InformationWeek: The Business Value of Technology

December 11, 2000

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Taking The Business Elsewhere

Tech companies set up shop off the beaten paths to ease recruitment and retention woes

By Judith Mottl

More on corporate geography:

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everal technology companies, weary of employee poaching, ever-increasing salary levels, and the costs of doing business in high-tech meccas, are packing their bags. These pioneers are relocating IT divisions or setting up new businesses in towns that many would describe as the boonies.

While CEOs and hiring managers admit it takes a bit more effort--and strong doses of recruiting creativity--to lure IT folks to remote locations, they claim the paybacks are great. Not only do IT staffers stay longer and discover a better balance between work and home, which boosts productivity and employee loyalty, but the reduced operating costs can significantly help a company's bottom line.

"The Internet, for the most part, removes geographic boundaries. I felt that it was possible to build a successful high-tech company in a location that provided a quality and balance of life," says Greg Gianforte, founder and CEO of RightNow Technologies Inc., an Internet software company in Bozeman, Mont.

Although high-tech centers keep emerging in cities, Gianforte doesn't think his 206 employees in Bozeman are missing out. "We have employees who go just as fast as they do in Silicon Valley, but there's no commute and we're surrounded by five mountain ranges. That's something we get a huge productivity dividend from, and it's a strategic advantage you won't find in Silicon Valley," he says.

And despite his company's location, Gianforte, himself a former Silicon Valley exec, has been able to pull in execs from top industries, including Compaq, Network Associates, Oracle, and Hewlett-Packard. "Employees want to balance a very intense nine-to 10-hour workday with the ability to get away and focus on family or some activity so they can recharge," he says.

Opening shop in Bozeman was a homecoming for Gianforte, a Montana native. He founded his first venture, a network-management-application company called Brightwork Development, in Silicon Valley in 1986. He stayed there until he sold the company--then known as Network Associates Inc.--to McAfee Associates Corp. in 1994. Gianforte was ready for a change and had no interest in a hot tech region.

"One of the biggest problems I had running the company [Network Associates] was in hiring and retaining people; it was just such a competitive market," says Gianforte, who founded RightNow in 1997. The company, which develops Web-based customer-service software, posted revenue of $2 million in 1999. The nearly 50 IT employees form primarily a development team with skills including Unix, C, C++, and Java programming.

IT-staffing obstacles also prompted Egghead.com to centralize IT operations late this summer, moving 25 network engineers from its Menlo Park, Calif., office to headquarters in Vancouver, Wash. The 13 employees who declined to relocate will be laid off Dec. 29.

The relocation is a cost-cutting effort that will help the discount software E-retailer hit profitability by years' end, executives say. But it also will reduce IT turnover and, ultimately, cut recruitment costs. "The IT labor crunch hasn't eased off one iota, and it's just getting more difficult each year to attract and retain people," says human-resources VP Bill Skinner.

The Vancouver region isn't jam-packed with technologists, admits Egghead MIS director Linda Vigesaa. Yet she believes the lower cost of living, beautiful scenery, and slower pace will attract employees. "What I'm hearing is that people are excited to see what they can buy in terms of a house. They're also amazed about how pretty Vancouver is," says the IT manager, who moved in April from Phoenix to work at Egghead's Vancouver office.

The average cost of a Menlo Park home is $325,000, while a similar Vancouver home sells for $155,000, according to BestPlaces.net, a Web site that tracks nationwide costs of living.

And though high unemployment isn't usually a good economic indicator, it's a boon to companies looking for help. Last summer, Menlo Park's jobless rate was 1.5%; Vancouver's was 4.5%.

Attracting IT employees wasn't a nagging concern for CEO Mitch Johnson when he launched E-Mail Solutions Inc. three years ago in Omaha, Neb. Keeping IT churn low and avoiding competitive poaching by other tech companies were the big reasons Johnson steered clear of tech-heavy regions.

