Crain's Detroit Business - July 2009 Holiday Edition - (Page 10)

Page 10 CRAIN’S DETROIT BUSINESS Holiday Edition Federal money to overhaul unemployment insurance computers 3-5 year project could cost up to $90 million BY AMY LANE CAPITOL CORRESPONDENT LANSING — Michigan is embarking on a $30 million to $90 million overhaul of its more than 25year-old unemployment insurance computer system. The multi-year, federally funded project will move Michigan from a largely mainframe system to a server-based system designed to significantly improve UI administration. For one thing, the current system is based on computer language developed in the late 1950s, which is “a lot of things but cutting edge,” said Stephen Geskey, director of the Michigan Unemployment Insurance Agency. He and other agency officials said the new system will be more efficient, agile and easier to manage from the state’s perspective, and more customer-focused, responsive and speedier for employers and claimants. For example, automated processes will replace certain manual computations of employers’ charges, credits and statements of account. Employers will be able to elec- tronically transfer their tax payments and will be able to schedule their payments for certain days. They also will be able to go online and see, in real time, that the agency is processing their transactions. Unemployed workers would be able to go online any time and certify, as required, that they’re still unemployed and meet eligibility requirements for benefits. Currently, that system is shut down from 7 p.m. to 7 a.m., when the database is updated. An integrated database will provide better coordination and information sharing between the system’s tax and benefit areas. And UI agency staff who now must go many places in the system to enter a single piece of information will be able to “go into one screen and make changes all at one time,” said Chris Peretto, the agency’s director of customer service. Employers will be able to electronically transfer their tax payments and will be able to schedule their payments for certain days. The conversion also should save the state money. For example, state officials said the approximately $8 million a year that the state spends for IBM Corp. to host the mainframe in Boulder, Colo., would be cut by at least $4 million annually. Federal stimulus money is enabling cashstrapped Michigan and other states to move ahead. California, for example, is planning six UI-related projects, from beefing up call centers to upgrading its computers, said California Chief Information Officer Teri Takai, formerly Michigan’s CIO. Like Michigan, California is looking at what upgrades other states have done to see if systems can be adapted, without starting from scratch. “Not only because it’s cheaper, but because you can get up faster,” Takai said. Geskey said the wide cost range Michigan is contemplating reflects, in part, whether the state uses another state’s system as a prototype and installs Michiganspecific changes, or pursues “something that would be all original. “We really won’t know what type of numbers roll in for quite a while,” he said. An initial step is hiring a contractor to operate a project management office. The contractor will create the main request for proposal to be issued for the project and will be responsible for ensuring the project meets state requirements for time, cost, scope and quality. Bids are being evaluated for that three-year contract. Geskey said he hopes to have the upgrade begin this year and said the project could take three to five years if it follows typical timeframes. A bill recently passed in the Legislature allocated $69.5 million in federal stimulus money toward increased service capacity and technology improvements at the UI agency, on top of $14.9 million the agency received earlier from the American Recovery and Reinvestment Act. Geskey said he did not know how much federal stimulus money would go toward the project and how much UI administrative funding through the U.S. Department of Labor would be used. Wendy Block, director of health policy and human resources at the Michigan Chamber of Commerce, said that “generally, we think that a computer upgrade is good news for both employers and employees.” But she said that as part of the upgrade, the chamber would like to see the state integrate software to better detect unemployment fraud by employees and employers. Geskey said the newer technology and integration of information that will be part of the upgrade will enable the state to improve its ability to identify potential fraud. He said yet to be determined is whether buying third-party frauddetection software would be redundant. To that end, however, the state Senate has passed bills that would increase the amount of money the state can recover for unemployment benefit fraud. The money would be deposited in a new fund, to be used first to buy software to detect and collect unemployment benefit overpayments. Amy Lane: (517) 371-5355, alane@crain.com Dot-com bust turned into boom for IT company BY TOM HENDERSON CRAIN’S DETROIT BUSINESS Credit the dot-com bust for the success — and the very existence — of Secure-24 Inc., a fast-growing IT company that moved into a new headquarters in Southfield on Northwestern Highway in June and finished the build-out of