PJM Consulting

  • Home
  • About Us
  • Services
    • General Management Consulting
    • Interim Executive Management
    • Product Management & Marketing
    • SaaS Management Consulting
    • Business Development Services
    • Distribution Channels
    • Digital Marketing Services
    • Sales Management Consulting
  • Morettini On Management Blog
  • Resources
    • NEWS
    • Morettini on Management Videos
    • LINKS
  • Contact Us
You are here: Home / Corporate Strategy / What is the Best Place to Locate a Tech Company?

By Phil Morettini 2 Comments

What is the Best Place to Locate a Tech Company?

Share on Facebook Share
Share on TwitterTweet
Share on Pinterest Share
Share on LinkedIn Share
Share on Digg Share
Send email Mail
Print Print

There are many great places in the world where software and technology companies thrive.

Outside the US, India has a rich history and deep resources in software development.

Brazil, China and Eastern Europe have emerged as low cost development centers. All of these areas are better know for outsourced software development services, however, and are only slowing emerging as homes of actual product-based companies. China and the “tigers” of Southeast Asia are known as low cost manufacturing (and in some cases low-cost development) centers.

Canada is promoted by many as the best place in the world to conduct software development, due to aggressive tax credits and other government incentives.

Israel has become an important high tech center, particularly in networking and security development.

The point is one could probably write a book on the many places tech companies thrive. But in the interest of brevity, I’ll use US-based locations as examples in this article, while discussing what regional attributes in general are important to consider when locating a new operation or complete company.

Labor cost considerations
This is obviously, very, important. But I contend that it’s not everything, especially in the tech business. You still need access to all of the key components that make a software or technology company successful–regardless of cost. Having said this, where in the country you locate can have a pretty major effect on your cost structure, and therefore your competitiveness over time. If for example you decide to locate in the Bay Area, you will be paying the highest salaries, rent, etc when compared to just about everywhere else. You may believe it is worth it and many do. Of course there are strategies such as outsourcing that can be used to reduce some of that cost disadvantage. But it is important to understand what effect location will have on your cost structure and plan for that effect.

Product development resources
Generally the most important consideration with respect to product development resources is to locate in an area where there is access to the talent flowing out of engineering colleges. This might be a major metro area, but it also could be a smaller city (with the advantage of lower overall costs) which is the home of a major university. For example, most of the Big Ten Universities have small tech clusters located in their regions, even though they are mostly located in smaller cities. It also helps to be located in an area where developers WANT to live–warm weather and different types of recreational opportunities tend to dominate this aspect of discussion. Another factor is what type of developer you’re looking for. For example, if you’re involved in the wireless business, you will be hard-pressed to find a stronger preponderance of development talent than you will in my favorite city,  San Diego. If you decide to locate in any area where your access to developers is limited, outsourcing is then no longer an option but a necessity and will play an important role in your success or failure.

Management resources
Access to management resources is strongly correlated with whether or not a region has a critical mass of tech companies. As a result, the Bay Area is superior to anywhere else with respect to the overall depth of management talent. But I think this is often overplayed (especially by those residing in the Bay Area!). There is arrogance by some in the technology business that says if you don’t live in one of the major tech centers you couldn’t possibly be a top-notch tech executive. The reality is that not every talented person wants to live in the Bay Area or Boston;  so they executive talent be found everywhere. If you’re putting together a startup only a small cadre of senior executives is needed to launch successfully.

Lifestyle preferences
This is an important consideration and a highly variable and very personal factor. I believe that it’s important to be happy if you’re going to be successful in business, at least in the long run. If you’re a skier, it might be great for you to locate operations in Boulder, CO. If you love the beach or are a triathlete, San Diego is a great choice. If you love cultural activities New York or San Francisco might be ideal. If you’re all business all the time you can’t beat Silicon Valley. Know who you are and what you like and set yourself up somewhere you won’t regret in the long run.

Outsourcing
Outsourcing today is a factor that can be the great equalizer with respect to locating your company. For example, maybe you strongly desire to locate in the Bay Area because of the overall tech business climate, access to capital and senior management talent, but are worried about development or manufacturing costs. Done correctly, strategic outsourcing can overcome those issues.

Where do the traditional high tech centers of the country rank for you?

