The Price Of Doing Business

8127972 writes: "It seems that a ton of high tech companies are leaving cities (like San Fran) with high costs of doing business for cheaper cities (Washington DC is mentioned due to new government spending) or even cities in Canada. Sounds like American high tech workers are going to have to learn to say the word "eh?" a lot."

Amazing.

[BigZaphod]

I find it amazing that they are moving out of large US cities into Canda instead of just moving to the midwest or something. Chicago is quite a lot cheaper than the coastal cities, and it has all the usual big-city perks.

Of course there are also a lot of small citys that would kill for some high-tech company to move in. Seems like they could get some pretty good deals if they used that option.

Why do so many companies feel the need to be tied to a coast?

other related news

[lemonhed]

There has been alot of commentary on this subject. The Gartner group put out this commentary [com.com] about the "Tech Wreck" coming to the SF Bay area.

They claim that a city will do well if they install a broadband communications network that connects citizens, local businesses and the global marketplace.

I think that the obvious solution to this may be Telecomutting See this link for more info [gartner.com]

Bad news for San Francisco - Bad strategy

[Cirrocco]

San Francisco landlords threw out long-term tenants in favor of tenants who could only afford rent for the short-term. Bad strategy. Now that dot-coms have gone to the away place San Francisco is now full of empty building and landlords begging tenants to come back. They aren't lowering the cost of rent, though. They expect that people will continue to pay the outrageous rents that the dot-coms paid. Survey says? BZZZZZT!! Oh, I'm sorry! It looks like you'll have to forgo the new Mercedes this year, Mr. Landlord.

Bad karma revisits landlords who threw out poor people for those who could handle higher rents! News at 11!

So they're going to Take Off, eh?

[ackthpt]

Well, having lived around the Bay Area for the last 5 years, it's no surprise. Evictions were as outrageous as rent increases, making space for tech company offices and then screwing their employees through rent.

The median cost of rent where I live is the highest in the country. It's a nice place, but I could be buying a house in Ohio every five years, it's that bad. Firemen, police, teachers, gardeners, and others with lower incomes have been leaving the area and are very hard to recruit. The irony is, where tech industries fled to, early on, have become a similar problem. Austin, TX is a great example, seeing insanely rapid growth and the problems it brought, Sacramento, CA went the same route in the mid 80's. However, if you're looking for a decent place out of SF, Sacto isn't a bad place to go. Lots of office space and lower cost of living.

Canada? Wouldn't the taxes alone make that less appealing? When I think it's expensive in California, all I have to do is remember the GST and PST I paid in Ontario. Gads. Probably lots of available land, but so has most of the midwest.

Rural IT Options

[Nameis]

It will be interesting to see if some IT companies will move from the urban meatspace to the more rural areas of the US. The office space is *much* cheaper and it provides a safer environment, especially post 9/11.

Shameless Plug: rural communities with bandwidth can be found. Two I work in can be found at:

http://www.bowmannd.com

http://www.hettingernd.com

Columbus, OH....great place.....

[Chanc_Gorkon]

Columbus, where I live, is a great place for this. We have a decent bus system, lots of shopping places, and lot's of office space. There are alot of call centers here and lots of 18-20 year old's because of Ohio State, Franklin University, DeVry, Keller Graduate School, Capital, Otterbien and Mount Vernon Nazerene College are here also. Columbus is also one of Ohio's most wired cities with a decent penetration of broadband (available almost city wide I believe.). Rent's for workers can range from cheap to exhorbitant. You can, if you can afford it, even buy a condo downtown in Miranova (starting aroun $300,000). Miranova is for that executive who doesn't like to put a lot of miles on thier Beamer (right downtown). In any case, Ohio in general is a good place for high tech (at least that's my feeling anyway!).

The burbs

[DCram]

I live, work and play in a high tech burb. Just outside of Boston but in the tax free state of New Hampshire. When I first moved to this area it was great. Tons of high tech, low rent and tons of people just like me who had just moved into the area. After 4 years I will say that everything has changed. With all the high tech moving in the rent has jumped up 4-800 dollars for a two bedroom and the jump is even higher for a 1 bedroom for some reason.

I guess the moral to this rant is that no matter where you go to after a while its the exact same as where you left. The small town life doesnt remain the small town life for long as soon as the town fathers realize that they can make tons of cash off the tech industry.

I cant wait for the days where a high speed access point and a video phone are all you will need and you can work from anywhere.

Never understoof.

[Torinaga-Sama]

I never understood why a business would want to station itself in the Bay Area. If I pay 450k for a 3 bedroom house, it better be on 25 acres, preferably waterfront.

These guys are MBAs and they can't figure out how to spend less money. It blows my mind.

Availability of talent?

