The Story Behind the Story: Why the Qualcomm Study is Important

1/15/13Follow @bvbigelow

Mark Cafferty, CEO of the San Diego Regional Economic Development Corp. (EDC), said the local media seemed a little nonplussed when he stepped to the lectern Friday to announce that Qualcomm (Nasdaq:QCOM) has a huge economic presence in San Diego.

After the news conference, as TV reporters were recording their standup bits outside Qualcomm’s headquarters, Cafferty told me their reaction was along the line of “Why is this news?”

Nevertheless, the ensuing news coverage faithfully explained that a new study from the EDC and San Diego Workforce Partnership details Qualcomm’s economic impact in the region. On top of employing almost 12,000 people locally (out of 21,000 employees worldwide) and generating more than $4.5 billion in direct and indirect economic activity, Qualcomm is the innovation engine driving telecommunications and IT in San Diego and elsewhere. As the KPBS account put it, “It is no surprise that Qualcomm is big in San Diego.”

What may be more interesting, though, is why Cafferty and the EDC produced the study.

CEO Mark Cafferty of the San Diego Regional Economic Development Corp.

Mark Cafferty

As a quick glance of the EDC website reveals, a primary mission of the quasi-government agency has been “to attract high-wage companies to the region from around the world.” As Cafferty put it, providing research and assistance to companies interested in moving to San Diego (or in doing business here) is something the EDC has done for decades, and “we can do it all day long.”

Yet San Diego has not accumulated much of a record in terms of luring major Fortune 500 companies here. The best example may be Gateway, the personal computer maker that moved its headquarters to San Diego from South Dakota in 1998. Gateway, which rivaled Dell and Compaq in the golden age of desktop computing, was caught like an iceberg in the Gulf Stream in the years after Ted Waitt moved the headquarters to San Diego. Gateway left town following its 2004 acquisition of Irvine, CA-based eMachines, and was itself acquired by Acer in 2007. And that was the end of that.

Cafferty, who joined the EDC almost a year ago, says he wants to add some other goals—or perhaps values—into the mix of economic development priorities. One of those values, Cafferty said, is recognizing the importance of homegrown giants like Qualcomm. A corollary is the importance of cultivating the local startup ecosystem, so the Qualcomm story can be repeated—and sustained—more often. If anything, the Qualcomm study is a blueprint for what worked, with a few pointers to things that could help expand the innovation economy in San Diego.

San Diego Regional Economic Development Corp.The 42-page study is important because San Diego’s startup ecosystem has mostly become “a build to sell” market—a nursery for innovative companies that get acquired (and often transplanted elsewhere). Qualcomm deserves study because it is the critical outlier—the startup that stayed to become a successful global technology giant.

Considering the record of companies like SAIC, or Idec Pharmaceuticals, which “merged” with Biogen in 2003 and moved entirely to Weston, MA, in 2010, the EDC might want to replace “attracting high-wage companies” in its mission statement with “retaining San Diego’s homegrown companies.” (From what I’m hearing, it might already be too late to talk Bristol-Myers Squibb out of moving Amylin Pharmaceuticals’ remaining San Diego operations, following the $5.3 billion deal last summer.)

Cafferty told me that when new San Diego Mayor Bob Filner asked him, “What can I do?” he cited the example of New York Mayor Michael Bloomberg, who has used his bully pulpit to boost local innovation and encourage a new generation of entrepreneurs to the city that never sleeps. Extolling the virtues of San Diego as an innovation hub is something our political and business leaders need to learn how to do every day, Cafferty says.

Where San Diego is sometimes characterized as “the biggest small town in America,” Cafferty says, “My hometown of Boston is a small place that projects itself as large.”

Another key issue highlighted in the Qualcomm study, Cafferty said, is that high-tech companies like Qualcomm have a hard time finding qualified workers in the San Diego region. Bob Slapin of Software San Diego (previously known as the San Diego Software Industry Council) has been lamenting the shortage of software developers for years.

At a time when unemployment in San Diego County is 9.2 percent, the study says almost three out of five telecommunications and IT employers say they nevertheless have at least some difficulty finding qualified applicants for non-entry level positions. Just over a quarter say they’re experiencing great difficulty. Even for entry-level positions, 44 percent of San Diego County’s employers indicated at least some difficulty finding qualified applicants.

