Tech Firms Continue to Establish and Expand Engineering Centers

Seattle area has become a veritable satellite office launchpad.
| FROM THE PRINT EDITION |
 
 
 
When Derek Orr left Microsoft last fall to join Uber in its new Seattle office, he was one of a handful of Uber employees who ate lunch at a makeshift picnic table in a small Pioneer Square office. Earlier this year, Uber moved into a 40,000-square-foot office downtown that includes expansive murals of Northwest-style landscapes and a proper cafeteria where its employees, now numbering 150, can dine in style.
 
By the end of this year, San Francisco-based Uber expects to have nearly 200 employees in Seattle, and it’s looking to enlarge its office — already the size of the average grocery store — by 50 percent.
 
The fast-growing Seattle office seems more like a startup than the Northwest outpost of a global company. Uber’s Seattle office is “empowered to work autonomously,” says Orr. “They’re there when we need them,” he says of the people at the home office, “but we do not have to wait for a decision from San Francisco.”
 
Uber is one of more than 80 companies headquartered outside the region that have established offices here so they can better recruit from the deep pool of software engineers.
 
“Seattle, arguably, is the fastest-growing tech hub in the country,” Orr asserts. “There are a lot of companies to draw amazing talent from.”
 
 
ROOM TO GROW: Derek Orr, left, and Jon Kantrowitz work at Uber's new office in the Second & Seneca Building downtown.
Uber expects to have 200 workersin Seattle by year's end.
 
Eighty satellite offices may not seem like many, given that there are some 12,000 tech firms in Washington state. But the number of branches has grown dramatically in recent years, and they tend to include the world’s most successful companies with astonishingly rapid growth trajectories.
More than half of the engineering centers have been established since 2014, according to GeekWire, the Seattle-based tech news service. While they typically start small, many have grown quickly and now play strategic roles for such global giants as Google and Facebook. 
 
The Seattle tech community, once described as Snow White and the Seven Dwarfs because of the overwhelming presence of Microsoft, has gradually become more diversified with the emergence of Amazon and numerous midsize companies like Tableau Software and F5 Networks. The new engineering centers add yet another important source of growth and variety.
 
Consequently, the tech sector has become a key driver in boosting the demand for commercial real estate. During the past year, tech companies leased 2.5 million square feet in the Seattle area — the equivalent of about 17 Costco stores — with South Lake Union, downtown Seattle and downtown Bellevue representing three of the six hottest tech neighborhoods in the country by transactions, according to JLL, a real estate research firm.
 
Much of this activity comes from satellite offices that were established earlier and are now expanding. Facebook, which set up shop in Seattle six years ago, currently has about 1,000 employees and has moved into new offices in South Lake Union that could accommodate twice that number.
 
“The city [of Seattle] has greatly contributed to our engineering growth,” says Vijaye Raji, Facebook’s director of engineering in Seattle.
 
Google, which recently completed a large campus in Kirkland, has 1,900 employees and is adding a new building in South Lake Union that will give the company the capacity to triple that number.
 
While Facebook and Google both started out with just 20,000 square feet or so of office space, Bret Jordan, managing director of the Bellevue office of real estate services firm Colliers International, says they now represent a significant presence in the region.
 
“Those second and third moves are the ones that have a significant impact on our office market,” he says.
 
And it’s not just the Silicon Valley tech giants that are choosing to establish engineering operations here. Chinese e-commerce behemoth Alibaba opened an engineering office here two years ago. Taiwanese smartphone maker HTC, Chinese telecommunications giant Huawei Technologies, Japan’s Mitsubishi Aircraft Corporation and French defense giant Dassault Systems all have software engineering operations in the Puget Sound area. There are also edgy startups like virtual-reality firm Magic Leap, Singapore’s GrabTaxi and Elon Musk’s SpaceX.
 
The companies are attracted by the Seattle area’s concentration of software engineers, who constitute a talent pool of more than 90,000, according to a 2015 Washington Technology Industry Association (WTIA) report.
 
 
“We have more software engineers than any city per capita in the nation,” says Suzanne Dale Estey, CEO of the Economic Development Council of Seattle & King County. 
 
And even though Silicon Valley is by far the leader in venture capital funding, WTIA CEO Michael Schutzler says, “For actual engineering talent, for software development, this is the center of the universe.”
 
