With President-elect Donald Trump inviting tech leaders to a meeting next week, no doubt many employees at Silicon Valley companies are hoping their CEO will decline the invitation, given the region’s near unanimous opposition to Trump’s campaign.
But that is wishful thinking. The election is done, and now it is time for many of these tech companies to bend the knee for a simple, practical reason: The federal government is one of the largest IT customers in the world. And The Donald is now calling the shots on budget spending that could significantly impact the fortunes of many of these companies.
In a scoop yesterday by USA Today’s Jessica Guynn and Jon Swartz, we learned that the Trump transition team has invited tech leaders to Trump Tower
to kiss his ring for a tech summit on Dec. 14. The story noted that Cisco CEO Chuck Robbins and Oracle co-CEO Safra Catz would attend, while Meg Whitman, CEO of Hewlett-Packard Enterprise, would not.
Whatever their personal feelings, Catz and Robbins have too much at stake to say no.
Indeed, according to an analysis of federal IT spending for 2015, Hewlett Packard (pre-split) was the federal government’s largest IT enterprise vendor, with $7.2 billion in sales. Even though Whitman, a Republican who supported Hillary Clinton, is skipping next week, it’s still pretty surprising she said no, and I wouldn’t be surprised if she reconsiders. We’ll see.
IBM is second on that list of IT enterprise vendors, at $4.8 billion. So, again, no surprise that IBM CEO Ginni Rometty wrote an open letter to Trump trying to appeal to whatever better angels he may have. And landing a spot on his Business Roundtable is a coup for her from a business perspective. But her moves have caused some dissent among IBM employees — including one who publicly criticized Rometty and quit — and show the fine line many of these CEOs are going to have to walk.
Cisco is the federal government’s sixth-largest IT enterprise contractor, at $2.3 billion in sales. Microsoft is 10th, at $1.04 billion, followed by Intel at $868 million. Oracle doesn’t crack the top 25, but government procurement records indicate Oracle is the federal government’s 55th-largest contractor in the “defense information” category, with $20,012,539 in contracts for 2015, and there are likely many others.
Of course, this is why many of the companies were moderately cheered earlier this year when President Barack Obama’s fiscal 2017 budget proposal called for an increase on IT spending, to just under $90 billion. That includes more than $19 billion on cybersecurity-related efforts.
Some of these companies have been squeezed in recent years, as federal agencies moved to embrace more open-source software and cloud-based systems under Obama. These saved taxpayers money but kept overall IT spending pretty flat. Sitting across from businessman Trump means an opportunity to talk policy, sure, but it’s also the first step in pitching and selling to a new customer. While Trump didn’t talk much about tech in his campaign, he did say “the cyber” would be important in his administration, so this seems like an opportunity to encourage even more spending.
Of course, in the policy realm, Silicon Valley has a ton at risk with the new president. His recent comments on trade and China are likely causing some sweating around corporate offices in the Bay Area. It sends alarms to any hardware company — like Apple, for instance — whose entire business model and logistics have been built over the past decade on the promise of low-cost Chinese labor, stable currency exchange, and open trade. If Trump truly strikes a blow against any of those things, hardware makers are going to suffer.
On the flip side, lower taxes always make corporate chiefs do a happy dance. And with tech companies stashing billions of dollars overseas to avoid U.S. taxes, a repatriation holiday, or even a massive tax cut, would let them bring a chunk of that money back.
And there’s no doubt some hope to wield influence in shaping policy. The problem with Trump from the tech industry’s perspective is not so much his positions on tech, but his almost complete lack of a clear position. In a recent analysis published by the Information Technology & Innovation Foundation, the organization found:
During the campaign, President-elect Trump largely focused on issues other than technology and innovation policy. And when he spoke about the tech industry, his comments occasionally were critical. In general, there were few articulated policy positions, especially outside of the tax and trade area.
In bullet points listing Trump’s stance on many key issues, lots are marked “unclear” or “no position.” The tech industry will likely be eager to help fill in those blanks.
Of course, the other drama to watch will be Trump’s filling of key tech positions in his administration. Obama elevated the roles of the federal CIO and CTO to emphasize his commitment to tech’s role in the federal government. Interestingly, current U.S. Chief Information Officer Tony Scott and U.S. Chief Technology Officer Megan Smith have urged tech workers in government to stick around and keep working for a Trump administration. And both have hinted that they would be “open” to the idea of continuing to serve under Trump in those roles. At the same time, there are rumors that Trump may drastically reorganize the White House administration, and possibly not even fill the CTO and CIO jobs.
There have also been some rumors that Zenefits CEO David Sacks, who recently announced he would soon step down, is considering a job in the Trump administration. And Google, in particular, has been adept at wielding subtle influence by having its employees take key U.S. government tech policy and operations roles. We’ll have to see if that can continue under a Trump administration.
In all of these cases, Silicon Valley leaders are going to have to make some fairly practical decisions about how to move forward. Simply ignoring Trump and refusing to engage with him, no matter how distasteful his politics may be, isn’t likely an option for most.