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Utility Reliability Drives Software Location Decisions

On the software side of the business, the buzz is on application service providers (ASPs), which provide business software for lease over the Web. Some ASPs develop their own applications, while others deliver over the Web what was already available in a box. Both kinds of ASPs are on a different site selection strategy trajectory entirely than the hardware companies. With no physical product to deliver, but a high standard of Internet reliability to maintain, the ASPs are concerned with Internet logistics. Their needs are all about fiber optic wiring, redundant power sources, and in many cases, being close to important Internet traffic exchanges like M.A.E. East, the Metropolitan Area Ethernet in Vienna, Va., or M.A.E. West in California's Bay Area, to minimize the cost of laying fiber optic wire. Equally of concern is attracting qualified labor.

Fairfax County, Va., just outside of Washington, D.C., has been a major beneficiary of the ASP and related Internet service provider boom, along with neighboring counties. According to Dan Gonzalez, vice president of commercial broker Staubach's Technology Practice Group, the site location needs of ASPs and ISPs are the same. "They need redundancy, access to multiple Internet feeds like fiber optic and T1 lines, and they like to have power redundancy, too -- two power feeds from two different power grids," he says.

AOL, the ISP giant soon to consolidate its headquarters with Time-Warner's in a planned tower in midtown Manhattan, started out near Dulles Airport where the company could access multiple power grids. PSInet and UUnet are neighbors along the Dulles Toll Road Corridor. "You don't want banks of diesel generators," notes Gonzalez.

Some ASPs build entirely redundant data center facilities in different parts of the country. Many run on a high level of security, with anonymous buildings, armed guards and retinal scanners.

Atlanta: An ASP Haven

Atlanta, already a boomtown for general business and supply chain application vendors, is attracting a lot of ASPs, particularly those leasing business-to-business applications. All the town seems to lack is a recognizable moniker like Silicon Valley or Silicon Alley. John Nail, a Chicago native, moved his ASP Employease from South Carolina to Atlanta, and then founded digitalBenefits, another ASP, there. "We chose Atlanta specifically for its untapped pool of technology talent, its climate, the commitment of the business community to support young companies and the relatively low cost for both doing business and living," says Nail. "Our business overhead is less than half what it would be if we were in Silicon Valley, and Atlanta's housing costs are one-fifth of Silicon Valley's. Also, Atlanta has been a communication center since it was founded in the 1840s as a railroad hub and the availability of high quality telecommunications infrastructure and lots of experienced network engineers gives the city a big edge over many others."

According to Darrell Glasco, vice president of economic development for the Metro Atlanta Chamber of Commerce, says that the city is reaching a critical mass where Internet, software and telecom clusters are beginning to grow exponentially. A mild climate and easy access to 60 percent of the U.S. population are also factors. According to Canup, Atlanta exceeds the average in fiber optic wiring.

Local software legend Bill Goodhew, founder of Peachtree Software, convinced Denmark-based Navision Software to make Atlanta its U.S. base. Navision, an ERP vendor to small and mid-sized businesses, now has 150 Atlanta employees.

Magnet, an ASP focusing on offering applications to financial services companies, is expanding in an Atlanta midtown high-rise. The new 23,000-sq.-ft. (2,137-sq.-m.) space is four times as big as its former facility, also in Atlanta, and it is located across the street from the new combined headquarters of ISPs Earthlink and Mindspring.

California's Magnetic Draw

Both Southern California and the Bay Area are cooking up lots of new ASPs as well. ZLand.com, an ASP, was founded in Santa Ana, Orange County, and has just relocated its corporate headquarters to Aliso Viejo, also in Orange County, an area where many high-tech companies are growing.

California's continuing draw for new ASPs, even beyond the sheer density of Silicon Valley's wealth of software and Internet engineers, is partly that it's a pleasant place to live. "ASPs do care about offering a great lifestyle to talented employees," says Tia Williams, vice president, Finance and Investor Relations, for Portera, an ASP in Campbell, Calif. "The Campbell location is centrally located between major freeways, and it's also a few feet away from a bike trail and less than a mile (1.6 km.) from a county park. Employees can roller blade, walk or bike during the day."

Portera's Campbell location is also close enough to the Silicon Valley talent pool to attract enough qualified people. About 150 employees in marketing, research and development, operations and headquarters administration work are located in the company's 30,000 sq. ft. (2,787 sq. m.) of leased space.

According to company spokesman Jon Osmundsen, AristaSoft, an ASP providing IT applications to small to mid-sized high-tech equipment companies, settled in Mountain View, Calif., because the region's high-tech cluster provides the ASP access to 1,500 potential customers, along with their many software development business partners. The company, founded in late 1999, has been growing at the rate of five people per week, and is currently employing more than 100 workers in Mountain View and in Hyderbad, India, home of many sophisticated engineers. The two global locations help AristaSoft maintain round-the-clock customer support.

U.S. Southeast's High-tech Alternatives

An interesting group of ASP clusters is growing in Boca Raton, Fla., and Miami. The root of these ASP clusters, according to Zihad Aganovic, CEO and president of CyLex, an ASP that provides document imaging services, is the key enabling technology for ASPs that was developed by a local company called Citrix, a founding member of the newly formed ASP Consortium. "Within physical proximity to Citrix there is an incubator culture that drives the founding of the next layer of companies," says Aganovic. "There's high awareness, here. There's networking and spin-offs." Talent and space were available, due to the big pull-outs of IBM and Siemens from the area in the mid-90s. Within the incubator culture, people readily encouraged one another and shared strategies.

One thing south Florida did lack was venture capital. Aganovic couldn't get California venture capitalists interested, but recently, a group of venture capitalists launched a firm in Miami to take advantage of the growing high-tech action. Aganovic has also had more trouble recruiting additional people down to Boca Raton. Californians aren't interested in relocating, but Northerners will. "We work harder to get the talent, but once they come they stay," he says.

Similarly, Huntsville, Ala., continues to throw off software startups. "There are more computer engineers per capita in Huntsville than anywhere else in America besides Silicon Valley," asserts Michael Becce, a spokesman for Cybex Computer Products Corp., a maker of computer switching solutions there.