Riegel: Why Baton Rouge got trumped on DXC deal
It is customary for the superlatives to fly on the day a major economic development deal is unveiled. So it was, perhaps, not surprising that Gov. John Bel Edwards described the recent announcement that global tech giant DXC Technology is opening a major processing facility in downtown New Orleans as “one of the most significant economic development deals in the state’s history.”
But the governor wasn’t exaggerating, at least not much. The DXC deal is huge, bringing a nearly $25 billion company with 6,000 clients in 70 countries to the heart of the Crescent City, where it promises to create 2,000 IT jobs over the next seven years.
Even if the deal never lives up to all its hype—and these deals seldom do—DXC is a win not only for New Orleans but for Louisiana in two key respects. First, the company will add clout to the state’s tech sector, which economic development officials have been strategically cultivating over the past decade.
Second, the deal will bring $25 million in state investment to computer science and STEM-related programs at LSU, UNO, Southeastern and Delgado. The dollars will go directly to those institutions to hire more faculty and expand their curricula, and the increased number of graduates they produce will not only fill jobs at DXC in New Orleans but at other area tech firms. Some young hotshots may even strike out on their own, helping to grow a true tech ecosystem in the southeast Louisiana Super Region—which has been the goal all along.
That Louisiana, which so often loses out on big deals, landed this one can be chalked up to several factors, the most important of which is the area’s low cost of doing business. Earlier this year, DXC CEO Michael Lawrie said his company planned to streamline operations during its first year to save some $100 million. Part of that effort, he said, would “most likely” include adding an “in-country, low-cost” delivery center. That center, as it has turned out, is the one now planned for New Orleans, which, along with Baton Rouge, is among the least expensive mid-sized markets in the U.S.
That doesn’t diminish the importance of the deal. But it does help explain why DXC was looking to Louisiana rather than to the usual tech hubs like Austin or Silicon Valley.
A generous incentive package totaling as much as $118 million also played a major role in landing the deal—especially the $25 million investment in higher education tech training programs—as did a polished sell from key players around the region.
“When we asked them what cinched the deal they said the level of team work, cooperation, unanimity, trust and responsiveness they saw in the Louisiana,” says GNO Inc.’s Michael Hecht.
Though the deal was a victory for the entire Louisiana “team,” it was somewhat bittersweet for Baton Rouge, which went up against New Orleans for the deal. Both cities were on a list of 30 mid-sized markets that DXC evaluated earlier this year, though Baton Rouge didn’t make the short lists of first 10, then six, and ultimately three finalists.
“I’m always going to want Baton Rouge to come out ahead. But we have to think about this as an opportunity. It is wrong to assume because one wins the other loses.”
—Adam Knapp, President and CEO, Baton Rouge Area Chamber
What made the difference between the two cities?
Unsurprisingly, that’s not the kind of question economic development folks like to discuss and DXC declines to say.
But there are at least a few factors that can be identified. One, according to LED Secretary Don Pearson, is the presence of IBM in downtown Baton Rouge. The company’s client services center competes in something of the same sphere that DXC’s Digital Transformation Center will, if not for customers than certainly for employees and there just aren’t that many trained workers yet to go around.
Pierson also points out that the DXC project “morphed” over the 18 months that the deal was in the works. Initial job projections were far less than 2,000 but as it grew it became apparent that it was simply too big for Baton Rouge.
“When it was a lower number, Baton Rouge made a very compelling case,” he says. “But as the number became more challenging I think they were more comfortable with New Orleans.”
Then there was the intangible but no less important “coolness” factor. Like it or not, New Orleans has a certain vibe that attracts millennials faster than a light does moths. Baton Rougeans may venture down to the Crescent City and see litter, homelessness and French Quarter hustlers. Young professionals go there and see funky neighborhoods, trendy restaurants and a network of bike lanes utilized 24/7 by hipsters, who buy their produce at urban farms and dye their hair a metallic shade of lavender.
Baton Rouge just cannot compete with that.
No one in the economic development community will say this, mind you. But sources who met in Baton Rouge with DXC representatives earlier this year say that message was communicated to them, loud and clear.
Baton Rouge Area Chamber President and CEO Adam Knapp says he is proud of the competitive package BRAC put together, and that the important takeaway is that the southeast Louisiana Super Region was the big winner.
“I’m always going to want Baton Rouge to come out ahead,” he says. “But we have to think about this as an opportunity. It is wrong to assume because one wins the other loses.”
No question. But if Baton Rouge is going to compete for a deal against a fellow market in the same Super Region, it’s important to understand the issues that do work against it so it can address them for the next opportunity.