Yet it’s not just about quantity. University of Washington Computer Science & Engineering Professor Ed Lazowska points out that Seattle area engineers are in the vanguard in a broad range of sectors, from cloud computing and e-commerce to online gaming and virtual reality.
 
“We are, honestly, in a different league,” says Lazowska. “It’s Silicon Valley and Seattle. New York has an extremely vibrant startup culture, but it is much less of a magnet for engineering offices.”
 
While Silicon Valley’s tech community is far larger than Seattle’s, one thing that makes Seattle attractive as a location for engineering centers is its lower cost of living. The average software engineer’s salary in Seattle is $125,000, more than 5 percent less than the average salary in the Bay Area, according to JLL. The personal finance website SmartAsset.com estimates that it is 25 percent cheaper to live in Seattle than San Francisco, thanks to lower rents and taxes. Commercial space in Seattle rents for 30 to 50 percent less than in the Bay Area, and the median home price is half that of the San Francisco area.
 
Seattle’s quality of life is another attraction. “It’s less about cash on the table and more about Mount Rainier and being on the ski slopes in under an hour,” Dale Estey notes.
 
The flood of tech talent that poured into the region to serve Microsoft and Amazon’s insatiable demand for more software engineers has also powered a positive feedback loop. Since many of those engineers don’t want to leave the Seattle area, companies interested in hiring them have established engineering centers in Seattle and Bellevue to accommodate them. Those engineering centers then create new centers of expertise and a greater depth of talent that, in turn, attracts more engineering centers.
 
This exploding demand for tech workers has so outpaced the state’s ability to educate them that, on a per capita basis, Washington state has become the leading importer of information and communication technology workers in the country, according to a 2015 WTIA report. 
 
To be sure, rising rents and a shortage of software engineering graduates relative to places like San Francisco and Boston could erode some of that advantage. But the UW has plans to double the size of its computer science and engineering program and dozens of institutions are popping up to provide basic training in coding, such as WTIA’s new Apprenti program, which offers software training primarily to women and disadvantaged minorities.
 
In many cases, engineering centers were initially established to take advantage of the availability of a particularly talented individual. For instance, when Lazowska learned that Brian Bershad, a colleague, was considering working for Yahoo, he contacted Google, which hired Bershad to open its first Seattle office in Fremont. When the UW hired the wife of a top Facebook executive, Facebook used the opportunity to have that executive open its first Seattle office.
 
Although those operations began small, they have evolved to play critical roles in driving the development of strategic products. Google’s Seattle and Kirkland operations, sometimes called SEA/KIR, play particularly central roles in the company’s cloud and mapping development efforts. At Facebook, the effort ranges “from video calling for Messenger to virtual reality to the infrastructure work that supports all of this,” says Raji. 
 
Facebook’s new Dexter Station office in Seattle’s South Lake Union neighborhood has enough space to allow the company to double its workforce to 2,000, and there’s potential for additional expansion with Seattle-based developer Capstone Partners planning to add 165,000 square feet of office space to the project. 
 
Google, which quickly outgrew its Fremont space, opened an engineering campus in Kirkland in 2004. To accommodate its continued expansion, Google recently added a 180,000-square-foot office building to that campus and is establishing a second campus in South Lake Union at Vulcan Inc.’s Lakefront Blocks project, which could house as many as 4,000 employees. The two campuses combined will give Google about one million square feet of office space in the Seattle area.
 
While many of the engineering centers are establishing themselves in South Lake Union or Bellevue, there’s also a strong move into prime office space in downtown Seattle as companies seek to be close to such amenities as restaurants, theaters and nightclubs that help attract millennials. Chicago-based Groupon opened an office in the 1201 Third Avenue Building, Redwood City-based Oracle Corporation is moving into Century Square and Venice, California-based Snapchat has established a beachhead near Pike Place Market.
 
In fact, tech companies often pick up the most attractive office spaces available downtown. “It’s a fight for talent,” says Doug Hanafin, a managing director at JLL. If the company is paying a tech worker more than $100,000 a year, whether the annual real estate cost is $8,700 a seat or $7,700 a seat is not that important, Hanafin explains. 
 
