With the booming economy generating strong demand for IT products and services, IT vendors and solution providers had high expectations for the new year in early 2020. But then the COVID-19 pandemic struck, followed by economic shutdowns in many parts of the country and a deep recession that ended the longest economic expansion in U.S. history.
This has been a challenging year for solution providers as they try to navigate a vastly different business landscape. Demand for some IT products and services, such as laptops and collaboration software, has soared to support millions of employees working from home. But economic uncertainty has also caused some businesses and organizations to hit the pause button on IT projects and purchases. What’s more, the business impact of the pandemic has been uneven throughout the country with some states all but shutting down their economies and others trying to maintain some semblance of business-as-usual.
The pandemic and ensuing recession have had a profound impact on the IT business environment. Solution providers not only have had to adjust their product and service offerings, but they’ve had to revamp any plans they had for geographic expansion or for building up their staffs with new engineering, development, sales and marketing talent.
Each year, CRN researchers and editors have undertaken the “Best States” project, a detailed analysis of the business climate in all 50 states, to offer solution providers and entrepreneurs guidance on the best – and the worst – places to start and operate a solution provider business. This year, with the pandemic and recession maintaining a grip on the U.S. economy, CRN has shifted the focus of the Best States analysis to include the more immediate business impact of the COVID-19 pandemic and the ensuing recession, in addition to the areas traditionally covered by the Best States analysis such as IT workforce education and experience, taxes and regulations, business environment and state infrastructure.
We present the results of the 2020 research, the eighth year of the Best States project, here in this story; in a slide show looking at the rankings of the 50 states across all criteria, including COVID-specific data; a slide show specifically examining the impact of the COVID-19 pandemic and the recession on each state; and an online database with the data used in the analysis presented in a state-by-state fashion. (A complete description of the Best States methodology and a list of the data sources can be found on the last slide in the main slide show while a description of the COVID-specific data used can likewise be found in that slide show.)
As happens every year, most states have moved either up or down in their rankings – some by just a few spots and some by many. The inclusion of the pandemic- and recession-related data introduced more volatility into the mix. Florida, which has been ranked No. 1 in the Best States analysis for the last four years, is No. 11 this year after the Sunshine State’s GDP declined 4.9 percent in the first quarter as the pandemic and recession hit and the state’s employment declined 6.7 percent between February and July. Virginia, whose ranking declined last year as it became a more expensive state in which to do business, is back up to No. 2 this year due in part to its relatively durable economy amidst the recession.
For the first time Washington State achieved the No. 1 ranking in the Best States analysis.
Washington’s ascendancy shouldn’t be a surprise given that the Seattle-Bellevue-Redmond region has become one of the country’s leading tech centers and is home to two IT giants (Microsoft and Amazon) with trillion-dollar market capitalizations. The Evergreen State’s tech sector accounts for 20.2 percent of total gross state product – No.1 among all states.
Washington’s robust GDP growth prior to the pandemic was among the highest performing states and media organizations like U.S. News and WalletHub rank Washington No. 1 for economic growth and economic development efforts. The state is No. 3 in workforce education and experience, according to the Best States analysis: Microsoft, Amazon and other tech companies in the region undoubtedly act as a tech talent magnet. The state is No. 2 in entrepreneurship and innovation and tech jobs account for 10.7 percent of the total workforce, tied with Virginia for No. 2 and behind only No. 1 Massachusetts by that measure. Washington is No. 7 in business climate/competitive environment and No. 2 in entrepreneurship and innovation, the Best States analysis concluded.
Solution provider 2nd Watch, which offers public cloud professional and managed services, calls Washington state home with its Seattle headquarters and facilities in Spokane and Liberty Lake in the western end of the state. While the company has some customers based in Washington, CEO Doug Schneider emphasizes that 2nd Watch (No. 134 on the CRN Solution Provider 500) is a very distributed operation that provides services to clients all around the U.S. – many, in fact, in the Midwest, south-central U.S. and East Coast and some with global operations. “We have a work-from-anywhere mentality,” Schneider said.
“We don’t really portray ourselves as a local or regional player,” the CEO said in an interview with CRN. He said one advantage to being in Washington state is the proximity to Amazon Web Services (AWS) and Microsoft, both of which (along with Google) operate the public cloud platforms around which 2nd Watch has built its portfolio of services including cloud consulting, managed services, business transformation, DevOps, and data center migration and application modernization.
When the pandemic hit and the economy slid into recession, 2nd Watch, like many companies, hit the pause button on hiring and expansion plans, according to Schneider. But once it became clear after a few months that 2nd Watch’s services were still in demand (and even increased demand as businesses turned to the strategic services provider as they reassessed their cloud strategy and spending), 2nd Watch resumed hiring for consultants, cloud service managers and sales professionals.
IT Giants like Microsoft and AWS do attract educated and experienced workers to Washington state, Schneider said. There can be some competition with those companies for top IT talent, although the CEO acknowledged it works both ways and he has hired people away from them. “It’s a great place to find talent in areas like software development,” he said of the Seattle area, at one point referring to it as “the cloud capital of the world.”
Virginia ranked No. 3 overall in this year’s Best States project. After experiencing a second-quarter slowdown, Clearpath Solutions Group, based in Reston, Va., has likewise seen sales resume an upward trajectory since June, said President and CEO Gary Vaughan, in an interview with CRN. “And our Q4 is looking very strong,” he said.
Clearpath (No. 315 on the CRN Solution Provider 500) is very focused on the Washington D.C.-Virginia area, although the solutions and managed services provider does have clients in Texas, Florida and Massachusetts and recently expanded into the Delaware and New Jersey region. While his company doesn’t do much federal government work itself, Vaughan said government spending provides “a rising tide for all boats. The economy here feels very strong.”
Like the major IT vendors in Washington state, the federal government in Washington D.C. does help attract IT talent to the region, supplemented by graduates of Virginia Tech and other area schools, Vaughan said. But with the government paying high salaries and benefits for IT workers, Uncle Sam can also be a tough competitor for employees, he said.
Massachusetts (No. 6 overall) ranked No. 1 in workforce education and experience in this year’s Best States analysis. That’s important to Rob Stephenson, CEO of Thrive Networks (No. 278 on the CRN Solution Provider 500), a Foxborough, Mass.-based IT solutions and managed services provider that prides itself on what Stephenson calls the company’s “white glove service.” That requires employees who are not only proficient in engineering and technical skills, but people skills as well.
“We have some of the most talented engineers and dedicated employees in the industry,” Stephenson said. “We have a very, very strong group of individuals here.” Thrive has multiple offices in Massachusetts, offices in Manhatten, Dallas, San Francisco, Chicago, Charleston, S.C. and Columbia, Md. The company also operates a security operations center in Portland, Maine.
The top five of this year’s Best States list were Washington, Utah, Virginia, Maryland and Georgia. At the bottom of this year’s list are Arkansas (No. 48), Louisiana (No. 49) and Mississippi (No. 50)