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MISSOURI
A Site Selection Web Exclusive, June 2010
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Tigers in the Tank

IBM brings another big job creation project to the Midwest.

by Adam Bruns
MISSOURI
IBM’s new project will benefit from, and confer benefits on, the strong research community at the University of Missouri, where enrollment has been growing faster than any other school in the Big 12 or the Big 10.
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n 2009, Columbia, Mo., home to the University of Missouri's flagship campus, was a runner-up in the race to land a major technology service delivery center from IBM, which instead chose Dubuque, Iowa, as well as a separate location in Lansing, Mich., for new centers that are creating hundreds of new jobs.

In 2010, Columbia was first across the line, as IBM in May announced it would create 800 new jobs at its third such facility to be announced within 18 months. And in all cases, it was higher education infrastructure that drove the process.

The facility will be operational in the fall of 2010, and by the end of 2012 should be fully staffed. Working with Missouri Gov. Jay Nixon, Columbia Mayor Bob McDavid, the Missouri Department of Economic Development, the Missouri Partnership and Regional Economic Development, Inc., IBM has signed a 10-year lease, with optional extension years, to occupy and renovate a building on LeMone Industrial Boulevard.

"This newest addition to our delivery center portfolio in North America is critical to IBM's ability to offer support at any level — local, regional and global – to provide the flexibility, scalability and security in solutions our clients expect," said Tim Shaughnessy, senior vice president, Service Delivery, IBM Global Technology Services.  "We selected Columbia for our newest facility based on several criteria, including the strong public-private partnership with the state and city, a competitive business model and the talent and skills that Missouri and the Midwest have to offer."

The State of Missouri awarded IBM US$8.6 million in Missouri BUILD and $14.7 million in Quality Jobs program incentives. The state's incentive package also includes $4.2 million in New Jobs Training funding, $300,000 in Customized Training funding and $412,500 in Employee Recruitment and Referral Savings funding.

Joe Dzaluk, vice president of global infrastructure and resource management, IBM Global Technology Services, says IBM's ramp-up at its other centers is on track, and the company should arrive at its target of 1,300 new hires in Dubuque by the end of 2010. "It was just the beginning of last year that we had an empty building," he says of the Iowa facility. Much the same could be said of the building now undergoing a transformation in Columbia, which had been sitting empty for some time, after uses by an automobile supplier and as a mixed-use facility.

Asked if the city was a shoo-in because of its previous runner-up status, or whether IBM wiped the slate clean for this project, Dzaluk says, "a little bit in between. During the first go-round, we were very impressed with Columbia and a few other cities. We had them in our minds as a competitive site. Having said that, we did wipe the slate clean when we started earlier this year."

An initial request for proposals went out to more than 25 cities in eight states. After evaluating criteria and making numerous site visits, says Dzaluk, Columbia was picked because of the availability of highly skilled and highly motivated work force; a sterling relationship between the public and private sectors in the community; and multiple economic factors such as building availability and housing.

As with the projects in Lansing and Dubuque, close scrutiny was given to university and college curricula in the Columbia area, recent IT graduation levels, local IT employment and unemployment, and related fields — the University of Missouri (known by most as "Mizzou," home of the Tigers) has a very large engineering school, including a significant number of engineering students with minors in IT, notes Dzaluk.

"Understanding the local labor force today, and what we think it will be like five and 10 years from now, is extremely important to us," he says. "The only way to understand it is to get into a very low level of detail. Dubuque and Columbia had done some very good data mining, and Columbia had a very good understanding of how many people are willing to move, or to change jobs."

The challenge is to analyze beyond the snapshot level, he says.

"People get preoccupied with what is available today," he says. "But if you think about the IT industry, and what people were working on five, 10 or 20 years ago, the skills you need today are very different. The snapshot is kind of important, but as we look for skills, we also look for qualities in people to ensure they can grow and develop. Graduates today, those skills are going to be perishable in the next five or six years."

In Dubuque, IBM plans to pay some $80 million in salaries over a 10-year lease. Asked if there was a similar projection for the 10-year lease in Columbia, Dzaluk demurs, but notes that over those 10 years IBM plans to invest "well over half a billion dollars in the local community" via salaries, facility improvements and IT. A fact sheet from the announcement says the average salary will be $55,000, which computes to approximately $44 million in annual payroll.

Surrounded by Crossover

The company held numerous meetings with administrators from area colleges such as Lincoln University, Columbia College, Moberly Area Community College and Linn State College, and led by Mizzou, with which IBM already had a relationship. The upshot will encompass more than just the new global delivery center. IBM will award to the University of Missouri a grant to enable researchers to collaborate on adapting cloud computing technologies for large-scale sharing.

"Cloud is clearly one of the strategic imperatives we have," says Dzaluk. "There is a lot of overlap between what the university is working on and what IBM is working on." There will also be opportunities to dovetail on some of the school's unique research programs, including genome sequencing and its large nuclear reactor for the production of medical isotopes. IBM's nanotech research will blend well with those efforts. In addition, Mizzou students will also be able to participate this fall in implementing sustainable design and landscape ideas at the new IBM site as part of capstone projects in the school of architecture.

The company will also work with the City of Columbia on some "smart city" initiatives. But as IBM evaluated the community and school systems to answer that all-important question, "Is it a place where people will want to stay?" all indications were that the city is plenty smart to begin with.

"We were very impressed," says Dzaluk. "The overall package from the community was very good. Not only the strong public-private partnership, but the city's focus on sustainability was consistent with other sites. What we saw that was very impressive personally to me was a strong sense of pride and community spirit — that, along with the quality work force, was a very good differentiator."