Thanks to several university computer-science programs and governmental tech-focused institutions in and around Omaha, the E-services provider hasn't hit any roadblocks in IT staffing. Nearly 60% of the 120 employees are Omaha natives, Johnson adds. "It's actually a pretty big techie community. It's an unsung secret in the sense that many companies have gotten their start here," he says.

According to the Greater Omaha Chamber of Commerce, approximately 50,000 workers are employed in information-intensive organizations in the Omaha area. In 1995, Forbes magazine rated Omaha one of the top 10 cities for nurturing IT companies in the United States, and WorldCom Inc. is building its largest data center there.

Natives who have spread their wings and are eager to return home are a big plus. "People want to come home to Omaha. It's not the weather or the nature here, it's the Midwestern values. So many people went to school here but had to go out of state and across the country to get a job. Now they can come back home to work," Johnson says.

E-Mail Solutions and RightNow Technologies are reaching out to college alumni who left the state for tech positions. That's how RightNow recruited Bozeman native Michael Comstock, who was working in Seattle.

Just about a year ago, Comstock got one of RightNow's postcards inviting tech alumni to "come back home to live and work." While it piqued his interest, the 1984 graduate of Bozeman State College left the card on the dining room table, where it sat for a few days until his wife, Kathy, picked it up and told him to call.

"She said, 'Call; it could be exactly what you're looking for,'" he recalls. Comstock wasn't planning to leave his job as a software engineer for Analytical Methods Inc. in Redmond, Wash., but he did make the call. Four weeks later, after accepting a job as a software project manager, the Comstock family of five moved to Bozeman.

"I never thought I would be able to come back to Montana or that there would be enough technology opportunities here," says Comstock, who returned after 16 years. The benefits of relocation--a shorter commute, a larger home in a more rural area, lower costs of living, and a better balance of work and family time--have more than compensated for the small pay cut he took, Comstock says.

"I loved my job in Seattle, but the traffic is awful, it's very crowded, and with three kids you want to make more time with your family. Now I've got a three-minute ride to work, and Yellowstone National Park is an hour's drive away," he says.

The family enjoys a five-acre home that cost about half of what it would have cost in Seattle; the city's lower crime rate and lower drug activity were also important factors, he adds. As part of the relocation agreement, Kathy Comstock was also offered a position. The customer-support specialist says family life has improved, and everything from day-care fees to gas prices costs less. "The best part, though, is that our kids are thriving and we're both working in jobs we love for a company that believes in a work-life balance," she says. But not everyone's eager, or able, to pack up and go. "If I moved I'd lose my talent pool," says Chris Wong, CEO of SkillsVillage Inc., which operates SkillsVillage.com, an online skills-procurement service in San Francisco. Wong admits Silicon Valley is expensive--he's seen a 100% jump in office-leasing costs in the past year--but he says the need for more work-life balance is "overrated" compared with the prestige of working in a high-tech region where serious IT careers are built.

Wong hasn't experienced debilitating staff turnover or recruitment problems. As a recruiter, however, he does acknowledge that attracting talent to the Valley isn't easy. "It's very hard, and companies looking to hire have to go a few extra steps in making it happen," such as offering relocation packages, salary levels, and benefits that are compatible with the cost of living.

It's also true that far-flung operations aren't as cheap as many envision. Often they find themselves matching Silicon Valley pay scales, says Forrester Research analyst Jed Kelko.

The best thing that could happen may be regional growth. Three years ago, RightNow was just one of a handful of technology firms in Montana's Gallatin County. Today, there are nearly 90, and the list is growing.

Vancouver's popularity as a technology mecca known as Silicon Forrest is growing, Egghead's Skinner says. "Vancouver today is what Seattle was 10 years ago," he says.

The ever-increasing IT talent search is prompting companies to try unique approaches for finding and keeping needed talent--even if it means returning to the boonies.

Illustration by Richard Beards
Photo of Skinner by Gary Parker
Photo of Gianforte by David Grubbs

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