Startup tech company will invest $15M to expand in Ann Arbor area
A Silicon Valley-based information technology services company plans to hire more than 1,000 employees at a new operation in the Ann Arbor region that - when fully staffed - would be the largest IT-related company in the area.
The Fremont, Calif.-basedÂ Systems In MotionÂ plans to set up an IT services “delivery center” in Pittsfield Township. The firm is a startup, but its leaders have experience in leading massive IT firms in India.
Ann Arbor beat out Austin, Texas, and Columbus, Ohio, to land the facility, which will employ services providers in infrastructure support, testing, network monitoring and software development. Local officials are billing the announcement as "in-shoring" of jobs - the reverse of off-shoring, or relocating to another country.
“It’s management of systems, not taking phone calls,” said chief marketing officer Debashish Sinha, who previously led marketing atÂ $1.8 billionÂ Indian IT services firm HCL Technologies. “It does require resources who are more skilled in technology in various new and legacy technologies.”
Systems in Motion, backed by $5 million in venture capital funding, plans to hire 1,085 workers within five years, according to the Michigan Economic Development Corp., which is providing a tax credit.
The company expects to invest $15 million in the expansion. Officials would not reveal the location of the company’s future office in Pittsfield Township.Â
The announcement marks the biggest economic
development victory for the region since General Electric announced in
June it would establish a $100 million engineering center in Van Buren Township.
The company’s decision to locate the IT services center in Michigan is a reflection of its confidence that the state’s 15.2 percent unemployment rate would produce plenty of applicants.
The firm also collaborated with local officials to secure $1.5 million in workforce development funding to train future workers at Eastern Michigan University. EMU and the Washtenaw County operation of Michigan Works! are collaborating to provide classes.
“It’s pretty well known that, over the last year or two, things aren’t working quite as well as everybody anticipated in India with offshoring these software development jobs,” said David Mielke, dean of EMU’s College of Business.
“It’s great to see that the jobs are coming back," he said. "It’s an innovative program that they can take good people and provide the training to get them up to speed to do the kind of software development that they need.”
Sinha acknowledged that India-based IT services providers would maintain a cost advantage over operations in the U.S.
“The service factory model that we’re building will make it such that we are at least cost comparable,” he said. “We might not be directly competitive but we will definitely be comparable.”
Systems in Motion is targeting a variety of sectors for its services, including health care, government, aerospace, energy and defense.
The firm’s chief executive, Neeraj Gupta, was previously an executive with a $700 million India-based IT services company, according to the company.
“The leadership of Systems In Motion has been in this business for well over 20 years,” Sinha said. “We’ve done this several times before. We’ve grown businesses from zero to a thousand people in two or three years. We’re very well-funded and our services are actually very in demand.”
Elizabeth Parkinson, director of marketing and public relations for Ann Arbor SPARK, said Systems In Motion recognized that it could quickly train and hire talented workers in the Ann Arbor region.
“What we’re hearing from Systems In Motion is that it’s the level and quality of talent and it’s the superior combination of available educational institutions,” Parkinson said. “They know that there’s good quality folks and students that are going to be looking for jobs. (And) they are very well aware of the lower cost of living in a state like Michigan compared to a state like California or Texas.”
Mielke said Michigan has a chance to help create a new business model for IT services that makes financial sense in the U.S.
“I would like to be on the forefront of recapturing the markets that we lost,” Mielke said. “This is a demonstration that, yes, Michigan can be competitive.”