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Sunday, 16 April 2017 12:56

Data enterprise: West Michigan grows as hub for call centers, data centers

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As the world grows more connected, experts believe that so too will data centers and call centers. The West Michigan region in recent years has become somewhat of a hub for both industries because of the area’s status as an affordable option compared to bigger metro areas like Chicago and Detroit. As the world grows more connected, experts believe that so too will data centers and call centers. The West Michigan region in recent years has become somewhat of a hub for both industries because of the area’s status as an affordable option compared to bigger metro areas like Chicago and Detroit. Courtesy Photo

Driven by relatively affordable real estate and a diverse workforce, the West Michigan region has become a growing hub for call centers, administrative back offices and — to a lesser extent — data centers. 

Workers in the area’s call center industry now number into the thousands. By contrast, employment in the data center sector is somewhat smaller, but it’s an increasingly important part of the region’s economy, according to data compiled by The Right Place Inc., a Grand Rapids-based economic development organization.

According to industry experts, the reasons for this emerging trend are many. But in particular, they cite the increasing interconnectedness between call centers and data centers, even though the two address vastly different business needs. 

“Connectivity is the word I would use,” said Dean Whittaker, founder and president of Whittaker Associates Inc., a Holland-based economic development consulting firm. “I think what they both bring and need is connectivity. If you’re looking at a call center, it needs fiberoptics. Data centers need fiberoptics. What we’re building is a fiber optic communication infrastructure.”

Whittaker told MiBiz that, for a number of years, he’s been exploring the general economic impact that call centers and data centers have on the region. Ultimately, he concedes that call center or customer service jobs may not be the most glamorous positions out there, particularly when compared with lucrative high-tech jobs offered by the data center industry. However, data centers employ far fewer people. 

As the tech sector constantly evolves, data centers have become an increasingly important part of the industry, he said. 

“In terms of jobs, they provide dramatically different skills, on both ends,” Whittaker said. “We have some high-end, high-paying data center positions that will manage the data center. And we have call centers that provide jobs for another segment of the economy. They both serve a purpose. They provide work for people on both ends of the economic ladder.”

A MATTER OF LOCATION

In recent years, the Grand Rapids-Wyoming Metropolitan Statistical Area (MSA) and areas along the lakeshore and in Kalamazoo have been successful in attracting customer service representative jobs, including call centers, according to data from the Bureau of Labor Statistics (BLS). 

The BLS statistics show that each of the MSAs in West Michigan has a slightly above-average concentration of jobs in the sector. 

Economic development and commercial real estate sources say that concentration has many explanations, including that large employers often shift many of their administrative and back-office functions to less costly regions, such as West Michigan. 

“Wacker Drive is a bit more expensive than Chicago Drive (in West Michigan),” said Tim Mroz, vice president of marketing and communications at The Right Place, referring to the downtown Chicago riverfront area that’s home to multiple large law firms and financial institutions. 

Add in a large college student population and the variety of languages spoken here, and West Michigan makes for an ideal location for that type of work, Mroz said. 

Whittaker of Whittaker Associates agreed with that assessment. 

“Right now, the back office operations of companies are being relocated out of major metro areas to lower-cost real estate locations and lower-cost wages,” Whittaker said. “Buffalo, New York is an outsource center for New York City. So major banks have their back offices located in Buffalo because it’s a lower-cost location both real estate and wage wise.” 

“Grand Rapids is too,” he added. “We’re a lower-cost location than Chicago or New York. You take your back office operations, move them out of the high-cost cities and put them in lower cost cities.”

However, West Michigan’s cost advantages rank among many factors that have led the industry to the region, according to sources who have worked with call centers for years. 

“If it’s just about cost, Schaumburg, Illinois is cheaper than Grand Rapids,” said Don Shoemaker, principal with Grand Rapids and Oak Brook, Ill.-based Franklin Partners LLC, a commercial real estate investment and property management firm. Schaumburg is a suburban community northwest of Chicago. 

“They like the workforce here,” he said of the West Michigan area.

In recent years, Franklin Partners has attracted users like Booking.com and Battle Creek-based Kellogg Co. to buildings the firm owns or has owned in southern Kent County. 

Statistics from The Right Place show that the two companies employ at least 880 people at their Grand Rapids-area facilities. 

Ultimately, Shoemaker said call center users are drawn to large blocks of space that can accommodate a high density of people. But to compensate for the high-density work environment, the companies typically offer a range of amenities like private areas and workout facilities, he said.

Mroz said the organization would welcome other large call center users to the area, although they are not a focus area for The Right Place.

“I think call centers, like every industry sector, play a role in West Michigan’s economic prosperity,” he said. “But they’re certainly not a magic bullet. One of the opportunities that call centers bring are entry-level office positions for individuals. Depending on the size of the call center, there are opportunities for advancement, becoming platform experts for particular clients.”

HIGH TECH NICHE

While call centers may play to the lower end of the wage spectrum, data centers employ highly skilled, handsomely compensated workers and offer different opportunities for the region, sources said. 

That’s particularly true with the emergence of Switch Ltd., the Las Vegas-based data center operator currently building what’s said to be the largest data center east of the Mississippi River at the former Steelcase Pyramid site in Gaines Township. 

A report this month from the Computing Technology Industry Association (CompTIA) found that Michigan’s technology industry grew by an estimated 5.1 percent in 2016, adding about 10,700 new jobs with an average salary of $89,200, or 77 percent higher than the state’s average wage. 

While the region has long been home to a number of other data centers — both vertically owned by local companies and co-located facilities such as the Pyramid site — a company like Switch locating here offers new opportunities, according to Mroz at The Right Place. 

“Eventually, the long term play on data centers is the supplemental opportunities and businesses that grow out of that,” Mroz said. “Other business services crop up in support of those large data centers.” 

Indeed, Whittaker with Whittaker Associates says that the presence of Switch should enable just that scenario. 

“Switch’s location expands our broadband importance on the planet,” Whittaker said. “Now we’ll have multiple feeds from fiberoptic companies providing services for that data center. That will put this region in a great position relative to broadband services, which I’m really excited about. I think connectivity is what will drive our economy forward. The connectivity it attracts, (it’s greater) than the facility itself.” 

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