★ Amazon Announces Search for Second HQ Location, Invites Cities to Make Pitches (Sep 7, 2017)
Amazon today announced that it’s initiating a formal search for a second North American headquarters city in addition to its current HQ in Seattle, and invited cities to make pitches to win its business with a formal RFP process. The approach here is reminiscent of Google Fiber’s strategy of inviting cities to pitch to host its early networks, a process that resulted in tax breaks and other concessions intended to lure Google to municipalities, and Amazon is clearly aiming for very much the same approach here, hoping to get big tax breaks and other incentives. The driver here is twofold. Firstly, this is a PR move intended to get lots of positive attention from cities around the US both during the process and once it’s completed and it starts creating jobs and other economic activity in an area.
Secondly, it’s a practical issue: Amazon has grown to over 40,000 employees in Seattle, a big coastal city with a high cost of living and doing business, and with another massive tech company – Microsoft – nearby and competing for potential employees. It’s also been criticized recently for being too dominant a force in Seattle. In addition to hiring tens of thousands of warehouse workers around the world each year, Amazon is beefing up its AWS and advertising sales forces, and there’s no particular reason why they need to sit in expensive Seattle office space. As such, hunting around for a lower-cost base with substantial financial incentives from the local government makes a ton of sense for practical as well as PR reasons. We’re going to see cities falling over themselves to win this business, which Amazon says will eventually provide 50,000 direct jobs and $5 billion in construction investment.
The challenge of running two headquarters will be a fairly unique one for a big tech company – others certainly have satellite offices, and big mergers sometimes result in dual headquarters arrangements, but this would be the first time that I’m aware of that a big tech company would deliberately choose to divide its HQ function between two locations in different stats. That’s going to create some unique challenges for managing the business, though Amazon’s highly balkanized management structure likely makes it a little easier. As with the recent acquisition of Whole Foods, this big process is going to be completed remarkably quickly: responses to the RFP are due by October 19th, and the announcement will be made next year, though the RFP talks about three distinct phases, with 500k square feet of office space required by 2019 and up to 8 million required “beyond 2027”, and mentions the “initial 15-17 years of the project”.
Update: two other things worth mentioning which have popped up since I published this: Amazon is also opening an R&D hub focused on machine learning in Barcelona, Spain; and Recode reports that there’s already political opposition to Amazon’s approach of seeking tax breaks for its new HQ.
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