Situating offices in buildings that have views, easy access to bicycle trails and public transit or proximity to good restaurants is important because many employees choose the Seattle area precisely for quality-of-life reasons.
 
“My wife’s job, the kids’ education, the quality of life we have here is not something we would be able to do in the Bay Area,” says Will Kiefer, who moved from Boston and took a job in Dropbox’s Seattle office when his wife accepted a position at Harborview Medical Center.
 
 
NICE PLACES TO WORK: 1. Dropbox's office on the 64th floor of the Columbia Center downtown provides expansive views of the city
and Elliott Bay. 2. A design detail at Facebook's office in Dexter Station reflects the prevailing attitude about working in Seattle. 3. Google
plans to occupy Vulcan's huge Lakefront Blocks development in South Lake Union. 4. GoDaddy's Kirkland office looks out on Lake Washington.
 
Satellite offices often develop their own distinctive cultures to help recruit new employees. Kiefer says he was attracted by the startup feel of Dropbox’s Seattle office. “I saw the opportunity to get in and help grow the culture, to help grow the new office,” he says. “That’s exciting.”
 
Seattle’s Dropbox workers can easily connect with their colleagues at headquarters through online chats and presentations. “Working in the remote office often feels as if you’re just on a different floor in the same building,” says Kiefer. And being away from the head office has no negative effect on a person’s career. “Where your actual physical desk is does not play into any of those career decisions,” he says.
 
The tech strength in Seattle harks back to the Boeing Co., Pacific Northwest Laboratories and the University of Washington, but has clearly accelerated with the arrival of Microsoft, then Amazon, with their tens of thousands of employees, as well as dozens of companies in pioneering fields like data analytics, cybersecurity, home automation and virtual reality. 
 
Google’s virtual reality activities are led from Seattle by a group created by UW faculty member Steve Seitz. Los Angeles-based Belkin International opened WeMo Labs in Seattle to collaborate better with UW Professor Shwetak Patel and his team after acquiring smart-home automation technology developed at the UW. 
 
The increasing ties between Seattle and Silicon Valley tech communities have also helped. Uber’s Seattle operation came about because a UW alumnus who cofounded the storage company Isilon ended up running engineering at Uber and hired a former colleague at Isilon to head the Uber office.
 
In rare cases, an entire company will up and move, as happened when Tableau Software decided Seattle’s family-friendly environment made it “the promised land” for growing a business, says Tableau Chairman Christian Chabot. Seattle is more compact than the Bay Area, with a “fantastic outdoors culture” and a robust startup and engineering community, Chabot asserts. Tableau now has 3,100 employees worldwide, with 60 percent of its workforce residing in the Puget Sound area.
 
Another attraction of Seattle is the fact that employees here tend to job hop less than in the Bay Area. The average tenure of a tech worker in Silicon Valley is less than nine months, says Schutzler. “Basically, it’s a very mercenary world down there — I think of it as a crazy free-agent world,” he says. “Our average tenure is 2.5 years. … It is compelling for tech companies to know they have loyal employees.”
 
For some, of course, Silicon Valley remains the place to be. “There’s the prestige of being in the Valley as the epicenter of the tech industry,” says Seco Development executive Kip Spencer. But Seattle’s growing reputation for tech savviness is gaining ground, not just among domestic companies but also foreign multinationals.
 
“Companies overseas used to only look at San Francisco or Boston because those  are the most well-known tech hubs in the world,” says Schutzler. “Now they always add Seattle to their list of potential sites.” 
 
That trend could accelerate with the opening in Bellevue this fall of the Global Innovation Exchange, an educational institution established as a joint venture between the University of Washington and Tsinghua University in China, with financial backing from Microsoft. The institute will start by offering a master’s degree program in technology innovation, and Seattle-based companies will be best positioned to snap up its graduates.
 
Looking forward, tech industry experts expect Seattle’s strength in cloud computing, big data, gaming, and augmented and virtual reality to continue to attract remote engineering offices. 
 
“In five years, it’s hard to know what contraptions we will be carrying,” says Dale Estey. “Certainly they will be data driven.”
 
Lazowska also expects strong interest in developing medical apps spurred by health initiatives at Paul Allen’s various institutes and the Bill & Melinda Gates Foundation. 
 
