May the Salesforce (dot com) be with you

When Radian6 was acquired last year, a number of folks in government and in economic development fretted that Salesforce.com would end up shutting the NB operations down and moving what was left to its head office in the United States.  In fact, I was in a meeting where a prominent government official was visibly upset by the acquisition.  With a slightly different point of view, I said (in that meeting) that this was one of the most important FDI announcements in New Brunswick’s history.

This insular attitude is not new.  I heard it when GTech bought Speilo – they would just close the Moncton operation down.  They have expanded it.  When Whitehill Technologies got acquired, we were told it would be shut down.  Thomson Reuters just announced an expansion.

I could rhyme off a dozen examples but you get the point.

Now Salesforce.com planning to hire another 300 workers in New Brunswick.

There will be cases when multinational firms purchase a New Brunswick firm and eventually shut it down.  That has happened before and it will happen again but I have crunched the numbers on this many times – companies that are started in New Brunswick and don’t get acquired by an outside firm are far more likely to go under than those that are acquired.  The IT industry boneyard in New Brunswick is filled with big idea companies that did not survive. And that’s okay.  Businesses fail all the time.  But we need to understand the importance of New Brunswick linking into the global economy.  If a firm can start here and go global – without being acquired – that’s great too but in many cases, the best path forward is through tying up with a bigger firm with established markets.

And, worst case scenario, a firm like Salesforce.com does shut down Radian6 in New Brunswick.   The value created from the sale still remains.  The tens of millions of dollars stays in New Brunswick and gets recirculated into other investments here.  The big payout to the NBIF will be used to fund more new innovative startups.

And you can’t buy the brand building.  George Donovan, CEO of Gogii Games, says his contacts in Silicon Valley are asking him “what’s going on in New Brunswick” – after the Radian6, Q1 Labs and other deals.

May the force be with you.

 

This entry was posted in Uncategorized. Bookmark the permalink.

8 Responses to May the Salesforce (dot com) be with you

  1. mikel says:

    I was waiting for this blog:) There is a BIG problem in economic development terms in simply describing ANY deal as ‘good’ or ‘bad’. There are good aspects and bad aspects. In fact, you don’t even get into the point that this is a ‘media monitoring’ company, which a lot of people think is a worse kind of business than cutting down trees (you can replant trees, you can’t retrieve your data).

    Obviously this is better than NO jobs, and better than closing the office down. However, its quite odd to read a blog about how important jobs are, then to have a blog saying that even if the firm closed down and put all those people out of work then its just fine. THAT is just really weird. Just because the government makes a little off its equity investment, and the people get a cheque, that’s hardly a reason to call it ‘good’. Yes, unemployment insurance cheques are ‘good’, but nobody would argue that they are better than well paying jobs.

    I agree that in the long term this may be better for Radian 6, they acquired a technology that was very much ‘right place right time’. Gogii games is also a good success story, but the idea that somehow this translates to ‘what is going on in New Brunswick’ really defeats me. Go look at public policy and payroll rebates-EVERY province has payroll rebates. So in short, what is ‘going on in New Brunswick’ is that there seem to be two semi successful tech businesses. Stop the presses. In fact, if anything what is going on is the presence of luck. If there were no ‘big fish’, there would be no gogii games. The owner even admits that it was pure chance that they met Gene Simmons and his wife after a casino concert, and this led to more business, and meeting the head of Archie comics, which is leading to even more business-in part because Archie comics are basically so far behind the times they didn’t even know HOW to develop a video game from one of the most successful US franchises. That’s not being cynical, thats simply realistic. The ONLY thing you can ‘develop’ from luck is the importance of at least being in the technology game.

    And like anything else tech, these companies are not tied to resources, only to people. Which means just because you have good news one day, that doesn’t mean anything for the long term.

    I absolutely think this is great news, ANY job growth is better than the alternative. However, this still doesn’t prove its a GOOD thing for local companies to be bought out. You may have your examples, but we have good data from stats canada that show that in MOST cases, foreign takeovers do NOT translate into job growth. And while a company may be in growth mode now, its when it inevitably contracts that you see the ‘outposts’ get closed first.

    I hate to be the bearer of bad news, but I remember seeing the data just after New Brunswick joined confederation. There was a HUGE influx of new investment which ramped up economic activity with ‘foreign takeovers’. It actually wasn’t until TWO decades after confederation that we saw those outposts start to close down. Which means, you have ten years of positive data, and a CENTURY of bad data which follows. Not something I’d jump and scream about.

  2. Frank says:

    Everyone in New-Brunswick is thinking “What’s going on in New Brunswick” haha.

  3. Frank says:

    Frank :
    Everyone in New-Brunswick is thinking “What’s going on in New Brunswick” haha.

    oops. Meants to say “What’s going on in Silicon Valley”

  4. The Radian6 job news is good but this post conveniently ignores the fact that the government gave the company $12K per job, or $3.8 million, to keep the jobs here. And what happens if we turn off the taps – do we still keep the jobs? Or do they disappear as the sceptics have been worrying?

  5. mikel says:

    Its the details that are important. Is that payroll rebate every year? For 12K a job would have to pay 55 grand or else the government not only is losing taxes on that job, but directly subsidizing it, which gives the libertarians out there a bit more clout with their reasoning.

    Haven’t we discussed that the whole point of jobs is taxes. I’m beginning to understand why Invest NB decided to use GDP as a marker instead of taxes or even jobs.

  6. Richard Reeleder says:

    ” The big payout to the NBIF will be used to fund more new innovative startups.”

    This is an excellent development and the payroll tax rebate should more than pay for itself. Of course, the ‘bad news bears’ will complain – a lead story on the local CBC website spins an interview with another IT outfit into a complaint re labor shortages resulting from this deal. Overall the interview was positive but the CBC decides to take a negative spin. As per typical around here, successes get ignored or downplayed but every failure gets plenty of ink and bandwidth.

    “the government gave the company $12K per job, or $3.8 million, to keep the jobs here.”

    I think the deal creates new jobs, it does not just preserve existing jobs. A number of those will be high-wage jobs that will generate significant tax revenue.

  7. mikel says:

    Again- will it generate 12K per job? Thats a LOT of taxes, and most of that goes federal.

    And why SHOULDN”T other companies complain? Thats pretty valid if a competitor company is getting 12 grand of a person’s salary paid by the government, how can you possibly compete with that? So thats pretty valid.

    I don’t agree about the CBC in this case, when the Radian deal was announced the media was pretty universally positive. If the overall interview was positive then that was pretty fair. I think the negative aspect is pretty valid, and they’d be pretty remiss not to cover it.

    The CBC IS strange in NB though. Since the government announced eliminating the provincial tax on apartment buildings and second homes, they’ve only had two web stories on it, and both were pretty positively spun even though this will cost the government about 100 million a year that they will have to dig up from elsewhere. And the only CBC radio was a short interview with a ‘pro’ and ‘con’ speaker, the ‘con’ speaker being a french guy you could hardly understand and who got less speaking time than the other. That’s VERY bizarre coming from the public broadcaster.

    But until somebody can answer that question-why should one high tech company have 12 grand of their salary paid by the taxpayer, while competitors don’t, then its a pretty fair criticism to make.

  8. mikel says:

    And by the way, its pretty fair to ask what happens IF the government stops subsidizing their payroll. What do they do, tell their workers, ‘by the way, your paycheque is going to go down 12 grand next year’.

Comments are closed.