a new data-storage center in Plymouth Township in May. CEO and President Matthias Horch and COO Volker Straub are both natives of Germany who worked in the 1990s for TDS AG, a German IT company that went public in 1996. In 2000, the company sent them to Detroit to establish a U.S. presence, just ahead of the dot-com crash. The crash hit TDS hard. Its share price went from about 40 euros to one euro in weeks, said Straub. Both he and Horch were told to abandon the company’s expansion strategy and return home. “We didn’t want to go back,” said Straub. What they wanted to do, he said, was continue to attack the U.S. market on behalf of a virtual company they hoped to turn into a real one — their own company. “We didn’t have anything. We didn’t have a data center. We didn’t have any servers. We just had a PowerPoint presentation,” said Straub. “We said, ‘If we don’t have three clients in three months, we’ll give up and move back to Germany.’ ” The presentation promised that Secure-24 would manage e-mail systems, provide outsourced services to manage large software ap- Horch Straub plications such as SAP, various Microsoft Corp. programs and Oracle Corp.’s PeopleSoft, and offer secure, off-site data storage and disaster recovery. Three months later, they had their three customers. They then began the hard work of buying and configuring servers and building data networks and storage systems. Large competitors include IBM Corp. and EDS Corp. Smaller competitors include Online Tech Inc. of Ann Arbor. “And we’re competing with offshore companies,” said Straub. And competing well, going by the numbers. The company employs 105 now, up from 64 a year ago, and expects to be at about 160 by year’s end. Revenue in the fiscal year that ended Sept. 30 was nearly $12 million, said Straub, with expectations of about $20 million this year, most of it from companies outside the state in a wide niche target: revenue between $100 million and $8 billion and with a user count of about 200 to 10,000. In 2008, Inc. Magazine ranked Secure-24 as the fastest-growing IT company in Michigan and the 13th-fastest-growing nationally. In June, Horch was named Phoenix, which will continue in Ernst & Young entrepreneur of the operation. year for the Central Great Lakes It will consolidate some operaRegion in the IT category. He is a tions into its new headquarters, in finalist for national entrepreneur about 20,000 square feet of the of the year, which will be an- 55,000-square-foot Carson Centre nounced in November. on Northwestern Highway. All of that has been accomOne of the first customers Horch plished without taking on equity and Straub called on while trying partners. to raise money for their would-be Horch and Straub are the sole new company was Alan Zekelman, owners, and they say they have no president of Atlas Tube Ltd. A manplans to sell. ufacturer of steel tub“We’re having too ing, Atlas Tube had a much fun growing the manufacturing plant business,” said just outside of WindOn the Grow is a Straub. sor and an office in Secure-24 has in- feature that will Plymouth. vested $5 million in appear in most issues Zekelman said he the new 18,000-square- highlighting growing listened to their pitch companies, large and foot data center in a but had little interest small. Know of a former engineering company you think in investing in the center and expects to- Crain’s should write company. He was, tal investment there to about? Contact however, in need of exceed $10 million. someone to help him Managing Editor In March, based on Andrew Chapelle at manage and store data a recommendation achapelle@crain.com. and improve his from the state’s Michifirm’s cross-border gan Economic Development Corp., the networking. Michigan Economic Growth Authority “It was clear they knew what approved a state tax credit for the they were doing,” he said. company of $7.1 million over 10 “I was impressed by their level years. Secure-24 had been consid- of integrity and honesty. I just ering offers from Toledo and Can- don’t find that every day,” he said. ton, Ohio. “They’re just the right kind of peoThe MEDC estimated that the ple to do business with.” support for Secure-24 will lead to Zekelman is past president of 263 new jobs at the company and the Holocaust Memorial Center in another 240 new jobs indirectly. Farmington Hills. He said SecureAs part of the deal to build a 24 hosts the center’s e-mail system data center in Wayne County, Se- at no charge. Secure-24 sold the cure-24 will host the county’s IT center its computer and networkservices and support IT services ing equipment at cost and mainfor all 43 of Wayne County’s mu- tains it for free, as well. nicipalities. Cla

Table of Contents for the Digital Edition of Crain's Detroit Business - July 2009 Holiday Edition

Crain's Detroit Business - July 2009 Holiday Edition
Contents
Isotope in Short Supply
Biz Groups Petition Drive Fails
Tourism-Marketing Funding Plan Opposed
Historic Black-Owned Bank Holds Off Federal Takeover
New York Investor Builds Major Stake in Radio's Saga
Cell Phone Chain Gains Ground in Metro Detroit
Bill would Nix Occupancy as a Factor in Setting Building's Taxable Value
Federal Funds to Overhaul Unemployment Insurance Computers
IT Company Made Most of Dot-Com Bust
Focus: Power Sellers

Crain's Detroit Business - July 2009 Holiday Edition