In a recent interview with Scott Gorcester, CEO and Karl Burns Chief Strategy Officer of cloud service provider VirtualQube, we were able to get some insight regarding the major growth seen in Seattle’s tech industry.
BIM- A lot of people think this is Seattle’s Biggest Boom ever, what are your thoughts on this perception?
Scott- I would call my position on whether this is our biggest boom ever as “Cautiously optimistic”. Certainly this is a powerful event in our history, however, the nature of the tech industry allows it to be highly distributed. This means that revenues generated by NW based tech firms do not necessarily flow into our local economy.
BIM- It has been said that Seattle is soon to be “the next silicon valley”. What is your opinion as to the longevity of the cloud business boom in Seattle?
Scott- Will the true Silicon Valley please stand up. Seattle and maybe more appropriately the PNW is certainly a technology hub but will probably never overtake the original Silicon Valley. I have felt for a long time that we are “A” Silicon Valley but not “THE” Silicon Valley”. My opinion is that the tech business and the cloud industry is alive and well and will see sustained growth in this area for the next one to two decades at a minimum. It should be noted however that there are many threats to the “well-being” of tech industry and things can change quickly.
Karl – Seattle might be the next Silicon Valley, but the easy access to capital in San Francisco, New York, Austin, and even Boston have significant advantages over Seattle. In addition, the skills required to build a business from start-up to rapid-growth are many (including organizational design, talent management, financial planning), and those skills are more readily available in the other cities I mentioned. If we focus on startups, I believe that Seattle will continue to be on the short-list of places to be, but will likely not take over San Francisco and New York. Top five is not a bad place to be overall.
If we focus on the longevity of the “cloud business boom”, I think Seattle will be in a leadership position for about 3-5 years, but the leadership position will likely fade after that. There are a number factors to analyze an industry with, but the simple definition of “Cloud” is a virtualized infrastructure to support business. This means “cloud” skills can be sourced from anywhere. For this reason, I cannot think why a technology which allows for any location to deliver/receive services would be concentrated in a single, physical location. With Azure and AWS in the area (and Apple following suit), we have a significant first-mover advantage with a high level of “cloud” skills concentration here when compared to other regions. With more and more on-line and self-service trainings growing in popularity and decreasing in cost, I cannot see this talent pool being restricted to one geographic region, thus eroding our early competitive advantage after 3-5 years. We rank very high in the number of “cloud” jobs available per capita, but other cities with larger checkbooks are catching up and will likely surpass us in a couple of years. According to indeed.com, there are twice as many “cloud” job positions in San Jose as Seattle, and San Francisco has more than us too, even on a per capita basis. I see these technology hubs as expanding their influence to include “cloud” offerings. We could keep up, but I don’t think Seattle should “get into a land war in Asia” (to quote “The Princess Bride”). Instead, we should already be thinking of what the next set of technologies could be (Artificial Intelligence, Automation?) to continue this upward economic trajectory.
I know Apple is building a skills-center here in Seattle and will be able to lure top talent from competitors as well as grow their own. What they do after that (take the learnings back to Cupertino or continue a service delivery arm from here) remains to be seen. From my understanding of the firm and its operations, they will learn and then bring the skills in-house (Cuppertino). Apple wants to have its own infrastructure to support iTunes, and they need the skills to do that. Once the learning is accomplished, I believe it will transport those skills back to the mother ship.
BIM- Do you think Seattle is on its way to a permanent recovery from the economic crash?
Karl – Nothing is permanent. Seattle’s housing prices are the fastest growing since the recession, over the past two years of any of the Top 20 cities in the US, but the price to income ratio is still below that of LA, and San Francisco among others. It sure does sound like we are repeating history a bit. I’d like to see us with better infrastructure investments to insure we are growing at a sustainable rate to accommodate the needs of all the talent we’re importing. 20,000 new apartment units are coming onto the market by the end of 2015 to accommodate the throngs of people moving here for new, high-tech jobs. Since an apartment isn’t a store-of-value the way a house is, what happens when those young professionals want to make an investment in a home? The inventory of homes is not increasing, so this will continue to drive prices up until the price/income ratio gets out of whack and we drive off the people talent due to pricing. According to reports, Boston experienced a significant brain-drain a few years ago for just this issue, and they have some of the best universities and educated young workers in the country. We don’t want to follow suit.
So making this as close to permanent as possible (again, nothing is permanent) will require all sides coming together to create a city that has the right balance of infrastructure, housing, and education to meet the needs of our city/region for decades to come. Co-operation is most common when economic times are good, so let’s hope those conversations are happening now. The fact that our sub-terranean drill “Bertha” is stuck under the city, and is sinking, while the two sides argue doesn’t bode well for our future…