Here’s my ranking:

Tech Center Costs Developers Management Lifestyle
Bay Area Worst Highest Highest Good
Boston Worst Plentiful Plentiful Good
Southern California High Good Good Great
Austin Moderate Good OK Good
North Carolina Moderate Good OK Good
Smaller-metro areas Lowest Scarce Scarce OK

Before anyone screams that I’m short-changing their area, this is obviously VERY subjective. This is my take only–what is important is that you create your own grading system before deciding where to locate your operations. Some may consider a smaller area which isn’t a traditional tech center to be an IDEAL location. Others might feel that Bay Area is a great place to live. A lot of this is simply personal taste.

What’s the most important location attribute?
The one most important consideration is the preferences of you or your team! What’s key to keep in mind as you make this decision is to think globally and long term about what’s important. The beginning of a new company business unit is an opportunity to start with a clean sheet about what’s important for the business as well as the founders personally. Don’t just start up you new business in a location because “you’re already there”, maybe because the parent company is there, or you just lost or quit an employee position. This decision will have many implications down the road and once you make it, your flexibility to overturn it will be much more limited in the future. The bottom line is that while geography should play a role in your decision, no place is perfect. And these days you can start up and successfully run a tech company just about anywhere.

What’s your view on where’s the best place or most important attributes to starting a new software or tech business? Leave a comment and clue us in on your view.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil directly at [email protected]

Share on Facebook Share
Share on TwitterTweet
Share on Pinterest Share
Share on LinkedIn Share
Share on Digg Share
Send email Mail
Print Print

Filed Under: Corporate Strategy, Distribution Channels, General Management, Software/Product Development, Startup/Early Stage Tagged With: annual management, Bay Area, best location, best technology location, consumer software, hardware, high tech, lifestyle, location, low cost, manufacturing, outsourcing, product development resources, software, software developer, strategy, taxes, tech center

About Phil Morettini

Phil Morettini is the author of the Morettini on Management Tech Blog and President of PJM Consulting. Mr. Morettini has an extensive C-level software and hardware company executive background. PJM Consulting provides management consulting and interim management services to technology companies.

Comments

  1. Jeff Campbell says

    January 16, 2014 at 9:55 pm

    Canada!

    Tech Talent – lots here and lots in the US that would consider repatriation.
    Cost – One word. SRED! Ok its four words. It offsets startup dev cost significantly (63.7% ish).
    Management – Again, lots of talent and experience here and Canadians in the US and abroad that would come back.
    Lifestyle – This is why many would consider coming back to Canada and so many more decline on opportunities south of us. You just have like a little snow every now and again.

    I recently closed a major financing with a US VC who wanted to move the company to the US post money. It wasn’t hard to convince them to stay in Canada, every objection was neutralized and the benefits were plenty.

    Reply
  2. Marek says

    November 2, 2016 at 10:56 am

    The best place? No doubt is Poland 🙂

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Article Categories

  • B2C
  • Business Development
  • Business Models
  • Corporate Strategy
  • Distribution Channels
  • enterprise software
  • Financing
  • General Management
  • hardware
  • Interim Executive Management
  • Marcom
  • market research
  • Mergers & Acquisitions
  • mid-market
  • Online Marketing
  • Operations
  • Pricing
  • Product Marketing/Management
  • Promotion
  • Retail
  • SaaS
  • sales
  • Social media
  • Software/Product Development
  • Startup/Early Stage
  • Uncategorized
  • VARs
  • Videos

Article Tags

B2B business model CEO channel channel sales conflict consultant consulting consumer software Corporate Culture direct sales distribution distributor early stage Google growth hardware high tech internet M&A management market marketing Microsoft online open source Phil Morettini PJM Consulting product Product Development product management product marketing Promotion SaaS sales sales force seo software startup strategy tech technology VAR VC Venture Capital

Article Archives

Company Profile

PJM Consulting
San Diego, CA 92130
(858)792-1062

Founded 2001
Management Consulting & Interim Executives for Software and Hardware Companies

Follow Us On Your Favorite Social Media

  • Facebook
  • Twitter
  • Google+
  • YouTube
  • Reddit
  • LinkedIn
  • Tumblr
  • Email
  • RSS Feed

 

Privacy Policy

Subscribe to Newsletter

© 2004-2019 PJM Consulting Some Rights Reserved