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The Politics of Place

By David Friedman
Senior Fellow

Planet IT
February 15, 2001

As the market's relentless slide forces IT managers back to basics, it's time they reassess the simplest, yet most crucial business reality: dirt matters. Locating an IT venture is proving to be a critical, but overlooked problem of the new economy. If the promise of information technology is ever going to be fully realized, IT enterprises must consider setting up shop in a far wider range of venues than ever before

Throughout the last decade, information age companies struggled to find places where their disparate workforce could live under one roof. Like siblings with profoundly different tastes and ambitions, high-tech talent increasingly clustered in one of three distinct, if not exclusive, communities.

IT engineers, systems specialists and nuts-and-bolts developers overwhelmingly preferred what Joel Kotkin, author of The New Geography, a current best-selling account of American IT development, calls the "Nerdistans." These are the new homogenized suburban areas that sprouted up to serve white-collar professionals and little else. Marked by sparkling mega-malls, multiplex theaters, Starbucks shops and the ubiquitous SUV, the Nerdistans' monotonic, no-surprises society appealed deeply to new economy technicians. They flourished in such formerly exurban areas as Southern California's Route 101, bucolic Northern Virginia and aggressive, upwardly mobile areas such as Raleigh-Durham, North Carolina.

At the same time, creative content types were flocking to gentrified urban areas such as San Francisco, Seattle, Santa Monica and Manhattan -- places where largely childless, single workers with substantial disposable incomes could experience a bit of after-hours edginess. Most importantly, these "Boutique Cities," as Kotkin christens them, let IT entrepreneurs intensively mingle with their peers in the print and broadcast media.

Then there are the Valhallas -- the precious, high-end mountain and coastal hideaways that attracted information age owners who wanted to continue being IT players but couldn't wait to live the successful retiree's good life. Places such as Naples, Florida, notes Kotkin, or Jackson Hole, Wyoming, accounted for a massively disproportionate number of dot-com domain registrations.

Accommodating the diverse locational preferences of IT personnel can spark a management crisis. Before Broadcast.com was sold to Yahoo, owner Mark Cuban wanted to relocate from Deep Ellum, the colorful inner-Dallas community where his creative staff was happiest, to North Dallas, a pristine, sterile, white-collar, coffee-shop Nerdistan. Conflict over the proposed relocation threatened the company's ability to retain its key personnel. (It remained in Deep Ellum.) A similar struggle marked Southern California-based Broadcom.com's decision to move from one of the region's most attractive Nerdistans, coastal Manhattan Beach, to more creatively inclined Westwood.

What this means is that effective IT managers have to be as sensitive to real estate as they are to virtual reality. Where a company chooses to open its doors determines its character as a content or technically driven enterprise and its ability to recruit top-line staff. Nerdistan companies will have trouble attracting well-connected, savvy, media-oriented workers. Companies located in Boutique Cities will struggle for the very best technicians. Valhalla companies located in whatever ski or surf playgrounds their owners may desire often have the thinnest skill base and most ineffective

Although these important location considerations were overshadowed by go-go Internet hype, many IT managers were at least dimly aware of them. Such concerns may prove even more critical in the future. A big reason for the market's sudden devaluation of IT-oriented companies is that they never contributed to the economy beyond the limited suburban, cosmopolitan and upscale hideaways in which IT elites ensconced themselves. Self-absorbed media hype went only so far. As soon as the economy downshifted, information age companies without demonstrable links to other business enterprises were the first to decline.

In the coming decade, the savvy IT manager would do well to open shop somewhere other than the information-age ghettoes of the past. For one thing, places where "old" economy businesses locate are usually less expensive. Even more important, only by understanding other sectors as keenly as they comprehend their own business can information age enterprises form the enduring competitive links that generate sustainable earnings and wealth.

Pampered technical and content staffers may resist working anywhere other than near their favorite coffee shops or blues clubs. Business realities will almost certainly collide with such sentiments.

More than megabytes, "location, location, location" may be IT's management mantra for the 21st century.

Copyright: 2001 Planet IT

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