Apple’s recent announcement that it’s building a new $1 billion campus in Austin, Tex. adds momentum to the trend among tech startups and investors to look beyond Silicon Valley to incubate and grow the next generation of innovative companies.
Moreover, in what amounts to doubling down on its satellite strategy, Apple
also said it will establish new sites in Seattle, San Diego, and Culver City, Calif., as well as expand in cities across the U.S., including Pittsburgh, New York, and Boulder, Colo. over the next three years — welcome economic boosts for those areas.
I’m not sounding the death knell for Silicon Valley. To be sure, this remarkable region south of San Francisco is still the brightest star in the global tech universe. Silicon Valley will remain Apple’s home base, as well as that of Google
, Cisco Systems
and many others. Its position of dominance is not in jeopardy — yet.
Nonetheless, many of the tech startups planting their flag in Silicon Valley to be near angel investors, venture capitalists, investment banks, and tech talent are keeping only small teams there. They are increasingly utilizing less-costly satellite offices, remote co-working spaces, or other remote-work options for the majority of their employees.
Indeed, satellite campuses and remote working initiatives have become increasingly viable as Silicon Valley has shifted its focus from hardware to software and app development. Engineers can code from anywhere, and there are no shipping costs associated with transporting code.
Costs and challenges
Additionally, the economic, employee-recruitment and retention, and quality-of-life challenges of doing business in Silicon Valley and living in Silicon Valley are well-documented and daunting — even for giants such as Apple, but particularly for startups.
The operating costs for a tech startup in Silicon Valley can be three or four times that of one in emerging tech hubs such as Austin, Pittsburgh, Columbus, Ohio, the Charlotte-Durham, N.C. area, Wilmington, Del., and Boise, Idaho. A private equity investor recently observed at a CNBC investor event that a tech company in his portfolio relocated to a Midwest tech hub and added six months of cash burn onto its balance sheet. That’s not inconsiderable.
Moreover, the cost of living in Silicon Valley is among the highest in the U.S. Buying a home — even for highly paid Silicon Valley employees — remains frustratingly out of reach for many.
Both startups and growing companies need high-quality talent and as more and more people have flocked to Silicon Valley, traffic and congestion have increased. By one recent estimate the average Silicon Valley commuter sits idly — and unproductively — in traffic for 67 hours per year.
All of these factors make Apple’s Austin expansion look like a wise strategic move. Selecting Austin for its new campus was certainly driven by Apple’s long experience there. The company already has 6,000 employees in Texas’ capital city, second only to its Silicon Valley headquarters. Apple said its Austin employee count will grow by 150% to 15,000 once the new campus is completed. California’s job losses are Texas’ gains.
Notably, Apple’s positive experience and long tenure in Austin obviated the need to conduct a long and costly Amazon.com-like search of the U.S. for its selection of a site of its new campus.
Doubtless many tech companies are already looking closely at Apple’s satellite strategy as they seek ways to grow faster and run their operations more efficiently while still attracting and retaining the best available tech talent.
Inevitably, that examination and scrutiny will lead to more, and more innovative, remote working opportunities
Requiring employees to show up every day at a common location and work fixed hours is a remnant of the Industrial Age. It’s long past time to let it go. An executive at a growing company described in Fast Company magazine recently how he has grown a workforce from 19 employees in 2006 to over 400 today — all of whom are remote.
This will increasingly become more the rule than the exception. The breadth and variety of talents companies need cannot be found in a single location. There is no community overflowing with top-notch web developers you can hire in one lightning recruiting session. Winning companies of the future will leverage all the technological advances of recent years to make working remotely easier than ever.
This inevitable evolution will create both opportunities and challenges for communities throughout the U.S. — to provide both the education and quality-of-life options that top tech companies will require as well the infrastructure to make productive remote working possible. Apple’s Austin satellite campus is just an early part of this evolution.
Lou Shipley is a lecturer at the MIT Sloan School of Management.
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Source : MTV