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IBM to establish service delivery center in Columbia

Monday, May 17, 2010 | 6:52 p.m. CDT; updated 9:35 p.m. CDT, Monday, May 17, 2010
Gov. Jay Nixon welcomes Tim Shaughnessy, senior vice president for IBM Global Technology Services, to Columbia on Monday to introduce the opening of an IBM service center in Columbia. Dave Griggs, left, chairman of REDI's board of directors, gave the opening statement.

COLUMBIA — Information technology company IBM will open a new service delivery center that will create 800 new jobs in Columbia and an annual payroll of $44 million.

The new facility, which will move into a vacant building at 2810 LeMone Industrial Blvd., is expected to be operational by November; hiring of new employees will start this summer.

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IBM service delivery centers offer information technology support services and business process outsourcing services to its clients in the United States and around the world.

“We anticipate creation of up to 800 jobs by 2012,” said Timothy Shaughnessy, senior vice president for IBM’s Global Technology Services, during the announcement outside City Hall on Monday afternoon.

Speaking at the event, Missouri Gov. Jay Nixon, Mayor Bob McDavid and Shaughnessy of IBM all said that attractive incentives put together by promoters of the initiative, dubbed “Project Tiger,” made IBM’s location here possible.

Dozens of people and institutions — including Regional Economic Development Inc., the city of Columbia, Boone County, MU, Columbia College and others — have been involved since January in bidding for the project to come to Columbia.

It will be the global tech company’s third service center to open in the U.S. in the past 18 months; the others are in Lansing, Mich., and Dubuque, Iowa. The new center also will rank among the biggest private sector employers in Boone County.

Economic impact unprecedented

McDavid called IBM’s decision to come here “the second most important public-private partnership in the history of Columbia,” exceeded only by the founding of MU.

He said IBM is expected to benefit public schools and government by paying millions in taxes. It also is expected to stir the real estate market by creating new demand for at least 300 houses for company employees.

The annual average wage of all the new jobs will be $55,000, according to a statement issued by Regional Economic Development Inc., a public-private partnership that promotes business development in Boone County.

REDI President Mike Brooks said the impact eventually will extend beyond IBM.

“The secondary jobs created in the community from this project could generate upwards of $70 million (per year) in payroll dollars,” Brooks said, adding that IBM will count among the top 10 employers in the region and that the deal will rank among the biggest new projects of the year nationally.

Boone County Southern District Commissioner Karen Miller said IBM’s location here will be a huge boost to the regional economy.

“I believe people felt that the economy was starting to turn around, but this is that shot in the arm that gives us all some confidence that our little piece of the world will be better off,” Miller said Monday afternoon. “It will have a great impact on our average median wage in the community, and I really believe that it’s kinda like a rising tide floats all boats. I believe that this is going to help underpaid people, and it will help people who don’t have jobs be able to find jobs.”

Jerry Wade, a candidate for mayor this spring who was Columbia’s Fourth Ward councilman when the project was negotiated, said the impact of IBM and of smaller entrepreneurial start-ups over time will be monumental.

“What that clearly says is the transformation of the Columbia economy is underway, and we have the potential of becoming a national, if not global, center of high-tech activity,” Wade said. “Now, that potential is there. That’s what this does. This gets us that kind of potential identification and has the potential for that kind of momentum. It clearly says we’re the place to be."

Shaughnessy said IBM chose Columbia from among “several dozen” competing cities. He refused to disclose the other cities that were in the running.

Shaughnessy cited Columbia’s “strong sense of public-private partnership, a competitive business model and availability of a talented work force” as the three factors that attracted the global information technology giant to mid-Missouri.

He added that IBM will work with institutions of higher learning in Columbia to recruit and train professionals for the high-tech jobs. The company also plans to create partnerships with learning institutions to design courses that will prepare students to work at IBM.

“We expect that 80 percent of the total work force will come from the university and the local community,” Shaughnessy said.

The new IBM service center will be one of an estimated 80 such centers in 20 countries around the world, including emerging economies China and India.

The Columbia center, however, will primarily be expected to support IBM’s strategic outsourcing clients based in the U.S., according to a company statement.

IBM also intends to renovate the service center into a green building that will match the goals of the city’s Sustainable City program. The company will plant trees and add bike paths connecting with downtown.

Shaughnessy would not give an estimate of the budget IBM has set aside for initial investment in the project.

Former Columbia Mayor Darwin Hindman, who was in office during negotiations for the project, recounted the secretive process of wooing IBM to Columbia that involved signing strict nondisclosure agreements.

“The negotiations took time and were complex,” Hindman said. “They were, of necessity, done in confidentiality.”

Historic incentives

The project brings an unprecedented set of incentives from state and local government. The state government offered IBM more than $28 million in tax credit incentives that include the Missouri BUILD program ($8.6 million), the Missouri Quality Jobs program ($14.7 million) and the New Jobs Training program ($4.2 million), among others.

