The PDC just released the results of its software industry survey. Here is the full presentation. The survey is a good start, but ultimately generates more questions than answers. Many observations are made. By far the biggest one is that software companies in Portland are very, very small. This fact actually skews several of the other findings.
That Portland’s software companies are small, is not a surprise. Far from it. Those of us who deal with local tech companies (outside of the more traditional world of chips, screens and such) directly know this. Seeing the data, however, really makes it sink in.
A full 49% of responding companies have less than 25 employees. On the other end of the scale, only 9% have more than 500 employees. Size matters. Arguably, several other findings in the study are directly related.
For example, the observation that most innovation (67%) is happening in Portland is probably a result of small company size. If, for example, you are a 15 person software company, it’s highly unlikely that you have a separate R&D department based in another market – as you commonly see with larger companies. Of course the innovation is happening here. It has to.
Another observation is that most companies can find local talent. Again, with small companies, hiring tends to be done in ones and twos. It’s generally easy to find local talent in small volume (there absolutely is a lot of talent here, BTW). Larger companies with with greater hiring needs will tend to look elsewhere. For example, Facebook, based in the Silicon Valley of all places, announced a Seattle office to pull from the developer pool there. In Portland, we hire in smaller numbers and are generally able to find the talent locally.
Another set of observations isn’t very helpful in that they are generally applicable to software companies located anywhere. It feels good to say that Portland’s software companies tend to innovate. Innovation, however, is simply a part of the business. Software product cycles are extremely short. Software companies innovate or die. Show me a software company that says innovation isn’t central to its business, and I’ll show you a company that isn’t going to make it. Innovation in software is a general observation about the business versus something unique to Portland.
The importance of educational infrastructure is another such observation. Software is a knowledge industry. Brains, not brawn, are required. Software companies in any market will say the same.
Some observations point to the fact that Portland is simply a small market. The fact that 54% of respondents generate less than 24% of revenue locally, simply points to the fact that businesses in small markets have to sell elsewhere.
In summary, the single finding that jumps out is the fact that software companies in Portland are small.
Portland’s software companies are like those located anywhere in that they are innovative and need to hire educated workers. Small Portland software companies can hire locally, because they don’t need to hire in mass quantities. Their R&D functions tend to be located locally because they are small.
None of this is good or bad, it is what it is. The more interesting questions, however, are unanswered.
For example, will the software cluster be strengthened if we see more larger companies here? Alternatively, is small the best approach for Portland? If we do want to help small software companies grow, what are the missing pieces? How much does Portland’s famous lack of venture capital play into the equation? If we want to attract more capital, what do we need?
Finally, it’s not surprising to see those who report that they don’t like doing business in Portland show concern about local government and the tax structure. This is a tricky issue. Is it simply self-fulfilling (there are studies showing that Portland and Oregon have relatively favorable business tax structures)? Or, alternatively, does the public sector make it relatively more difficult to do business here. Follow-up work needs to be done here as well. I personally hear the entire range of opinions on this matter.
This study was a great effort by the PDC and should be applauded. There is a sincere desire there to help and Portland has great potential. I have many of my own thoughts about what needs to be done here, but I’m done for today :)
As a footnote, I’d suggest renaming the “Software Cluster.” The industry includes enterprise software, desktop software, SaaS providers, mobile developers, and Internet. The term “software,” while perhaps technically correct, doesn’t capture the cluster’s breadth. I would suggest a different term, perhaps the “Digital Tech Cluster.”