Four Observations About the Dell—EMC Deal and Its Impact on Jobs and the Tech Economy
Earlier this month, EMC joined the ranks of “former” Massachusetts-headquartered technology innovators after Texas-based Dell announced one of the biggest tech buyouts in history.
The company was the brainchild and passion of college classmates Dick Egan and Roger Marino, two visionary leaders who founded EMC in 1979, grew it into a global powerhouse and never abandoned their deep commitment to its status as a Massachusetts-based employer. The implications of losing a locally-led brand with EMC’s global reach to a peer technology state are important to understand. As importantly, it should remind us all of the type of impact a once-small firm can have. It’s hard for many to remember now, but once, EMC had all the attributes of small, fledgling, tech startup.
Here are four critical observations to frame our longer-term tech-based economic strategy in Massachusetts:
1. Companies Will Come and Go: Deal With It (and Win)
Whenever a Massachusetts company is acquired by an out-of-state firm, there are immediate and legitimate concerns about potential job losses and much handwringing (some well-justified) about what the changes mean for us- and about us- as a state. In the wake of the merger announcement, Dell committed to maintain a major business unit headquarters in Massachusetts. Neither Dell nor EMC are projecting job reductions in Massachusetts in the near term—despite a history following big mergers that suggests otherwise.
While not much about the Dell-EMC integration strategy is public, tech leaders and state policymakers must focus on the bigger questions and opportunities it raises. How can we foster and benefit from our dynamic ecosystem of tech company formation and growth across an unrivaled array of tech sectors?
The continuous movement of myriad technology companies through the business lifecycle creates a dynamic environment for economic growth. The formations, growth spurts, acquisitions and mergers all create opportunities for talent and ideas to proliferate. Even when companies fail, entrepreneurship can flourish, as Babson College’s Dan Isenberg pointed out in 2013. Boston, for example, is full of computer start-ups created by alumni from Lotus and DEC. Even EMC, which is headquartered outside Boston, benefitted from this environment, having acquired some of the ventures of these alumni. Similarly, local entrepreneurship may get a boost. Benjamin Gomes-Casseres at Brandeis points out in a recent Harvard Business Review piece, even if Dell smothers EMC, the local offspring of EMC may well give birth to new enterprises.
2. Local Leadership Matters
I was fortunate to know Dick Egan personally and to partner with him professionally. Dick and Roger were both Massachusetts born and educated and their commitment to EMC and their home state was laudable. In my experience, local leaders have often been the most willing to actively engage in efforts to improve the environment for business and the quality of life in Massachusetts.
EMC grew quickly and became an economic engine for the Commonwealth and countless communities whose residents were employed by EMC. Philanthropic and educational institutions became beneficiaries of the company’s success—support that many fear may begin to erode.
As importantly, EMC has been a consistent advocate for pro-growth policies that help create a healthy business climate for the broader tech economy. EMC was a home-town company whose co-founders fought to improve state policies and lower costs that would inhibit its ability to grow in Massachusetts. Engaging remote CEO’s and senior executive leaders in those efforts can be difficult. High costs in Massachusetts are more difficult to overlook or accept when a company’s leadership team is located thousands of miles away, particularly if those leaders are in a state where lower costs are the norm. I hope that won’t be the case with Dell and I have already reached out to CEO Michael Dell to welcome him to Massachusetts and encourage him and his leadership team to be active participants and collaborate with them in our mission.
3. Massachusetts Can Win, But We Must Adjust
In the post-EMC era, business and political leaders must focus their efforts to continuously improve tech and life science employers’ access to talent and lower cost barriers to future employment growth and investment in Massachusetts.
Over the course of history, Massachusetts rightly has been regarded as a hub of innovation and a leader in developing new technologies that improve the quality of life for people around the globe.
Alexander Graham Bell, Guglielmo Marconi and Amar Bose are three giants of innovation with Massachusetts roots whose brilliance and technological advancements shaped the world we live in today. These innovators helped to create a legacy of discovery and progress that is carried on by the brilliant men and women who make up our state’s diverse technology ecosystem.
Those who drive the Commonwealth’s innovation economy today run the gamut from large multinational companies to sole proprietor code developers whose founders made Massachusetts their choice for headquarters. Ten thousand such companies with worldwide revenue under $20 million are headquartered in Massachusetts.
Whether large or small, these tech and life science employers combine to create one of the most vibrant and diverse technology economies anywhere, employing hundreds of thousands of people in the process. When these businesses grow they hire more people and generate more tax revenue the state can use to fund the programs we all care about.
Policymakers and civic leaders must partner with tech leaders to identify, design, and implement policies that will make Massachusetts the most attractive place in the world for a technology business to start and to scale. Encouraging research and development activity, facilitating tech transfer and helping nascent firms bridge the various “valleys of death” growth companies face are all things we can and must partner on to create the highest probability that “the next EMC” forms and stays right here.
4. May the Data Drive You (and Dell)
Undoubtedly, Dell is aware of data that both supports a long-term engagement in Massachusetts (talent pool and innovation) and presents cause for concern (high costs). Data drives site location and relocation decisions in every multistate employer, and there is no reason to believe Dell will act any differently.
In 2015, the Mass. High Tech Council launched the Massachusetts’ Technology, Talent and Economic Reporting System (MATTERS), a web-based data analytics tool designed to measure and evaluate Massachusetts’ talent and business competitiveness, while providing policy makers, advocates and technology leaders with dynamic, searchable data to inform public policy decisions.
MATTERS consolidates key cost, economic and talent metrics along with independent national rankings into a single source. MATTERS empowers users to measure the health of the technology environment in any state and allows easy and meaningful comparisons among a group of states, with a particular focus on Massachusetts 14 “peer” states—including Texas—whose economies are similarly “tech-centric”.
So what does MATTERS tell us that Dell’s leadership should consider when sizing up the Bay State and Texas?
Massachusetts has the second highest percentage of tech workers of any state (Texas ranks 13th), the largest number of tech clusters, and a highly educated workforce, with the 2nd highest number of Bachelors degree holders (Texas ranks 32nd). Yet, according to data compiled by Wanted Analytics and Monster Government Solutions, Massachusetts ranks among the toughest places to hire, and Texas ranks 30th most difficult.
However, by a number of impartial measures we have a long way to go in making Massachusetts more cost competitive relative to our peer states. High state and local taxes (per capita) and payroll taxes place Massachusetts in the bottom 6 nationwide. By contrast, Texas’ lower costs place it in the top 10 in these categories. With retail electricity rates 43% higher than in Texas, Massachusetts needs to continue innovating how it sources and imports energy. In 1996, EMC and 11 other tech firms helped pioneer the competitive retail electricity market by participating in the Mass. High Tech Council pilot program that led the way to restructuring electricity markets in Massachusetts.
In the end, history will write the final chapter for EMC and assess its legacy impact on Massachusetts and our tech economy. In the meantime, those of us who remain, will continue to work improve the conditions for success—and look for the next wave of home-grown EMC’s to scale in Massachusetts.
In this 2003 file photo, EMC’s Richard Egan talks with a member of the Mass. High Tech Council before addressing the crowd as the keynote speaker a their “Doing Business in Ireland” forum at Bentley College in Waltham.