Alphabet and its Google unit have the largest number of high quality engineers, according to a Bernstein Research report based on data from SignalFire, but Twitter, Facebook and Amazon all have strong talent pools. Uber is growing its engineering talent at a breakneck pace.
The Bernstein report, outlined by analyst Carlos Kirjner, is notable because it aims to tie company performance to engineering talent. Using SignalFire's TalentRank metrics, Bernstein ranked the quality of engineers and other factors such as attrition rates when stock prices fall as well as the migration of engineers.
SignalFire has developed a proprietary dataset and methodology covering more than 3 million private and publicly traded tech companies. Individual engineers are ranked and benchmarked based on track record, innovative projects, education, experience and leadership.
Bernstein's takeaways highlighted how some companies can have talent pools that lag Internet giants, but are strong in their markets. For instance, PayPal's engineering talent lags the likes of Google and Amazon, but surpasses rivals in the payments sector. eBay is similar in that the marketplace competes with a bevy of smaller players.
At a high level, the engineering talent pecking order looks like this:
Among the key takeaways:
- Alphabet has the largest quantity of quality engineers. That quantity matters given the need to innovate at scale. Kirjner, however, noted that Google/Alphabet management has to worry about the stock price because attrition rises when share prices fall. Nearly 20 percent of Alphabet's engineers have a TalentRank above 95 percent. Overall, Alphabet, Apple, Amazon, Microsoft have the most ability to innovate at scale.
- Twitter have the highest talent score among the companies covered by Bernstein. Part of that score is due to the smaller quantity of engineers, but Twitter has the talent pool to grow users, engagement and revenue.
- Facebook is building its talent pool, but has a strong ad engineering team. Bernstein found that Facebook's ad engineering team is the best in the companies that were analyzed. Facebook's ad engineering talent scores are better than Google's, but part of that ranking is a function of staff size.
- Yahoo's engineering talent pool has been deteriorating for years. That fact isn't going to surprise anyone. Yahoo's engineering team is good, but smaller and on average less qualified than the teams at Facebook and Google.
- Amazon's engineering talent is high quality and can operate at scale. Kirjner said AWS is the most likely reason. Amazon's attrition rates are in the range of other companies.
- Pinterest has the best high-quality engineers but Uber has the best growth rate at scale.
- PayPal and eBay are good enough. PayPal engineers aren't as qualified as other Internet giants, but the company goes against traditional payment players.
It is impossible to dismiss threats from Google, Amazon or Apple outright, but PayPal has a leadership position, it has built scale and is capturing the benefits of a strong network effect. Google and Amazon's multiple past failures, and PayPal's continued growth of payment volume, users and engagement demonstrate just how hard it is to bootstrap an online wallet or a substitute from scratch. The extremely limited technical and engineering skills of traditional payment players suggested by the data will likely make it hard for them to scale up and evolve a feasible competitor to PayPal, no matter how big of a theoretical threat they may be. It is easy to create an icon people can click to pay online, but it is extremely hard to build a large scale Web payments business. This is still PayPal's to lose.
eBay has a similar situation in that it doesn't have to beat Amazon on engineering talent because it competes with multichannel retailers and thousands of smaller online players.
The lesson for enterprises is that your engineering talent only has to be better than your industry rivals.