BREXIT

What's next for Austin tech companies after Brexit?

Software makers could be most impacted, while chipmakers say they expect little to change.

Posted July 1st, 2016

Story highlights
  • Central Texas

After United Kingdom residents voted to leave the European Union last week, a software company in Austin was faced with its own Brexit decision: whether to keep its European headquarters in London. 

BP3 Global, which builds business process management software for Fortune 500 companies, had picked London as its European headquarters in part because it was an EU country.

Now that the UK is no longer part of the European Union, BP3 Global has decided to move its headquarters out of London, potentially to Denmark or the Netherlands, where it has other offices. 

Amit Malhotra, chief strategy officer for BP3 Global, said London will still be its "spiritual" European home and the company will keep the 15 staff members there. 

"But our official headquarters will actually move," he said, noting that they are experiencing growth in both the European Union and the United Kingdom.

BP3 Global's move is an example of the weighty decisions Austin tech companies are weighing as they watch the turmoil brought by the vote unfold. 

The degree that companies are affected depends largely on their industry. Semiconductor companies are tied much more closely to Asia, while software makers, especially those focused on business and financial services customers, often have strong ties to London and the EU.

"London is quite often the gateway to Europe -- it's the door you pass through first," said Mark McClain, co-founder and CEO of SailPoint Technologies, which sells identity management software. "Now the question is whether Brexit will do some damage to London's position as a financial center and what that might mean for some of us who have used it as a great way to break into Europe."

SailPoint, which opened its international sales effort in London in 2008 and now operates in 33 countries, is taking a wait and see approach, McClain said.

"Short term we're going to continue to focus on what we have there and see if it really does start to dramatically affect how business is happening either in the UK or the rest of Europe," he said. "We don't know if it's going to have a huge ripple effect."

Longer term, Austin software companies will need to assess whether London is the right base to tap into Europe's business and financial markets, said Barbary Brunner, CEO of the Austin Technology Council.

Barbary Brunner, CEO of the Austin Technology Council.  

“The question is whether this will make it difficult for there to be a fluid transfer of business," she said. "They’ll be asking, ‘Do I move it to Ireland? Do I move it to outside of Paris or somewhere in Germany?’”

For established tech companies, the question isn't whether to keep operations in London; most will. It's more a concern about uncertain market conditions and the ripple effects.

Several Austin-based semiconductor companies either declined to comment or insisted that Brexit would have little to no impact on their operations. 

Round Rock-based technology giant Dell Inc. has about 2,500 employees in the UK, with main locations in London, Bracknell and Nottingham, England, and Glasgow and Edinburgh Scotland, according to the company’s website. Dell Inc. executives declined to comment for this story.

Bill Schnell, a spokesman for Cirrus Logic, a chipmaker based in Austin, said the company's stance on the Brexit vote is that it is "business as usual."  The company  has offices in Scotland, England, Spain and Sweden

Silicon Labs, also headquartered in Austin, said the Brexit news has little impact on operations. 

"Our UK connection is only a small part of our global presence, said Silicon Labs spokesman Dale Weisman. "We do have a sales office near London and do some design work in the UK, but overall we're not that exposed."

But there is one semiconductor firm with operations in Austin that could see a big impact from the Brexit. ARM, a chip designer, employees 500 people in Austin but its headquarters is in Cambridge in the United Kingdom. 

"Brexit will not have a significant impact on our business as almost all of our earnings come from outside the EU zone," said spokesman Phil Hughes. "But we will watch the negotiations closely, particularly on the subject of visas."

Hughes said the company employs about 200 non-U.K. citizens that are residents of European Union countries at ARM's Cambridge headquarters. 

"We may lose some EU research grants but these have represented less than 1 percent of our (research and development) spend in the last three years and we hope to see this picked up by the UK government," Hughes said. 

The Brexit vote is also on the mind of Greg Gilmore, CEO of Austin-based Planview, which specializes in project and resource management software. The company, founded in 1989, has long been a global player, with 49 percent of revenue generated from outside the U.S. 

"We are an international business, and any uncertainty is not good for business," Gilmore said. "Currency fluctuations have a negative effect on our operations. In the short term, our revenue would be impacted with a decline in the pound or the Euro."

But the company, which has a sales office in Europe and seven operations centers worldwide, is " totally committed to international operations, and this certainly isn't going to change our vigor," Gilmore said. "We believe Europe and the rest of the world is an important growth opportunity."

Of course even companies that don't have operations in London or the EU could feel be affected by volatile financial and currency markets.

“Merger and acquisition activity could slow or stop,” Brunner said, “and it may be harder for certain types of companies, especially those with global business models, to raise a significant round of funding. It’s like an economic yellow flag that’s been raised.”

Venture capital activity, which thrives on stable markets, could slow as well.

“Turbulence is never a good thing,” said Morgan Flager, an Austin venture capitalist with Silverton Partners. “In general, investors want status quo as far as macro economics. When it’s not there, they are less likely to take risks” on new investments.

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