What will the arrival of Apple and Google mean for the Triangle’s tech companies?
Almost as soon as Apple’s expansion to Research Triangle Park was made official, the debate began over what the company’s, and Google’s, looming arrival will mean for the region’s burgeoning tech scene.
Will the two tech giants, both valued at more than $1 trillion, be a boon to the region? Or will they harm it?
“Ugh,” tweeted Robbie Allen, an artificial intelligence entrepreneur in the Triangle. “... I think it’s very bad news for the Triangle startup scene.”
Allen, who founded and sold Durham-based Automated Insights for $80 million in 2015, worried Apple and Google will make it even more difficult for young companies to find talent, as the corporations can afford much higher salaries. And, he warned, the region’s quality of life — its relatively affordable homes and less traffic than larger cities — would be harmed, thus blunting one of the Triangle’s main advantages.
The truth will likely fall somewhere in-between, with the Triangle suffering some near-term heartburn from the arrival of Apple and Google, as well as it presenting an opportunity to significantly raise the profile of the region.
“There is no doubt that in the short term it could be painful,” said Ted Zoller, a professor of entrepreneurship at UNC’s Kenan-Flagler School of Business. “But in the long term, it could be the best thing to happen. We are no longer a flyover city anymore. This will make us a major player.”
The arrival of Apple repeats a successful economic play North Carolina has used for decades: attracting satellite campuses of successful tech companies. Many of the Triangle’s largest employers are satellite campuses, including IBM, Cisco and Lenovo.
But Google, Apple, and even Microsoft — which is adding hundreds of employees here as well — are at the top of their industry, with large amounts of money to spend on salaries and a brand that has a strong appeal.
Apple plans to have an average wage at its RTP campus of $187,000 (though that number could be skewed by large earners) for the expected 3,000 employees. Microsoft planned on an average wage of $125,000. Google, which did not get incentives from the state, has not revealed an average wage for its planned Durham office, which is expected to eventually employ 1,000 people.
“There will be a war for talent. There will be pressure going up on wages,” Zoller said. “But we are also going to retain more talent (from the universities) and we will attract more relocations.”
Competition for workers
Of course, the thousands of jobs from Google and Apple won’t be added overnight. But employees with certain highly sought-after skills — like computer engineering, data analysis and machine learning — know they’re coming, and it could influence their expectations.
The incentive package Apple is getting from the state could help it recruit against companies already based here, like homegrown analytics giant SAS Institute, for instance, said John Quinterno, a principal with South by North Strategies, an economic research consulting firm.
“Given the size of the incentive package, maybe Apple has an unfair advantage because the state is subsidizing their costs,” he said in a telephone interview. “Are you really competing for labor or is one firm being favored over all others?”
Zoller said he believes Apple’s competition will be felt most intensely by the larger and more established tech companies in the region.
“The cost of attracting talent is going to go up for Red Hat, IBM and SAS,” Zoller said. “But you are also going to draw talent to the region because of these two new engineering centers. Eventually, the pie will get bigger.”
By getting the seal of approval from Google and Apple, the region could experience a “halo effect,” in which other companies suddenly hold a better opinion of the Triangle, said George Ratiu, senior economist at Realtor.com.
Talent that might have considered the Triangle a rung below other tech-centric cities, like Seattle, Austin and Boulder, Colo., might have a change of heart. That validation could also sway more investors, too.
“When you have someone like that signal they are willing to make a bet on a location like Raleigh, it tells a host of other companies ... that it is a market that has the power to sustain that level of interaction and engagement,” Ratiu said. “So, that, in and of itself, brings a whole constellation of companies to the market that might not be there right now.”
A ripple effect on startups
But the momentum brought by these tech jobs also has driven up costs in other metro areas and created significant housing and infrastructure crunches, he said.
“This announcement is part of what seems to be a much broader trend in which tech companies are acknowledging that their success has, in a sense, impacted the very home cities where they started,” Ratiu said.
Because of that, those companies are now spreading their offices to other parts of the country. Both Google and Apple’s Triangle expansions were coupled with smaller jobs announcements in other cities, like Pittsburgh and San Diego.
Jesse Lipson, the founder and CEO of the Raleigh marketing software startup Levitate, said he believes the startup scene in the Triangle eventually will benefit from Google and Apple’s arrival.
“Employees will often leave large tech companies to start their own businesses,” said Lipson, who started Levitate after leaving Citrix. “I also think it will become easier for startups in the area to attract talent from outside of the region. Right now, senior folks sometimes hesitate to relocate to join a Triangle startup because they don’t think they will have a lot of other options if the job doesn’t work out.”
But he also acknowledged Apple and Google will bring growing pains in the near term.
“The labor market for tech in the Triangle (and everywhere else) is already very constrained.” Lipson said in an email. And startups often can’t pay the highest salaries.
But we can “differentiate on our people, culture, and fast-paced environment,” he said. “I think some of the larger established tech companies in the area may have more to worry about than startups.”
Justin Benson, the CEO of the Durham-based payments software maker Spreedly, said most startups probably won’t be competing with Apple for talent.
That’s because the type of person who wants to work at a small startup is usually not interested in working for a large company, especially when it’s not the headquarters.
“Think of someone who looks at a condo in the heart of the city and one who looks at a five-bedroom house in the leafy suburbs,” Benson said. “Both are attractive places to live, but there’s not many people who are going to look at both.”
A startup might pay less, he added, “but you can get in on the ground floor of something or get equity. Our first engineer became our chief technology officer. There’s just a whole different set of incentives.”
But if there is a looming talent crunch, it could be solved, in part, from lessons learned during the pandemic.
Many Triangle startups now say they are open to hiring employees based anywhere in the world, after staying productive with remote work technology over the past year. Whereas they might have previously limited themselves to hiring only local talent, they can more easily look elsewhere now.
“We are more distributed than ever, and more open to (hiring remote workers) than ever before,” Benson said.
Staff writer Aaron Sánchez-Guerra contributed to this story.
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate.
This story was originally published May 3, 2021 at 2:50 PM with the headline "What will the arrival of Apple and Google mean for the Triangle’s tech companies?."
