Readings

Rust Belt City Competes for Call-Center Jobs,
Woos Indian Investment in Its Biotech Industry

BUFFALO -- Shock waves from India's election are buffeting this Rust Belt city, which has bet a good part of its economic future on its ability to both compete with that nation and lure Indian investment.

For the past year or so, Buffalo has battled to keep new call-center jobs from going to India, while it has courted Indian firms to invest in its local biotechnology industry. Buffalo's plan assumes that India will continue to open its hidebound economy rapidly, an open question given the complex political situation the new Congress party-led government faces. For the first time, Buffalonians have been forced to examine how geopolitical changes far beyond the Niagara River will affect their economy.

"Our economic development people probably think more of the fate of the Buffalo Bills," says David Triggle, a University of Buffalo drug-development expert. "They need to think in global terms."

Buffalo is trying to attract the kinds of call-center jobs in which knowledge of American culture is important, such as handling complicated insurance claims. India's cost advantage fades if a Buffalonian can handle a Blue Cross claim faster than a Bangalorian -- and without complaints. The city also is trying to jump ahead of some scientific glamour spots in wooing Indian investment in biotechnology, and realizes that India is feeling political pressure to show it can create jobs in the U.S.

"You go where you are wanted," says Arup Gupta, the U.S. head of Tata Consultancy Services, a big Indian software company that plans to use the University of Buffalo's computers to test new biotech software. Tata turned to Buffalo after heavy lobbying by Democratic Sen. Hillary Clinton.

Buffalo needs an unconventional strategy because the conventional ones have failed. After the local steel industry collapsed in the 1970s, Buffalo tried to turn itself into the "byte belt." But few computer companies bit. In the 1990s, Buffalo looked for more cross-border business, but couldn't even agree how to refurbish the crowded bridge to Ontario.

Since 1950, Buffalo's city population has fallen by half to 292,000, while the region's population has remained essentially flat. Unemployment in the region was 7.4% in March, well above the national average of 5.7%. Rotting grain mills and steel plants sit on a bleak, five-mile patch of polluted land south of the city.

Out of adversity, Buffalo developed a community spirit that has some economic advantages. Buffalonians love Buffalo so much that they are willing to work cheap to stay in town. Buffalo computer workers make about 17% less than the national median wage for the work, and retail sales personnel lag the median by about 11%, according to a Federal Reserve Bank of New York study. Those who leave are called "ex-pats," even if they move 150 miles to Syracuse.

Of course, Buffalo has downsides, most notably its winters, made famous by the blizzard of 1977 when snow drifted as high as 30 feet. "One funky snowstorm," complains James Boldt, chief executive of Computer Task Group Inc., a Buffalo computer-services firm. "In Florida, you can die from hurricanes."

Buffalo Niagara Enterprise, a partnership of government agencies and companies, has tried to spruce up the town's image. In 1999 to 2001, the group spent about $2 million annually on television and print ads showing Buffalonians out and about, often in sunshine. Then it wrote local television outlets, urging them to play up Buffalo as a winter wonderland

In 2002, officials even paid a California consultant about $5,000 to suggest new names for the region, figuring that Silicon Valley did wonders for San Jose. Some possibilities: Innovation North and the Eureka Crescent. They rejected them all as hokey. Some locals do talk of the "Golden Horseshoe" of cities -- encompassing economically suffering Rochester and Buffalo as well as faster-growing Toronto.

With manufacturing in a decades-long decline locally, Buffalo planners focused first on call-centers jobs, which can pay $25,000 to $35,000 annually and don't require much training of workers. Though many U.S. companies are turning to India for call-center sites, Buffalo says its debt collectors and insurance-service reps are especially good at handling "irates" -- angry, frustrated customers -- who might fluster Indians.

In 2003, insurer Geico was looking for a location for a new 2,500-person call center. India wasn't in the running. The firm sells expensive insurance policies over the phone, which even Americans have a hard time understanding. It helped that Warren Buffett, whose Berkshire Hathaway Inc. owns both Geico and the Buffalo News, was a Buffalo booster. "I was cheering for Buffalo," he said in an interview. "If it's a jump ball [between Buffalo and some other city], I want it to go to the home team."

Mr. Buffett says he didn't direct Geico to choose the city; Buffalo had to sell itself. Buffalo Niagara Enterprise commissioned a study highlighting the region's advantages, including 16,000 workers already in the call-center industry. Thomas Kucharski, the group's CEO, drove Geico Long Island executives through Buffalo's piddling rush hour. After New York state came through with tax incentives and training grants, Buffalo won the competition.

The Geico win was a psychological boost for the region, which started to think that the second part of its development scheme -- getting Indians to invest in the local biotechnology industry -- might not be crazy either.

After lobbying from the University of Buffalo, the state is helping to bankroll a $110 million center, now being built downtown, which connects the university, and its Dell supercomputer, with a local genetics-research institute and cancer hospital. Buffalo hopes to become a leader in bioinformatics, which uses computers to analyze genetic information and design new cancer drugs.

Better-known scientific hot spots, such as Boston and San Francisco, also are in the hunt for investment. But Buffalo figured that Indians, who often see themselves as overlooked and underappreciated, would respond to personal appeals. At the urging of Sen. Clinton, an Indian trade mission made a detour to Buffalo in June 2002. The city staged a science fair for the high-tech executives, featuring exhibits on artificial blood and computer techniques for modeling proteins.

Mr. Triggle, the University of Buffalo professor, says Indians don't have the anti-Buffalo snobbery Americans might. "If you think Buffalo is a dirty place, spend a few days in Calcutta," he says.

Some Buffalonians suspect Tata Consultancy is opening an office to steal computer contracts and ship them to India. But Sen. Clinton says she has warned Indian firms that they must show they can create jobs in the U.S.

Mukul Natu, Tata's Buffalo manager, says he is trying. The first of 50 software specialists he plans to hire this year is a young, curly-haired Buffalo suburbanite fresh out of the University of Buffalo. If he can't find enough qualified Buffalonians, he says, he'll hunt next for Buffalo ex-pats.