Utility hires outsourcer -- but keeps IT staff

In Michigan, there's a demand for tech talent but a net migration out

Consumers Energy, a large utility in Michigan, has hired an offshore outsourcing firm to take over some of its IT operations. But instead of cutting its internal IT employees, it is retraining them for new types of work.

The utility, which supplies natural gas and electric power to more than 6 million in the state, plans to enable employees and customers to access "any content, from any device, anywhere, anytime," said Vice President and CIO Mamatha Chamarthi.

Variations of the Consumers Energy story are being played out throughout Michigan. The state is seeing new IT opportunities, but it is also experiencing a net loss in STEM (science, technology, engineering and mathematics) degree-holders.

Consumers Energy is shifting the application and maintenance support of many of its applications to outsourcing firm, HCL America, a subsidiary of an India-based firm HCL Technologies.

HCL announced on Friday a plan to open a development center in Jackson, Michigan in the next three to four months with about 100 employees, increasing to 500 in the next few years. Consumers Energy is the anchor client.

HCL is also being tasked to help train Consumer Energy's IT workers to develop mobile applications development, new SAP capabilities and other applications to meet the company's access goals.

The utility's internal IT employees will be shifted to projects that more directly impact the bottom line, said Chamarthi. "They will be doing much higher value work," she said.

Chamarthi says the demands on her IT organization are increasing, as is the utility's investment in IT. It is one of the reasons they hired an outsourcer. But in discussing this decision, Chamarthi also pointed to problems in state's IT labor pool, namely a brain drain.

Last summer, the utility had 40 computer science interns, and "when we asked how many of them would stay back in Michigan, only three raised their hands," Chamarthi said.

Michigan is experiencing a net loss of people with STEM degrees, but the show of hands by the interns doesn't tell the entire story. Between 2009 and 2010, Michigan lost an estimated 18,737 people with STEM degrees, while gaining 16,281 from other states and other countries, according to data compiled by Ken Darga, Michigan's state demographer.

While that points to a net loss, the state has done better than most in retaining its STEM degree holders; 38 states and the District of Columbia lost a higher percentage of their STEM population than Michigan.

The problem for Michigan is increasing the number of people willing to move to the state.

Detroit-based Quicken Loans has about 300 IT openings in the state, and it recently held a networking event last week in Palo Alto, Calif., to try to encourage people with Michigan ties to consider returning to the state.

"The demand is definitely greater than a lot of folks realize," said Michelle Salvatore, director of recruiting at Quicken. Company recruiters talked to about 100 people at the event, and the company plans to interview about 15 to 20 of them.

"One of our major goals is to show them Detroit, and show them that it is a cool, hip place be," Salvatore said.

Quicken is looking for a range of skills: engineers, business analysts, DBA, Salesforce.com experts, .Net developers and "anyone in the BI world," said Salvatore. The company did $30 billion in retail home loan volume last year.

HCL, Quicken and other businesses also recruit from local universities. The University of Michigan is graduating about 250 students in computer science and electrical engineering, and of those graduates one in five will stay in Michigan, with an equal percentage going to California and Washington state, said Marios Papaefthymiou, a professor of electrical engineering and computer science and chair of Computer Science and Engineering department at the university.

The number of students who are now in the university program is up about 40% from three years ago, based on the number of students they teach in their courses, said Papaefthymiou.

The main reason why enrollments are increasing, he said, is because "computing is permeating the entire economy." More than half the school's graduates go to non-IT firms, such as banks, pharmaceutical, chemical and aerospace. "Everyone needs people who understand computing."

To retain, as well as to bring, technical talent to Michigan, a Silicon Valley-type culture in Michigan will be needed, Chamarthi said. Some of that will be accomplished by making the IT goals challenging, she said.

By the end of this year, Consumers Energy hopes to have an employee portal that will make anything an employee needs quickly available on any device. It is developing new tools for its field workers, geographically enabled, with real-time information. It's already started providing customers with mobile apps and plans to expand those capabilities.

HCL will be hiring for its development center. It employs about 8,000 workers in the U.S. The company doesn't break out the overall number on work visas versus workers hired locally, except for its development centers.

It has established development centers in Seattle, Cary, N.C., and Rochester, N.Y., which in total employ about 1,000 people. About 80% of the workers at the development centers are local hires, with the remaining being on work visas, said Rajeev Sawhney, corporate VP for utilities at HCL.

In 2001, Dave Phillips was one of the people who co-founded Detroitnet.org, a networking group for IT professionals. The group doesn't have sponsors or impose a cover charge, and is focused on nothing more than networking. It had as many as 800 attend its recent "Pink Slip Party," which connects recruiters and IT professionals.

"There is a lot of competition for talent," said Dave Phillips, one of the founders of Detroitnet.org. He is a systems architect at a financial services firm.

Detroitnet's Linkedin site has about 3,500 members, and Phillips says he is starting to see regular queries from former Michigan residents about job prospects back home. The effort "is all focused on helping things get better here," he said.

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed. His e-mail address is pthibodeau@computerworld.com.

See more by Patrick Thibodeau on Computerworld.com.

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