High Tech in Montana

Greg Gianforte | CEO, RightNow Technologies

I’d like to talk to you about Montana’s economy and how we can create more good-paying jobs here.

If you think of Montana’s economy as a combustion engine, it has three cylinders that have traditionally provided power. One cylinder is agriculture, another is tourism, and a third is resource extraction of lumber and mining. I firmly believe that high technology can be a fourth cylinder on that engine.

RightNow Technologies is a software company that I started in Bozeman 13 years ago. We now do over $200 million a year in revenue with over a thousand employees around the world. Forty-five percent of our employee base is MSU and UM graduates, so we’re keeping kids home and bringing them back from out of state. In addition, our average wage in Bozeman is $86,000 a year, making us one of the better employers here with wages that are two to three times the average local wage.

Unlike other industries, in high technology 85 percent of every dollar we spend is wage or wage related. In software or intellectual property businesses we don’t have tractors, we don’t have to buy inventory, and there is no manufacturing plant. At the end of the day all we have are used computers, used furniture, and people, and a lot of them. And we have to pay them well to get the best.

We’ve had a large impact in the Bozeman community. In 2010 our total payroll was $43 million. From an economic perspective, typically when a dollar comes into a community it tends to bounce around four or five times, buying meals, cars, houses, these sorts of things. And if you think of that, the impact over five years of our payroll in Bozeman, in Gallatin County alone, is over a billion dollars.

We’d like to see more companies like RightNow Technologies contributing to our economy in this state.

Montana is a great place to run a business. There is a strong university system. We have a great work ethic. And this is something our customers around the world continually comment on. And this state provides an incredible work-to-life balance. These are all benefits to an employer and it is an environment that could be great for high tech. In a real sense the internet has removed geography as a constraint and it places Main Street, Bozeman, right next to Wall Street, New York City, and Silicon Valley in California.

There is no reason why we can’t build world class technology businesses right here in the state to create more high paying jobs.

There are two things that I think are important as we drive for more high tech contribution to our state economy. The first is that we need a tax code which is business friendly to help encourage entrepreneurs to locate and create businesses here.

If we had a sales tax, that would really be a hit on tourism. The property tax that we have is a hit on agriculture and resource extraction. But in high tech, because the bulk of our returns come in the form of capital gains and income taxes, the focus really has to be on the tax policy related to these two areas. I would like to encourage our state legislature as they look at tax policy and changes in both capital gains and income taxes, to consider recommendations that might encourage entrepreneurs and businesses to locate here. In particular, a number of other states have implemented a program that provides preferential capital gains rates for stock owned by employees of companies that are headquartered in the state, with very good success.

 The reality is that Montana does not get much income today from capital gains associated with employee owned stock of companies that are headquartered in the state. Yet it would provide a haven to attract entrepreneurs to create and grow businesses just like RightNow Technologies if we reformed this provision. I would encourage the legislators to support a policy like this.

The second area I’d like to talk about in respect to encouraging a high tech economy is education. In a very real sense, when our employees go home at night we are left with used computers and used furniture. The people are the key to our success, and as I mentioned, 85 percent of our expenses are payroll or payroll related.

Education is important to us. It is at the heart of our business. That is why we’ve been so proud to partner with Montana State University and underwrite a number of RightNow Distinguished Professorship positions, making a hundred-thousand–dollars-a-year commitment over multiple years, to help increase the quality of the already great education that students get at Montana State University.

In addition, at RightNow we’re trying to raise awareness about careers in high tech by inviting young girls each year into the business to see how we operate, and hopefully to get them excited about a potential career in high tech. Not everyone is that familiar with what we do. For our students in the audience, work hard in your math and physics classes, because that is the foundation you will need to succeed in the high tech economy.

I’ve also served at Petra Academy for ten years as a way to give back to our community. Petra is a K-12 classical Christian school in Bozeman, it’s a private school. I serve because I believe we need choice in education. One size does not fit all in education. Free market choice increases competition, increases quality, and it is good for the students of Montana. A survey done recently in Montana of parents of school-aged kids found that 90 percent of these parents would prefer an option other than public school.

And yet Montana does not have any school choice legislation.

In fact, 39 percent said that they would prefer private school if they could afford it. Eight percent of those surveyed would prefer charter schools over public. And 11 percent said they would home school if they could, rather than go to public schools.

A report out from the Department of Education, said that about 20 percent of the kids that enter seventh grade don’t graduate from high school. In addition, of the ones that do graduate, about 30 percent need remedial work before they can attend college. This is pretty strong evidence that although the current system is serving some people, it is not serving all people.

Montana is one of only eight states in the country not to have any school choice legislation. I would encourage the legislators in our audience to consider this and look at some of the other successful models that are working in other states.

Educational choice should be available to families of all income levels. In a certain sense we already have school choice in the state of Montana, if you have money to pay for it. What we need is school choice for families of low income. If you want to pursue this further, both the Montana Family Foundation and the Friedman Foundation for Educational Choice are both very active in educating and working to get school choice adopted across our country. We need to act here in Montana, too, so we can produce the kids we need for a high tech economy.

The internet and high tech are this generation’s gold rush. Just as this state benefited from the last gold rush, we have an opportunity in our current generation to increase our economy, to put Main Street right next to Wall Street and Silicon Valley. We have an opportunity to significantly improve our economy and create good paying jobs in the process. To do that we need a friendly business environment, particularly tax code related to capital gains and income tax. And we need to focus on K-12 education and provide more choice. It is possible for Montana to add another cylinder to our economic engine.

The key is the raw materials: that’s the kids and how we educate them.

Thank you very much.