[tinrobot]

The one problem is - a tech company is composed of talented individuals. Most of the really talented people can find good jobs within their area, so they have less incentive to move to Podunk for just their career.

You can move the company, but if only the lower half of the talent pool follows, it's not a very good decision.

Re:Sure, whatever.

[csbruce]

There are a lot of technology companies in the states paying nearly twice as much in salary for US workers

Canadians are extremely competitive internationally. Americans are simply over-paid; that is why America is an importer nation, because American-made products are also over-priced internationally.

Finally, some sense

[BlueMonk]

...or should I say cents. Supply and demand, folks. What am I missing here? There's no reason whatsoever for most of these high tech companies to hang out in these high cost areas. You're jacking up the price for everyone else to live there just so you can form some geographical "high-tech band" in the US, when no industry could be farther from geocentricity than the high tech industries who've now finally gotten a clue. Take your business anywhere you can find electricity. For the price you're paying to run your company in the "high tech band" you could probably house all your employees and their families in dream homes in Iowa or someplace.

I'm no authority, but I am just glad to see things finally evening out a bit. A town isn't meant to consist 100% of high tech profitable firms. They need teachers and "sanitation engineers" and whatnot -- the guys who don't make a zillion dollars a year to pay for the housing.

Re:blame canada?

[Glytch]

Oh yeah, for sure. We got the curling too, eh? And Tim Horton's. :)

Trust me, my fellow techies, if you ever move up here, get an apartment or house within two or three minutes walk of a Tim Horton's. You will not regret it.

Krispy Kreme blows away Horny Tim's

[Ars-Fartsica]

Sorry, as an expat in the Bay Area I can tell you with assurance that KK blows away Tim's by a good margin.

Once KK enters the Canuck market, you are going to see Tim's get hammered (or vastly improve their donuts in response)

Diversity and Tolerance are why the Bay Area wins

[jamiefaye]

San Francisco and Silicon Valley has an enormous critical mass of Gay/Lesbian/Bi/Trans people, and Nerds. The counter-culture continues to thrive here.

For techies - it means that you are respected and accepted everywhere, no matter what you look like.

It is the opposite of the nightmare world Jon Katz describes in "Voices from the Hellmouth". Nobody who has been dumped-on for being smart or diferent wants to go back out into the cold.

Attempts to replicate the Bay Area have to replicate this tolerance too - which often requires a massive, slow change in attitude.

-- Jamie

Re:other related news

[plopez]

I think you hit the nail on the head with telecomuting. As long as 3 years ago I heard aobut companies looking for places other than Atlanta simply due to poor transportaion with a lack of mass transit. More companies are getting sauvey (sp?) to the fact that 2+ hour commutes to and from work have HUGE hidden costs. As far as cities selling themselves as a good place for businesses, transportation or telecommuting is going to become more and more important.

Sandhill Rd is the only true "prestige" address

[Ars-Fartsica]

The rest of the Bay Area is about proximity to talent. The VCs get some juice from having a Sand Hill Rd address, but for the rest of the companies here, there are real tangible benefits.

How many other places in the country can you place an ad for an esoteric vertical technology and reasonably expect 100 good resumes??

Re:Price of Living in Canada

[csbruce]

That is because Canada has roughly the same affluence as the poorest state in America.

That is highly doubtful. Canadians have always had a higher standard of living than Americans, and until just this year, the highest standard in the world (displaced by Denmark, I think). America is barely in the top ten.

Honestly, so many Canadians don't seem to know how well they have it!

Re:South Carolina!!!

[Mr. Sketch]

* Detractors:
* Well, it is South Carolina
* Convincing your staff to move here

I've lived in South Carolina for most of my life and I wouldn't say it's a bad place to live and actually right now I'd much rather be there than here in colorado where it's -20 with the wind chill :). The only real detractor I would say is the hurricanes, but california has earthquakes, so pick your poison. However, if you go too far outside of the main cities, you have to deal with hicks and rednecks. Charleston is really pretty and the coast has some nice beaches, and I would say it's a pretty good place to live.

On a side note, you will have to get used to a few cultural differences: "ya'll damn yankies better no be comin' don her and talk 'bout no 'civil war', ain't been no 'civil war', ya'll must mean da 'war o' nothern agression'!"

Re:Well, except for one thing...

[Tackhead]

> ...the fact that trying to actually get in to Canada "sucks [cbc.ca]".

What could be harder than proving you have a college degree, can speak English, and a job offer? That's most of the "points" you need right then and there!

Especially compared to the 6-7 years of hoop-jumping with INS -- an agency that seems dedicated to the propostion that terrorists can get in just fine on student visas, but technology professionals have to stick with the same job for the better part of a decade and beg for permission from a state employment agency (3-6 months), the federal department of labor (another month), then back to the INS to ask for permission to apply for a green card (between 3 months to 1 year), and then another year or two after permission's granted, to actually get the green card. Get laid off or company reorgs? Get on the next plane back home and start from scratch.

