Is Amazon’s HQ2 Strategy Viable? Our Take

17 Oct 2017
by Eric Simonson, Salil Dani

On September 7, Amazon announced its intent to establish a second headquarters in North America – one that it states will be an equal to Seattle and that it expects to employ up to 50,000. It has also issued a public RFP inviting interested states / provinces / metro areas in North America to submit their responses by October 19. This move is unique and unprecedented. Unique in that the strategic intent is so bold – an equal headquarters of significant scale – and unprecedented in that the volume of expected employees is far beyond any other similar announcement. No other organization has undertaken such a challenge in the North American geography, particularly for knowledge services work (although the roles Amazon plans for the headquarters go beyond knowledge work to include roles such as manufacturing and distribution).

Our experience in helping organizations select and optimize locations for their knowledge work (IT, finance, analytics, etc.) tells us that this selection will be complicated and likely will not play out as initially stated; for example, the employee count may be lower, or it might require more than one location. Regardless, we will take Amazon at its word and assume it does indeed want a location capable of providing 50,000 employees and able to operate as an equal headquarters.

Interestingly, the RFP is framed with an economic development mindset as opposed to getting the best possible talent pool. It focuses mainly on real estate (site/space requirements, availability, accessibility) and incentives (amounts, structures, approvals, etc.). While the focus on real estate and incentives is understandable, it can easily mask the bigger issue: can Amazon get the volume and quality of talent it needs to fulfill its HQ2 vision?

With this in mind, we see the following factors as being the most dominant considerations

  • Scalability of talent
  • Business mix
  • Time zone
  • Physical proximity

This viewpoint offers some quick context on how to view the announced initiative and then provides Everest Group’s simple assessment of some of the key factors likely to drive the actual location selection decision. While a more detailed assessment should consider the various skill sets, business strategies, competitive intensities, ramp-up scenarios, and other factors, we believe that this simple assessment should provide the various stakeholders a perspective on the complexities and trade-offs associated with this location selection decision. We believe that our assessment will serve as a valuable contrast to the listing of cities put forward in the media in the wake of the announcement – most of which were not based on a firm understanding of the implications of the required scale (amongst other limitations).

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