Mike Brooks, president, Regional Economic Development, Inc. (REDI) in Columbia since coming from the Indiana Health Industry Forum in summer 2009, says it was simply great teamwork: "We calculated there were 112 people who in one way or another touched on the project."

Of special note was Dave Griggs, REDI's chairman. "I've never had a volunteer who's been as unselfish with his time as Dave has been," says Brooks. "The company understood he was a volunteer, and he was with us as professional staff throughout this project. They saw that here is the volunteer chairman of this organization putting in almost as many hours [as staff]. It was pretty impressive."

Brooks says the community involvement has included nearly $9,000 worth of in-kind donated media exposure when IBM is ready to hire, training space from a local college branch and donated temporary office space from an office building owner.

Brooks knows town-gown dynamics, having run a research park at Utah State University and served for 14 years as the director of the economic development corporation in West Lafayette, Ind., home of Purdue University. He's impressed himself by the forward thinking of Mizzou leadership since the school explicitly made economic development part of its mission just a few short years ago.

"The interest I see expressed here is very strong, not unlike the opportunity I had in West Lafayette. In terms of commercialization of technology, obviously we're at a much earlier stage than in West Lafayette, but we're moving pretty rapidly."

He gives credit to Rob Duncan, vice chancellor for research, and to Steve Wyatt, the university's vice provost of economic development.

"It's dramatically beginning to change the culture, and complements what we already do," says Wyatt of the added mission. "We have a growing, outstanding research effort at the University of Missouri. We have a dynamic student body, at a little over 31,000 students, and have grown enrollment by over 30 percent, which is greater than anyone in the Big 12 or the Big 10."

Wyatt was involved in the effort in fall 2008, "Project Chip," that saw the final decision go Dubuque's way. This year's effort was similar, and similarly rapid, with the first request for information coming in January and the final lease signed in mid-May. He says the university's role is to not only offer its superior engineering students (he previously served as the engineering school's dean), but also to offer comprehensive support in the form of internships, continuing education for IBM employees, recruiting and research partnerships.

Cloud computing represents one of five areas the university is focusing on developing more fully: disruptive technologies. The other four are sustainable energy, new media, food for the future and "one health, one medicine," which seeks linkages between the university's strong veterinary and human health programs. Brooks says that type of focus has meant that REDI doesn't need to redo the university's efforts, which have helped the area recruit small companies as part of the Kansas City Area Development Council's animal health corridor, for instance, as well as speak to those who want proximity to the research reactor, and form early plans for a new small-business incubator in downtown Columbia.

"I spent 10 years running the chamber in Bloomington, Indiana, and I consider the two communities to be somewhat similar — based around limestone, close to a significant lake, a campus close to downtown," says Brooks. "You have a campus where students really like the community and would like to stay, given the right opportunity."

Use What's Already There

IBM's site selection team had an open mind about final location, but with a bias toward using an existing building.

"If there are empty buildings in the town, why build the building?" says Dzaluk, who leads the company's Big Green initiative. "And given the availability of acceptable existing structures, it made the decision pretty easy. We found several that met that need."

They almost didn't, however.

"We received an RFI on the 26th of January," says Brooks. "Among other things, the requirement was for a roughly 100,000-square-foot [9,290-sq.-m.] office space. We did not have a 100,000-square-foot office building. The schedule was to be in operation by the fourth quarter of this year. Even in the best case model, we did not see new construction as feasible. That left us with what kind of buildings we had in that 100,000-square-foot range."

Brooks knew from a project in West Lafayette converting industrial space to office for Sikorsky Helicopter that it could be done. The challenge was communicating to IBM how the older building on LeMone, "not terribly attractive," could become the most attractive choice in the end.

"When we drove the company to the building, we always made sure the door was open so they didn't see much of the outside, but got out of the bus on the inside," quips Brooks. Having a foundation, steelwork and strong electrical distribution system probably saved a few months on the schedule, he estimates. Architectural renderings showed how the reuse could unfold. And even though local incentives are limited in scope, Brooks went to Columbia Mayor Bob McDavid to try and secure a municipal commitment to purchase the building for about $3 million and lease it to IBM for $1 a year.

"The mayor was not willing to commit to that action, but said to put forth that proposal," he says. "I honestly believe if he had not done that, we would not have been in a position to compete for this project. That was a strong statement that, given the right opportunity, the community wants to be a significant player in attracting the right kinds of businesses."

Financing for the purchase was worked out among the LeMone Family Trust, the Columbia Area Jobs Foundation and a group of area banks that was willing to lend up to $10 million to the foundation for building refurbishment. Annual fixed rent and operations fees from IBM will total just over $1.9 million.

The company will aim for LEED-Silver certification, and will also work with the city to incorporate the new facility into Columbia's Sustainable City program, which includes building bike paths to connect the facility with downtown Columbia. In some cases, however, the community may learn from IBM, given its experience in managing workspace for some 400,000 people worldwide who sit at desks every day, including at other global delivery centers in such places as Johannesburg, Boulder, Buenos Aires and China, all designed to have the same look, feel and tools. Every ergonomic and environmental detail is pored over, says Dzaluk, noting a colleague's assertion that 62-watt bulbs will do where many assume 75 watts is the norm.

"You'd think it would be standard stuff, but it isn't," says Dzaluk, whether it's lighting, carpeting, roofing materials or the pitch of the roof. "The level of sophistication that goes into an office building design is mind-boggling to me."

But that doesn't mean speed will be sacrificed. The company plans to move in during the fourth quarter of 2010, hire 100 by the end of the year, and pursue an aggressive ramp to complete hiring the other 700 by the end of 2011.


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