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Advanced ICT: How Important Is It in the Site Decision?

Data and call center operators are savvy about information and communication technology, but manufacturers should also make it a priority.

Apr/May 10
It's not at the top of the list, and few manufacturers will cite it as the primary factor in choosing a site. But Area Development's 2009 Corporate Survey showed that the availability of information and communication technology (ICT) services is becoming an important consideration among corporate decision-makers. Survey respondents naming ICT as a selection factor rose more than 27 percent compared to 2009.

That doesn't mean ICT is about to topple cost, location, or incentives at the top of the list. But for certain manufacturers operating particular systems, ICT can serve as a pivotal tie-breaker.



Beyond Basic Cable
Basic communication infrastructure is crucial for manufacturers, according to Lakeland, Florida-based real estate broker David Bunch, but more sophisticated external connections remain a priority for call centers and similar operations.

"They're looking at computer-operated equipment and machinery internally, but it's not usually that critical that they be outside-connected," Bunch said. "Whereas your fulfillment-like call centers are certainly looking at state-of-the-art, highest and best."

One reason ICT has not made a difference across diverse industries' site decisions is that basic, readily available infrastructure fulfills most manufacturers' ICT needs. A mobile phone only requires a nearby cell tower. Likewise, everyone needs a high-speed Internet connection, which the local cable company easily supplies.

And while T1 fiber optic lines and other advanced infrastructure can help run specific, sophisticated operations, companies were even less likely to cite these as important factors in Area Development's 2008 Corporate Survey when the question focused on specialized infrastructure instead of general ICT.

Even so, ICT is likely growing in importance as manufacturers become more high-tech, said George Bowles, a broker with Rochester, New York-based Bowles & Bowles. And he doesn't think many businesses will have trouble finding it.

"Most landlords I work with have anticipated current technical needs and have incorporated necessary facilities to meet most tenant's needs," Bowles said. "If more advanced specs are expressed as a need, in this economic climate with limited demand, landlords will jump through hoops to meet any reasonable demand."

Municipalities Invest in ICT
Indeed, it may be that public ICT infrastructure is ahead of manufacturers' needs. For instance, Kansas has aggressively laid the groundwork for meeting both present and future needs, said Mike McGrew, chairman and CEO of McGrew Real Estate in Lawrence. Halfway between Topeka and Kansas City, Lawrence is the home of the University of Kansas. The city is connected to institutions and organizations that have the interest and capacity to wire it for current and future needs. Some day, manufacturers might come close to tapping the capacity it is installing.

"Everyone wants the ability to go broadband and not have problems with bandwidth," McGrew said. "Bandwidth is expanding so much at the same time. I had a friend who used to work for a fiber company in the state of Kansas who said, `We are doubling the capacity over the one fiber we're using, over the 100 we have in the ground, so we can swallow anything someone wants to put on us.'" Some communities that have invested in ICT are starting to see manufacturing results, although those facilities are not always producing tangible parts.

The defense contractor Northrop Grumman Corporation recently sought a site for a 130,000-square-foot data center, and needed to connect via high-speed cable to its Virginia facilities in Richmond and Charlottesville. The corporation decided on a facility in Lebanon, Virginia that offered a custom-designed infrastructure that could provide one-gigabyte-per-second Ethernet transport to switched networks in Richmond and Charlottesville. The Lebanon facility now houses the Virginia Information Technologies Agency (VITA) and Northrop Grumman's internal IT operations.

That's the sort of big hit Salisbury, North Carolina sought by developing an extensive fiber-optic cable system. The community filled the gap left by private Internet and cable companies that found parts of the community too expensive to reach. Unfortunately for Salisbury, those areas include major industrials areas and a significant chunk of its downtown.

"One of the trends these days is that it's not about site selection, it's about site elimination," said Salisbury assistant to the city manager Doug Paris. "If you don't have the things that are on that list that are important to companies, they're not going to look at you. For us, we have to have this. It's vital. If we don't, they're going to move on and we're going to get marked off their list and go to another community that does have it."

The city is currently establishing a municipal department to provide broadband services known as Fibrant. The need for the service, Paris said, was demonstrated in a survey of businesses in which many indicated their desire for access to ICT infrastructure. The survey did not, however, "drill down far enough" to determine how the companies would use ICT to bolster their operations.

Pull on Manufacturing
Some uses are obvious. Data and call centers need to be wired to the hilt, and the availability of such infrastructure helped Lakeland, Florida land two major call center operations run by Affinitas and Vangent. The latter brought 1,500 job opportunities to the community.

But the communities that invest in ICT infrastructure usually hope to add new manufacturing facilities. The economic development community says manufacturing operations bring more value to the community due to tax base and overall wealth expansion that data or call centers. A few communities have struck gold with manufacturing, including:

• A new Louisville Slugger facility in Mason County, Washington

• A new Colgate-Palmolive facility in Morristown, Tennessee

• A series of metal fabrication companies in Independence, Oregon

• The expansion of a Cooper Tire facility in Anderson, Indiana

But even among the success stories the Fiber to the Home Council has touted, the majority are call centers, data centers, or other operations that - while undeniably high-tech - are not major manufacturing.

Jody Wigington, general manager for Morristown, Tennessee's city-owned utility, said other factors contributed to Colgate-Palmolive's decision.

"Telecom costs relative to infrastructure like electric rates, sewer rates, and tax incentives, from a dollar standpoint, don't compare," Wigington said. "The bigger companies can probably just pay Bell South to hook them up with whatever they want."

The city provides broadband services to businesses, according to Wigington, and its four largest customers are all manufacturers. But he still sees the service as just another item on the checklist than a decision-maker.

McGrew, who serves on the Lawrence, Kansas economic development board, said that is consistent with what he experiences on the ground. Manufacturers assessing a potential site still ask mostly the same questions they did 20 years ago.

"It's [ICT] in the laundry list of things they want to talk about," McGrew said. "But when a new company's coming to town, the first thing is, `What kind of incentives do you have for us? Do you have an existing facility? And if you don't, what are you going to pay us to come?'"

The companies will eventually recognize ICT, but it's low on the list.

"If it's one of these high-tech type things, they start talking about the broadband capacity and all that, but they really want to know is whether we have any tax incentives," McGrew said.

Operational Improvements
While manufacturers are not naming ICT as a top priority, many municipal officials say they soon will. They cite their own experiences as with high-speed broadband as evidence. Municipalities that installed their own systems consistently experienced operational improvements that would apply to manufacturers' needs, according to the Fiber to the Home Council. These included:

• Systems to monitor remote inventories more efficiently

• Systems to reduce physical transport costs

• Automated meter reading

• Remote turn-on or turn-off of utilities for non-payment issues

And even if ICT becomes a necessary but insufficient site factor, most people recognize that it can make or break decisions that ultimately create thousands of jobs and millions in tax base.

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