The demand for software development has followed the rise of smart devices, and represents a fundamental shift in technology innovation, especially in consumer technology. Software is ascendant, in other words, and producing software developers should be a priority if San Diego wants to maintain its place as a hotbed of technology innovation.

“Looking forward, employers in telecommunications and information technology are considerably more optimistic about hiring in the near future,” the report says. “Approximately half (48 percent) of employers expect to have more employees at their current location 12 months from now and 42 percent expect to maintain their current level of employment. Over the next 12 months, San Diego County’s telecommunications and information technology employers expect to add approximately 5,000 new jobs in the county.”

What’s left unsaid is that thousands of out-of-work job applicants apparently lack the requisite skills, education, or talent sought by Qualcomm and other telecommunications and IT companies. In this respect, Cafferty’s leadership at the EDC may prove to be providential.

As a young and energetic CEO, he embodies a significant change at the EDC. Perhaps more importantly, he brings extensive experience in workforce training and education from his previous reign as CEO of the San Diego Workforce Partnership. And to Cafferty, “talent” is one of the crucial ingredients that San Diego needs to boost its innovation economy.

To help address the problem, the study recommends:

—Developing opportunities for entry-level work experience and exposure to career pathways in telecommunications and information technology. Work experience and knowledge of specific industries are key requirements for the region’s technology employers, and ones which often disqualify applicants for employment.

—Identifying and supporting intermediate career opportunities that allow individuals to work and move toward completion of a four-year degrees.

—Emphasizing to students and job-seekers the importance of learning new technologies. It’s very important for employers that workers take on new responsibilities and communicate the technical aspects of what they are learning. The study says, “Technology employers are no longer focused entirely on hiring people who have very specific technical skills … but are also looking for those individuals who can learn new technologies, initiate new programs, take on new responsibilities, and who are able to communicate the nuances of their responsibilities and their industry to others.”

Instead of thinking of economic development only in terms of attracting new business to San Diego, Cafferty says the San Diego region needs to start thinking in terms of attracting “the best and the brightest.” He maintains that San Diego’s success as a regional innovation hub will come not from plucking a technology company from some other locale, but in helping to build a startup founded by somebody who’s already here.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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  • http://www.facebook.com/brant.cooper Brant Cooper

    Haven’t read the report and will do so, but “lamenting the shortage of software developers” is hardly a problem unique to San Diego. Silicon Valley has a shortage, too. Not sure of the point being made. Also, would be interesting to know what the impact of the defense industry is on availability of developers to tech industry.

  • Kian Saneii

    Bruce,

    * Outstanding writing, as always!

    * Mark Cafferty is truly a rock star, big time. I’m so excited for EDC and for all of us that he’s in this position of leadership and influence. I know he’ll make a TREMENDOUS, positive impact!
    * The point about SOFTWARE that you raise is absolutely critical. Very important.
    * The point about home grown versus plucked out elsewhere and dropped into San Diego is a great one that he, and you, raise.
    * Observation: Home grown requires support for amazing incubators like Evo (of which there are exactly NO others), and support from VENTURE capital. When the going was still good up North and in Boston, we ended up having not our fare share of VC funding. As the entire VC market / industry has recently essentially transformed (to put it politely), we are getting our disproportionately negative impact from that. For our size, and more importantly for the level of INNOVATION which actually goes on, there’s very, VERY little funding that’s going on locally. We’re producing and nurturing innovators, and we’re kicking off decent-chance ventures … only to have them stifled at worst and significantly hampered at best in pursuit of funding. If EDC can crack the code in this front, there will be tremendous uplift in economic activity, and just maybe a few Q’s built too — although I have to say that’s unlikely — but we don’t need a few Q’s, we need MANY MANY smaller companies, which WILL happen. We don’t need 12K employee successes, we need 12K medium sized successes! Sadly, I think Austin is coming on strong in this area, and they have NOTHING over us … other than an effective conference now and I’m sure a concerted, coordinated effort amongst city leaders, academia and industry.

    Thanks Bruce. My $.02!

    Best,

    Kian.