a new and distinct market
category: computer-based drawing and diagramming for general business users. We have gone beyond
"traditional" design software to create an entirely new market in drawing and diagramming software for
business users. Today we are the leading company in this product category, our products are the industry
standard, and are extending our core technology into new segments.Just as research and development was
critical to the birth of the computer-aided design industry, R&D continues to play a central role in Visio's
growth. Our ability to constantly innovate and to translate those innovations into new products and
services is unquestionably our lifeblood. I believe any technology company would agree. It is no
exaggeration to say that R&D is one of the largest contributing factors to the past, present and future
economic growth of the technology industries and of the U.S. economy as a whole.

The American economy reaps the rewards of the federal and industry investment in R&D in numerous
ways -- through the creation of thousands of new, well-paying jobs, increased productivity and more
effective communications. In short, our nation's investment in innovation has paid tremendous dividends
through the development of entirely new industries and a communications revolution.

The information technology industries accounted for one-third of U.S. economic growth from 1995-1997
and today these industries are growing at more than twice the rate of the rest of the economy. These
industries are supporting high quality jobs for American workers. The average worker in information
technology and IT-related jobs earned 64% more than the average private sector wage.

Perhaps most important, advances in technology have significantly improved the quality-of-life for all
Americans. We at Visio are proud of the small part we are doing to contribute to growth in efficiency and
productivity, new ways of doing business, and tremendous advances in our ability to communicate with
one another.

Unfortunately, however, the American investment in basic research has declined in the past decade and is
threatened by continued budgetary pressures. The Council on Competitiveness reports that federal
funding for research decreased at an average annual constant dollar rate of 2.6 percent per year from
1987 to 1995.To keep America's economy growing into the next century, government and industry must
work together to reverse this trend. Industry and the federal government must make a joint commitment
to increasing the American investment in research and development.

The federal role should be to ensure consistent increases in funding for basic science, engineering and
technology research. As the February 1999 report of the President's Information Technology Advisory
Committee points out, the federal role is irreplaceable in ensuring sufficient investment in critical,
long-term research for which no market advantages are foreseeable.

Top priorities for funding increases should include DARPA and the National Science Foundation, which
provides 25 percent of all federal support for basic research at academic institutions.
A strengthened federal commitment to basic research has an added benefit: It is among the most effective
ways to invest in the American education system. Federally supported basic research provides hands-on
scientific training to students in America's colleges and universities and fosters new generations of
technology industry leaders.

A renewed federal investment in basic research must be matched by a renewed commitment to R&D by
corporate America. The establishment of a permanent R&D tax credit would be the most effective tool to
spur additional corporate research and development.

Since its enactment in 1981, the R&D Tax Credit has provided a powerful incentive for increasing
research by American industry. A 1998 study by Coopers & Lybrand indicated that the Credit provides a
31 percent return on investment -- more than twice the rate of typical incentives. However, the Credit's
history of short-term extensions (and gaps in coverage) have created a level of uncertainty that makes it
extremely difficult for firms to rely on the Credit as an incentive to invest in longer-term research. This is
ironic, as it is exactly this type of long-term research that the Credit is designed to encourage.
Making the R&D Credit permanent will provide tremendous benefits to our nation, in terms of
technological advances and economic growth. Coopers & Lybrand estimated that a permanent R&D
Credit would result in an additional $41 billion in R&D investment between 1998 and 2010.
To conclude, these are extraordinarily exciting times. New technologies, products and markets are
changing the way we do business, the way we communicate and the way we live our lives on literally a
daily basis. The rapid pace of this change makes it easy to forget that this progress has its roots firmly in
the past and in our nation's strong historic commitment to innovation.

Industry and the federal government must rededicate themselves today to a strengthened national R&D
policy to ensure that the technology and productivity gains of the past continue into the next century.
On behalf of Visio Corporation, I'd like to thank the members of the Joint Economic Committee for
your commitment to these critical issues. We look forward to working with you to achieve a strengthened
national investment in a balanced research and development portfolio.