Another key strategy is the use of Chapter 100 bonds. Miller said IBM plans to spend $3.5 million on furnishings and fixtures. Those will be exempt from sales tax and will be exempt from personal property tax for seven years. IBM also plans to spend $1.5 million on computers, which will be off the property tax rolls for five years.

Miller said that even with those abatements, the IBM plant will bring an additional $21,566 in annual property revenue to the county.

The city of Columbia will buy the building for $3.2 million. The city then will lease the building to IBM for $1 per year for 10 years, with the option of extending the lease at the same price for five years.

McDavid said the City Council would conduct a first reading of an ordinance appropriating money for the building on Monday night.

Nixon, who recently has waged a campaign to reduce the number of state tax credits as a way of shoring up tax revenue that has been declining during the recession, said the IBM center is a special project whose long-term returns would exceed the incentives given.

“I have always argued that the return on the tax credits is what matters, and in this case, IBM is likely to create jobs for decades to come,” Nixon said.

Asked whether she foresees more use of incentives in the future, Miller said “absolutely.”

“I think that this is the way of the world, and especially when you have businesses that have to compete internally with each other to expand. … When you have that kind of competition going on internally, you have to expect that it’s going on nationwide.”

Miller also cited the council’s approval of the McGuire Boulevard Bridge, which will provide a northern entrance and exit off LeMone Industrial Boulevard. As it stands, the boulevard is a lengthy cul-de-sac. IBM would never have considered that property had the new bridge been rejected.

“I think we owe a lot to former council people and present council people who took a lot of heat for putting that bridge in,” Miller said.

MU, colleges ready to roll

Higher education officials promised that they had plenty of information technology training firepower to boost IBM and could develop more.

They said IBM is interested in several levels of training, from two- and four-year degrees for potential hires to specialized certificate programs for its employees.

A mix of higher education representatives gave at least three presentations to IBM identifying what their programs could contribute.

“Whenever you’re talking with a company as prominent as IBM, you pull out all your guns,” said Vicki Schwinke, dean of Academic and Student Affairs at Linn State Technical College in Jefferson City.

Dale Musser, director of the information technology program at MU’s College of Engineering, said IBM’s arrival could help change a curriculum that’s already being revised.

Musser wants to better connect his students’ learning with real-life experience, something IBM could provide.

At the presentations, he said, “I think that everybody that came together were telling them the same story: We’re willing to work with them to fit their needs.

“That’s the way it’s working these days.”

Educators interviewed from Linn State, Moberly Area Community College and MU said that they and other colleges offered: 

  • Revisions to current curricula to accommodate IBM’s needs;
  • New, specialized classes or degree programs;
  •  Internships that connect more closely — and over a longer period — to classwork; and
  •  Collaboration among mid-Missouri schools to make it all happen.

Schwinke gave this example:

At one point, she said, rural electrical co-ops were forced to hire line workers from out of state. The college worked with the co-ops to create an associate of applied science degree to train electric line workers.

Linn State, Moberly Area Community College and MU Extension already have a partnership at Advanced Technology Center in Mexico.

That kind of collaboration will help educators ramp up for the increased demand, said Evelyn Jorgenson, president of Moberly Area Community College.

IBM officials haven’t made specific requests yet, she said, so it’s too early to know whether changes would be made in the curriculum.

Boost should resonate

Others who spoke about the news on Monday had nothing but good things to say about the announcement.

“This is definitely a good time for this kind of announcement,” said Bill Harper, a broker sales agent for Century 21 who also owns Ashland Industrial Park adjacent to Columbia Regional Airport. He said real estate should rebound and noted that the industrial park is in a prime location between Columbia and Jefferson City.

“We’re looking forward to seeing business come to town because we’ve invested in the future of business in the city,” he said.

Todd Culley, CEO of Boone Electric Cooperative and a member of the REDI board of directors, said the impact of IBM “is going to be tremendous. The name recognition that IBM brings will position us for growth opportunities in the future.”

Connie Leipard works with Quality Drywall Construction, which worked on design planning for the IBM plant.

“These top-paying jobs are going to be great for Mizzou grads coming out of college,” Leipard said. “Mizzou’s engineering and IT programming were a huge part of why IBM chose to come here.”

Assistant City Manager Tony St. Romaine, who was closely involved in negotiations, said it was more than incentives and the prospect of an educated work force that lured IBM to town.

“The other incentive for choosing Columbia that we heard loud and clear (from IBM) was because they were attracted to the community,” he said. “The culture, the arts, parks and trails can be an important piece of economic development. They attract employers like that because they want a good place for their employees to live.”

Kristina Casagrand, Tom Warhover and Scott Swafford of the Missourian staff contributed to this report.

 

 

 

 

 


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