While some Seattleites look at the growth of the tech sector and wonder if the region isn’t bumping up against limits to its capacity, many in the new engineering centers see far more potential for expansion.
 
“San Francisco is sometimes a very dense place,” says Uber’s Orr. “Here, there’s a lot more space to grow.” 
 

Welcome to the Drone Economy

Welcome to the Drone Economy

A new industrial sector is arriving — and nobody’s at the wheel.
| FROM THE PRINT EDITION |
 
 
 
Jim Tracy runs a company that maintains and repairs wireless communications towers, many of them in some of the most rugged and remote country across eight Western states.  Just getting to the towers sometimes requires off-road vehicles and snowcats, says Tracy, the CEO of Legacy Towers in the Kitsap County community of Burley. Then there’s the climb up the towers, which can range in height from 100 feet to 1,700 feet. Aside from the risk posed by the height, there are other hazards presented by things like the weather or nesting wasps. And if inspection of the relay antennas at the top reveals the need for a part or a tool the technician didn’t bring up on the first trip, there’s another climb down and back up to be made. If only there were a way to inspect towers for hazards and to diagnose the problem from the ground, reducing risks and time spent on the job.  But there is, one already known to amateurs and hobbyists and one increasingly being used in scores of businesses — the drone, or, more properly, the unmanned aerial vehicle (UAV).
 
Legacy Towers got its first UAV in late 2013 and has found them useful in making climbers safer and their tasks more efficient. “If you can throw a drone in there,” Tracy explains, “you can cover more ground with less fuel use.” A camera-equipped drone can be dispatched to the top of a tower to read the bar code on an antenna, look for damage or check to see if it has been knocked out of alignment.
 
“The first one you get, it’s kind of cool,” Tracy acknowledges. “[But] at the end of the day, it’s just another tool.”
 
The power and potential in that tool are such that people are finding applications faster than technology developers or regulators can keep up. They’re also finding more places to deploy these devices.  Most of the attention has gone to things that fly — think Amazon’s experiments with drone deliveries — or operate on the highway, with Google, Tesla and every major auto manufacturer pursuing hands-free operation of cars. But driverless/pilotless/autonomous vehicles are also finding their way to, and doing work now, on rail networks, on farms and on the seas.
 
In the process, the people who write the software; make the antennas, sensors and other pieces that make the technology possible; build the trucks, cars, planes and boats that employ it, and apply it to problem solving in virtually every industry, as well as to those who collect and analyze data from drones, are building what might be called, for lack of a better term, the Drone Economy.
 
This drone economy isn’t a “maybe someday” promise of a flourishing economic sector. It’s already here. Much like the developing local space-business cluster (Seattle Business, January 2016), Washington is becoming one of the nation’s centers of research, development and commercialization of drone tech, with dozens of companies actively involved in it.
 
Creation of a new job-generating tech sector won’t be the only way the Drone Economy’s influence will be felt, either in this region or globally. Entire industries, and not just those dealing directly in transportation, stand to be reshaped by the products and services they already are bringing to market.
 
The activity and potential of the Drone Economy has caught the eye of state government, which in October convened the first meeting of the Unmanned Systems Industry Council. John Thornquist, who heads the state’s Office of Aerospace, says the council’s purpose is to get people in the industry talking to one another and to officials at all levels of government, to hash out issues that may limit the sector’s potential and “to help that ecosystem thrive.”
 
The idea of cars, boats, trains and planes that pilot themselves has been the stuff of science fiction and futuristic museum displays for decades. Some pieces of the technology have been around for years as well, as any kid with a remote-control car, boat or plane can attest. Real-world, full-size applications aren’t rare, either. Sea-Tac Airport’s subway system between terminals operates without on-board drivers. So does the SkyTrain system in Vancouver, British Columbia. Remote-controlled locomotives have long been used in switching yards.
 
But those applications are in closed spaces or networks, and the rail industry has had much less success applying the technology to long-distance freight networks. The Drone Economy is being built on the idea of getting autonomous vehicles, aircraft and vessels onto roads, into the skies and on the water.
 
