Michigan woos Covisint with network access point

The state hopes to keep the business-to-business auto marketplace close to home to build the state's image as a high-tech hub.

3 min read
DETROIT--As part of Michigan's bid to keep Covisint, a business-to-business marketplace that could become the world's largest e-commerce company, the state has offered to help finance a national network access point (NAP).

Costing in excess of $5 million each, NAPs are data traffic transfer points that deliver email messages and other information from network to network. Sprint, Ameritech and MCI WorldCom control crowded NAPs in New York, San Francisco, Chicago and a handful of other cities around the country.

Analysts say the nation is desperate for more NAPs to relieve the bottlenecks.

It's unclear which telecommunications provider would power Michigan's proposed NAP, which would serve Internet traffic going to or coming from the Midwest and help overburdened NAPs elsewhere.

Formed by General Motors, Ford Motor, DaimlerChrysler, Renault and Nissan, Covisint is a virtual marketplace expected to simplify the vast amounts of paperwork and time the automakers waste on purchasing orders. The automakers that formed Covisint spend an estimated $300 billion on parts and related expenses at 30,000 suppliers each year.

The proposed NAP would help speed Covisint's e-commerce initiatives and help build Michigan's image as a high-tech hub, said Michigan Economic Development Corp. spokesman Jeff Mason. The Lansing-based agency will contribute an unspecified amount of money to help build the infrastructure for the NAP.

Although the agency originally proposed building the NAP in Ann Arbor, home of the main campus of the University of Michigan, it has promised to help fund an NAP anywhere in the state if Covisint puts its headquarters in Michigan.

"It's important to us," Mason said Friday. "We'll help build it anywhere in the state."

The proposal is part of a larger package of incentives the state has dangled in front of Covisint executives, who are discussing whether to locate the company near the concentration of automotive suppliers in Michigan or to plant its roots in a technology hub such as Santa Clara County in California or Middlesex County in Massachusetts.

Redwood Shores, Calif.-based Oracle and Pleasanton, Calif.-based Commerce One also are partners in the marketplace, and each tech company has contributed more than 50 employees.

The Michigan Economic Development Corp. has offered Covisint as much as $1 million from a state fund to use for recruiting employees. Michigan counties vying for the headquarters--Oakland, Washtenaw and Wayne--also have offered special deals on prime real estate along arterial roads and a "tax holiday" that would allow the company to avoid paying certain business taxes for as many as 20 years.

Oakland County officials have been particularly aggressive in wooing Covisint.

County executives sent Will B2B's magic last?a booklet titled "The Courtship of Covisint" to more than 300 business owners and politicians, urging the power brokers to write to Covisint leaders expressing support for an Oakland County headquarters. The county's central business corridor along I75, dubbed "Automation Alley," is the North American headquarters of DaimlerChrysler, Volkswagen, Lear, Delphi Automotive and other international manufacturing companies.

"The average auto supplier is 2,075 miles away from Santa Clara County," said county executive L. Brooks Patterson, citing an independent study from a local consulting firm. "The customers Covisint is going to serve are predominantly located here. Why would you move away?"

The stakes are enormously high for Michigan counties and other regions bidding for Covisint, which is expected to employ more than 1,000 high-tech workers worldwide. The temporary headquarters will remain in the Oakland County city of Southfield, just north of Detroit, for at least one year.

A final decision on Covisint's global headquarters will not be reached for several months, executives and other Covisint workers said. The company, which plans an initial public offering as soon as next year if market conditions are favorable, will appoint a chief executive officer within the next month. The CEO will have final say in where the company is located.

Covisint also is starting to hire employees for regional headquarters in Japan and Amsterdam, in addition to numerous sales offices throughout Europe and Asia, said Covisint co-founder Brian Kelley.

"There's no question we'll have a major presence in Michigan, as we'll have one in Europe and Asia," said Kelley, who also is president of Ford's e-commerce division. "Where the headquarters is located is less important than an understanding that this is a global company operating in a virtual world."