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Tech Heads to the Bronx
Hoping to take advantage of a growing trend to bring IT jobs back to the U.S., a technology consulting firm is setting up shop in one of the poorest neighborhoods in the country, hoping to create a viable business and serve a philanthropic purpose at the same time.
That neighborhood is the South Bronx of New York, where within a two-mile radius there are five large housing projects and where 38 percent of the population lives below the poverty line, according to the 2010 Census. It is the poorest congressional district in America.
The company trying to inject tech jobs and spending power into the neighborhood is Doran Jones. Keith Klain is the company’s co-CEO. Klain spent more than 20 years setting up IT operations overseas. Now, he’s trying to bring some of those jobs back to the U.S. and into the South Bronx.
He joined Doran Jones from Barclays, where, until February of 2014, he ran their Global Testing Center. Now, he’s building a 45,000 sq. ft. facility in a nondescript building just across the river from Manhattan — the U.S. financial capital where a wealth of finance firms and other businesses are potential clients for the IT quality testing business he is starting up.
“This is a viable business. We’ll transform this neighborhood with real tech jobs,” says Klain.
The most important element of his plan, and what sets it apart from some of the other tech start-ups and incubators who have moved into the Bronx area to take advantage of one of the few areas of New York with relatively cheap rent, is a partnership with Per Scholas.
Per Scholas is a non-profit workforce training center. Klain set up a courses at the center specifically tailored to teach the kinds of skills he needs from entry-level workers. He has an agreement in which Doran Jones funds the free courses, and promises to staff 80 percent of its workforce with Per Scholas graduates.
Per Scholas also gets 25 percent of future Doran Jones profits. They even share a building.
Angie Kamath, executive director of Per Scholas, says the unique arrangement is an opportunity to change the dynamic in the South Bronx neighborhood.
“It’s going to, I believe, really kickstart and show other firms that they can, too, locate in what are traditionally underserved areas,” Kamath says.
“Part of this program is to give people an entry into a career that they wouldn’t ordinarily have gotten,” says Klain, “There is an overlooked population here that is a very rich source of tech talent.”
One of Klain’s most recent hires is Cochrane Williams, 37, who used to be a photographer with sporadic income. “I needed a career change. I needed something stable. I have a daughter. So I needed to also think about that,” Williams says.
Just as other entry-level workers who will be hired by Doran Jones through its partnership with Per Scholas, Williams’ starting salary is $35,000 with benefits. While that income does not go far in one of the most expensive cities in the country, entry-level Doran Jones employees will get an automatic raise to $45,000 in a year, and to $55,000 in two years.
“For a lot of our folks who are coming in and their last wages were $15,000, this is pretty life changing,” says Kamath. Many in the neighborhood hold minimum wage, or close to minimum wage jobs, she says, such as security guards or retail workers.
Williams says his starting salary was not his only consideration in deciding to join Doran Jones. He sees it as an investment in his future. “This is basically getting in on the ground floor. And you get to grow with the company. There is nothing more solid than that, in terms of trying to establish a career,” says Williams.
Doran Jones and Per Scholas are also hoping to get in on the ground floor. For them, that ground floor is a growing movement to bring IT jobs back to the U.S.
A number of firms have sprung up across the country to lure lucrative IT contracts away from foreign firms. Their pitch: that for certain IT jobs, being located near a business’s time zone, for instance, could be beneficial. They also can point to inefficiencies in the current outsourcing model: the need for lots of travel, or the hiring and relocation of middle managers to supervise far away employees.
Ron Hira has been studying the trend of IT ‘onshoring.” He is a professor of public policy at Howard Unviersity and author of the book Outsourcing America. There are a number of small companies around the country, most with a few hundred workers, he says, that are trying to win away IT contracts from foreign firms (which can have workforces in the hundreds of thousands).
“I’d say this is a small blip right now. But it has the opportunity to become a serious market niche, as much as 15 to 20 percent at some point,” Hira says.
The key will be for U.S. companies to grow beyond employing hundreds, says Hira. That goal faces hurdles such as tax incentives that unintentionally favor ‘offshoring’ by allowing companies to retain their profits untaxed overseas, he says.
“I’ve been approached by multiple other cities in the country that are looking at this as a kind of a case study: can this be done?,” says Klain.
Klain will open the doors of his new Bronx technology center in March. He has 15 clients lined up, and hopes to initially hire 150 people — and eventually, 450. Also, he says start-ups have already approached him about leasing space in his new center. A small sign that his hoped-for urban renewal of the South Bronx just might come to fruition.
Featured in: Marketplace Morning Report for Friday, February 6, 2015
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