A convergence of factors allows this transition to happen. Paul Kostek, a past president of the IEEE Aerospace and Electronics Systems Society and a Seattle-based contractor and consultant to tech companies, says the technologies that make autonomous vehicles and aircraft possible started out as solutions to other problems. In aviation, for example, where “weight and space are always critical,” the continuous drive for lighter and stronger materials made drones possible by dramatically shrinking the size, weight and power requirements. In automobiles, technologies developed to make driving safer, such as parking assistance and collision warning and avoidance systems, can easily be extended to help remove a human driver from the process.
 
 
Jim Tracy of Legacy Towers sees drones as another handy item in the toolbox.
 
Drone development has also borrowed from technology developed for use in fields outside transportation. WiBotic, a University of Washington-based business developing wireless recharging systems for aerial, marine and land drones, started with a charging platform for implantable medical devices like artificial heart pumps. “Drones need a way to scale in a way that power is not going to be a limiting factor,” says Ben Waters, WiBotic’s cofounder and CEO.
 
Technology has improved not just the vehicles themselves but also the images onboard cameras produce (thanks to stabilization) and the flight controls for operating UAVs. Adoption of the technology in the commercial sector has been accelerated, Thornquist says, by the low cost to buy and try one, and the often quick return on investment.
 
Kostek cites one other important factor propelling the Drone Economy: “Very rich people are interested in this.” With people like Tesla’s Elon Musk and companies like Google putting money into drone development, Kostek says the sector, much like commercial space, is being driven by “outsiders with capital to spend.”
 
Consumers also deserve credit for taking what were dismissed as toys and demonstrating their commercial potential, particularly for aerial photography, Waters notes. “They provided a unique perspective on how to do things.”
The result: An explosion of R&D and commercialization, much of it driven by a passel of regional companies and institutions:
 
■ Boeing-subsidiary Insitu, based in the Columbia Gorge town of Bingen, has been regularly winning multimillion-dollar contracts from the military for its surveillance drones. The company has expanded its commercial products and services, set up a business unit specifically for that purpose and participated in a project with BNSF Railway to use drones to inspect rights of way in remote areas.
 
Aerovel, based in White Salmon and founded by Insitu alumni, has been developing drones small enough to be launched from a fishing vessel, to look for schools of fish. An Aerovel Flexrotor was used to provide aerial scouting of routes through the ice of the Beaufort and Chukchi seas for a workboat fleet retrieving mooring anchors.
 
■ Thanks to Insitu, the Columbia Gorge has developed a mini-cluster of drone-related companies like White Salmon-based 
Sagetech Corporation, which makes small transponders to identify and control military and civilian drones.
 
■ Bellevue-based Paccar was playing with remote-control technology at its Mount Vernon research center as far back as the 1990s. More recently, it showed at an annual meeting a video of a demonstration of maneuvering and parking a truck at a Walmart distribution facility. Its European subsidiary DAF was one of a half-dozen truck manufacturers participating in an on-highway test of platooning — a tightly spaced convoy of trucks in which the trailing vehicles are driverless.
 
■ Few industries have leapt into drone technology with the enthusiasm of agriculture. Washington State University’s Center for Precision and Automated Agricultural Systems in Prosser has multiple research projects underway, including using an eight-rotor octo-copter to monitor irrigation in vineyards.
 
■ If you’re going to have a drone industry, you might want to have people trained in their operation and maintenance. Green River Community College offers an associate’s degree in unmanned aerial systems and a certificate for UAV operators; Big Bend Community College in Moses Lake has launched programs in mechatronics, sensor analysis and flight operations.
 
■ The University of Washington’s College of Engineering, meanwhile, has its Autonomous Flight Systems Laboratory to “support advances in guidance, navigation and control technology” for UAVs, and to integrate the technology into flight mechanics and controls courses in the university’s Department of Aeronautics and Astronautics.
 
■ Tech-sector senior statesman Tom Alberg, cofounder and managing director of Madrona Venture Group, co-authored a widely discussed think piece proposing the devotion of part of Interstate 5 between Seattle and Portland to autonomous vehicles. “We cannot predict the specific adoption rate for autonomous vehicles, but we believe that widespread adoption of autonomous vehicles is inevitable and will be here sooner than most observers expect,” the essay says.
 
■ Alberg adds Madrona has been backing its belief in the coming of the drone/autonomous age with a significant investment in Bellevue-based Echodyne Corporation, which is developing small, lightweight radars that could be used in UAVs and autonomous vehicles.
 
