How Outsourcing Helped “Save” Detroit | Article

Downtown DetroitIn polarized, political America, many people believe outsourcing and offshoring are a big reason why unemployment remains stubbornly high. But the truth is outsourcing is also helping America survive and thrive.

Did you know one of America’s fastest growing companies is an outsourcing service provider in metro Detroit? Secure-24 Inc., a provider of managed IT services, applications hosting and enterprise cloud computing, enjoyed a fivefold increase in business demand and increased employee head count by 61 percent in the last 12 months, according to Joe Szmadzinski, Chief Strategy Officer.

“Imported from Detroit”

Detroit, once the proud home of American auto manufacturers, has endured decades of decline and neglect. Half of its metro population left. “Rust belt America has something to prove,” adds Szmandzinksi.  “We have to work harder because we have a ‘rising out of the ashes’ approach,” he says.

“Detroit has been used as the poster child for what can go wrong,” Elliott Wilhelm, curator of film and video at the Detroit Institute of Art, told the New York Times. “But Detroit is rapidly becoming a poster child for finding creative solutions.”

Secure-24 Inc. exemplifies that spirit. The German co-founders, Volker Straub and Matthias Horch, relocated from Europe to Detroit in 2001 to start a company based on their extensive SAP hosting and managed services skills. They liked the climate: no hurricanes or monsoons. In fact, Michigan is one of only two states that have had no federally declared natural disasters in over 30 years, making it one of the best places for data centers.“

Why Detroit? Szmadzinski says the company found a niche: local data centers that housed complex IT systems and sensitive data that couldn’t be sent offshore for security, compliance and performance reasons. Detroit was the perfect place, he adds, because the region had built all the necessary technology infrastructure already. Southeast Michigan is a major hub for internet carriers with an extensive network of high-speed fiber needed to support enterprise IT.

In addition, the city was home to a wealth of highly trained IT engineers, thanks in part to the auto industry. In the 1990s GM purchased EDS, which had a large presence in Detroit. “EDS created a deep pool of tech talent that knew how to run data centers,” he explains. “A lot of those people suddenly became available when the downturn in the auto industry happened.” So when Secure-24 was looking for talent, it was the perfect match of talent and expertise. The area also boasts some of the top college programs in the nation.

Szmadzinski also cites Detroit’s culture as a key to helping Secure-24 grow. Employees bring a strong work ethic combined with a great customer focus on providing world-class support.

“That’s part of Detroit’s DNA,” he says. He calls his engineers “blue collar technologists” for their passion and willingness to roll up their sleeves and find the right solution.

The company’s growth path

The company’s first buyers were mid-sized businesses that used SAP as their ERP platform.

The fledging company received a business break when SAP left the hosting space. Its hosting and cloud services for SAP software lead to recognition as the only U.S. SAP Hosting Partner named Pinnacle Award finalist in 2010.

Today hosting SAP applications for customers comprises about 30 percent of its business, according to Szmadzinski. Twenty-five percent of its clients use Oracle applications, especially Hyperion, Oracle’s consolidated financial reporting system. The remaining work consists of porting over a company’s entire suite of IT applications and managing them out of Secure-24 data centers.

Currently the company is seeing an expansion in demand from companies in verticals that have complex regulatory or security mandates, like healthcare, life sciences or banking. The employees believe they have to live up to their name: Secure-24. “We understand we house other people’s data. We know they can’t afford to go down. Down time is not a word in our vernacular,” says Szmadzinski.

The company maintains an open-door policy, where employees are always welcome to meet with executives and bring new suggestions and input.

The result: The company has enjoyed 25-30 percent growth year after year, until last year when the rate topped 40 percent. “We are staying in our stack and moving up the stack,” says Szmadzinski.

Currently the company has 300 employees and anticipates hiring another 250 by 2015. It moved into a new corporate headquarters in April.

Buyers hail from Detroit

While more than half of Secure-24’s customers operate globally, there is still a percentage of the company’s customer roll that have their roots in Detroit. One of them is International Automotive Components, a global supplier of automotive parts and systems headquartered in Detroit. The company, a spin-off from Lear, hired Secure-24 to build a greenfield environment and handle its application management, monitoring and maintenance. “Since we were a spin-off, we had no IT infrastructure,” says Les Tolley, Director of IT. “We had no intention of building a data center, so we decided to outsource.”

The fact that the outsourcer was local played a large role in the selection process.

Tolley says the idea of outsourcing was “pretty scary because Lear ran a great data center.” He says he knew he selected the right company “when we brought up some big applications and we didn’t get any phone calls.” This was crucial because Tolley says “our production line can’t be down for even five minutes.”

But that’s exactly what Secure-24 does, keeping its customers’ apps running, imported from Detroit.

Here’s another customer’s story.

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