If you've got half a brain and a degree, getting into Canada to do high-tech work is trivial.

INS incompetency has made it clear that high-tech workers are neither wanted nor valued in the States.

Supply and Demand

[pinkUZI]

Calm down everyone!
This is an age old cycle. High demand for realestate in SF = higher prices being charged for rent. Now that demand is down the prices are going to fall and new tenants will go there.
Nothing to worry about so long as the government stays out of it and doesn't do something stupid with rentals like they did with utilities.

Skilled Workers

[Rice-Pudding]

They claim that a city will do well if they install a broadband communications network that connects citizens, local businesses and the global marketplace.

Sure, but there is another factor that is important for high-tech companies that Gartner is missing: skilled workers.

I work for a company that has one of its offices in Edmonton, AB, Canada. Why Edmonton? Let's see:

• Canadian dollar paychecks for employees
  
• cheaper costs for business infrastructure
  
• University of Alberta in Edmonton provides quality engineering talent.
  
• And yes, high-speed internet.
  

The third point there is very important. Yes, it is possible to attract SV engineers to Edmonton, but it takes a *lot* of effort and incentive. One major problem is that a SV engineer may sell a bungalow for $600,000 USD. In Edmonton, you can get a mansion for $200,000 USD; there are no houses to be bought for $600K. So the SV engineer suddenly has $400K to pay taxes on.

So, the vast majority of people in R&D are local-area Canadians.

San Francisco's "Housing Farce"

[cornflux]

For anyone interested in San Francisco's rent situation, you might find these two articles, by Thomas Sowell, to be interesting: The Housing Farce [jewishworldreview.com] and The Housing Farce, Part II [jewishworldreview.com].

Re:Calcualate your new salary

[Eppie]

The Home Fair calculator is wrong. All it does is multiply your salary by a fixed number and then it claims that those salaraies are equivalent in the two cities.

Homefair does not take into account the fact that many of our costs these days are interstate or not subject to local price limitations. The number for the "cheaper" state thus does not take into account that while local goods might be cheaper, vacations are not cheaper, mail-order computers are no cheaper, etc. In other words, a million dollars worth of caviar in Austin is probably about the same as a million dollars worth of caviar in New York.

Also, people's spending habits and the mix of luxury vs. normal, local vs. imported vs. domestic goods changes radically as income scales up and down. No single multiple can ever really reflect the difference in how far salary will go for a wide salary range.

Re:So they're going to Take Off, eh?

[FFFish]

Those who are going to argue about health care systems would do themselves justice reading Canada's Burning [washingtonmonthly.com], an expose on the media lies that are being fed to us all.

You may well find that what you thought you knew to be true, isn't.

San Francisco is just the beginning

[ebusinessmedia1]

The exodus from SF is the beginning of a larger trend. India graduates nearly 40,000 highly qualified engineers *every year*. China, probably four times that, and climbing. The Law of Lowest Wages, combined with increasing commodification of technology will drive many companies out of the US entirely within the next dozen years. Roughly 46% of our working population works directly or indirectly with technology. Think about what boardroon executives probably already considering as they make plans for future capital and physical investment. Capital is 'on the wire'. Domestic fealty just doesn't cut it for public corporations; not in a world where profit is king. There will still be strong technology innovation coming out of the U.S. for many years to come. However, much of the implementation of that innovation will not necessarily have to be performed by people here in the States. We're facing the very beginning of a huge social displacement problem. Look at the San Francisco phenomenon as a micro-trend that will soon snowball. Our domestic planners (an oxymoron?) had better start preparing for this and look for ways to either keep people fully employed, or actively interested in a slowed-down version of the 'good life', or we're looking for real trouble down the road.

Businesses Need to Learn Too

[Anonymous Coward]

Businesses need to learn that moving around all the time just to save money does not create a sustainable, competitive economic advantage. The real question for business should be: "What region has the most talented people, most advantageous geographic conditions, greatest access to finance, is known as having the most competitive businesses in the industry close by & has a government that actively participates in developing infrastructure to enable that industry?"

If businesses ran around all over the world looking for the cheapest labor (ie the lowest standard of living) they'd all be in Starvation City, Africa. But they're not, because (suprise! suprise!) 1. the workforce is uneducated, 2. the political landscape is untamed, 3. a 9 year old will blow your head off with an AK-47 for your Pez dispenser, 4. in six months the miserable country next door will have something awful happen there, pushing up people's desperation levels and you'll have to move your factory again to capitalize on the human suffering. What a pain!