Clockwise from left: Aerovel's Flexrotor is designed to operate over oceans and remote areas; WSU Professor Lav Khot
prepares to fly an octo-copter over a vineyard; an Autel Robotics drone equipped with WiBotic wireless power solutions.
 
A drone economy could well reshape businesses directly involved in the production or use of UAVs. Commercial real estate services firm CBRE recently issued a report on the impact of technologies including autonomous vehicles on its industry. Driverless trucks, for example, will increase the distance and hours those vehicles can operate, reducing costs. Supply chains will be able to operate with fewer but larger distribution centers, but those warehouses will have to be built to receive and deploy the new generation of autonomous delivery trucks.
 
The speed with which technologies are being readied for market is also one of the barriers to their adoption, as lawmakers and regulators scramble to keep up and deal with thorny practical issues like safety, liability and traffic management on the ground and in the air (e.g., how do vehicles and aircraft operate in the same space at the same time?), not to mention broader societal issues such as privacy and job gains and losses.
 
“The technology is going to be ready before the world is ready,” says Paccar President and CEO Ron Armstrong.
 
Mike Dozier, general manager of Kenworth, a Paccar subsidiary, says many of the technologies that make autonomous trucks possible have been showing up on trucks for years — lane-departure warning systems, drowsy-driver monitoring, even adaptive cruise controls that use GPS data to tell the engine to apply more power when the vehicle is approaching an uphill grade.
 
The truck is packed with data-generating sensors and equipment, for which costs have been steadily declining, adds Paccar SVP Kyle Quinn. The issue, Quinn points out, has been “how do you manage all the information coming off the sensors and interpret it?” 
 
Answer: creating breakthroughs in image processing and artificial intelligence. In other words, software is starting to catch up with the capabilities of hardware.
 
It may be some time before drivers are banished from the truck cab, the Paccar brass cautions. Drivers have duties beyond steering, accelerating and braking, such as securing the load and making sure it stays in place. They’re also needed to handle unexpected situations that autonomous systems aren’t sure how to manage.
 
Still, none of those barriers seem as daunting as what the commercial space business faces, and it’s been able to grow in spite of the challenges. Further, if regulators aren’t moving as fast as many advocates of drones and driver-free vehicles would like, they also aren’t saying, “No way.” 
 
For example, the Federal Aviation Administration issued its Part 107 compendium of rules in mid-2016 to govern use of commercial drones according to weight, speed, height, operator certification and other criteria. While it’s a long list, it does give those interested in the technology’s use some certainty. The FAA has also authorized research projects on flying UAVs beyond the operator’s line of sight, such as the Insitu-BNSF experiment.
 
The industry itself can do a lot to allay some of the safety fears of regulators and the public, Waters says, by “moving reliability from pretty high with top-of-the-line consumer devices” to commercial units with virtually no potential points of failure, and which have safety devices in place in cases of power loss or collision.
 
The technology also has the potential to mitigate problems it creates and solve others. Driverless trucks, for example, threaten the jobs of drivers. But the trucking industry has long been dealing with a chronic shortage of drivers; the American Trucking Associations reported the turnover rate at large fleets was 83 percent in the second quarter of 2016. And even as they eliminate jobs in some sectors, drones and other autonomous vehicles could create more in others. The FAA news release on approval of Part 107 says the new rules could help generate more than 100,000 new jobs in the next 10 years. 
 
Regulators and legislators will be under pressure to keep up with the explosion of applications. Forest fires can be monitored closely but safely. Insurance companies can inspect storm damage on homes — and transmit images to the home office — without sending an inspector onto a potentially precarious roof. Kostek, a resident of Seattle’s Green Lake neighborhood, came up with the idea of using drones to monitor the lake’s health. Farmers are already working with autonomous trackers guided by GPS. Underwater drones can inspect boat hulls. A local police department has used aerial drones to document auto accident scenes, allowing officers to reopen roads sooner.
 
Waters expects the boom to be even bigger in a few years, when companies now seeking  funding bring their products to market.
 
Kostek agrees. “We’re still early, early on as to how these technologies will be applied,” he predicts. “Somewhere, there’s a smart kid playing around with an idea none of us has thought of.”