Five years ago, state and local elected officials announced to much fanfare that tech giant DXC Technology would open a “digital transformation center” in downtown New Orleans, promising 2,000 jobs for the governor. John Bel Edwards was billed at the time as the largest tech-focused economic development project the state had ever seen.
But now, DXC appears to be scaling back those ambitions. As of last year, the Virginia-based company employed just 300 local workers, records show. The company occupies only three of the 10 floors it leases in its eponymous granite Poydras Street skyscraper and is actively seeking to sublease four of them.
From left to right, Mayor LaToya Cantrell; Governor John Bell Edwards; Terrell Boynton, Director and General Manager, DXC New Orleans Digital Transformation Center; Jim Smith, Executive Vice President, Customer Advocacy and Joint Ventures, DXC; Local businessman Frank Stewart; and the Louisiana Department of Economic Development. Don Pierson cuts the ribbon at DXC Technology’s grand opening on Wednesday, May 23, 2018.
Last month, Administrative Commissioner Jay Dardenne signed the May agreement between the Louisiana Department of Economic Development and DXC that ended an $18.6 million incentive program as DXC repeatedly failed to Meet job creation and salary benchmark requirements.
The terminated agreement and sluggish hiring at DXC underscore the challenges New Orleans leaders have faced in recent years as they try to lure major employers to the city and then keep them here.
“It’s going to be a very big thing,” Tulane University business professor Peter Ricchiuti said of the DXC trade. “When you have a big company like this, it spins off other tech entrepreneurs. Even just having a smaller footprint and providing office space, it’s not encouraging.”
In a prepared statement, Virginia-based DXC, a Fortune 500 company that provides IT services to enterprise clients, insisted in a prepared statement that it is not completely out of the local market. DXC spokesman Jim Pasinski said the company remains “committed to the greater New Orleans area … and continues to work hard to develop a highly skilled and diverse team of colleagues in New Orleans.”
high hope
When DXC arrived in 2017, the city was still ecstatic about its ability to attract GE Capital’s technology center five years ago.
State officials estimated at the time that DXC’s overall incentive package could be worth as much as $115 million, including city and state grants and tax breaks for the company, as well as funding from four state colleges and universities to create new IT. $25 million training program to prepare students for work at DXC.
New Orleans skyline, Friday, April 23, 202. (Staff photo by David Grunfeld, NOLA.com | The Times-Picayune | The New Orleans Advocate)
But the centerpiece of the package is a performance-based pay agreement, in which the state agreed to pay the company $18.65 million in cash to meet certain job creation and wage benchmarks: starting January 2018 and adding 300 employees annually through 2025 , the total will reach 2,000 people, with a total annual salary of 137 million US dollars.
Almost from the beginning, DXC was lagging behind. Although it surpassed its goal of 300 employees in its first year, its $10.2 million in salary that year fell well short of the nearly $19 million required for the incentive deal. DXC has also come under fire for using H-1B visa workers to fill some of the jobs that were supposed to be created for local workers.
As a result, the City of New Orleans slashed its program spending by nearly half in 2019, and the state paid no performance grants.
Over the next three years, the company continued to lag its forecasts. While DXC declined to say how many jobs were ultimately created, records filed with the state in June 2021 showed the company had 300 local employees at the time, with a combined salary of $29.4 million.
A pedestrian crosses the streets of S. Claiborne and Poydras as fog blankets the area. New Orleans’ Central Business District, March 20, 2017. (Photo by G. Andrew Boyd, NOLA.com | The Times-Picayune)
Today, those numbers are little changed, according to two sources familiar with the company and its local staff.
Under the termination agreement in May, DXC and the state attempted to negotiate a partial payment to the company under the performance grant agreement.
But “states and companies have different interpretations of company performance and amounts due,” the document said.
LED and DXC declined to elaborate on what the difference was. But “the company has received no state funding to date and is not eligible for any state incentive programs,” LED spokesman Mark Lorando said in a prepared statement.
LED also noted that DXC remains eligible to apply for other tax incentive programs and that the state will deliver on its funding commitments for STEM-related programs at the four universities.
Committed to New Orleans
In addition to terminating its incentive agreement, DXC has recently been downsizing its office space. In 2018, company officials cut the ribbon at 1615 Poydras St., a black granite high-rise across from the Caesars Superdome that once housed Freeport McMoRan. At the time, they said they planned to eventually fill 10 of the building’s 23 floors.
But earlier this year, the company retained Corporate Realty to sublease four of its 10 floors. Two of the four floors were never built, according to broker Randy White, who is listing nearly 90,000 square feet of vacant office space.
DXC declined to say how much of the building’s other six floors it occupies, but two sources familiar with the situation but not authorized to speak about the lease said the company currently occupies three of the six floors and has refunded the other three. owner of the floor.
A company spokesman for DXC said the termination of the agreement with LED and the reduction in labor and office space does not mean the company will leave Louisiana, although he declined to answer specific questions. State and local economic development officials also said they still believe DXC will maintain a strong presence in New Orleans.
“We are pleased that DXC has moved through the transition and COVID and remains committed to Louisiana, providing hundreds of jobs in the state,” said Michael Hecht, GNO Inc. President and CEO. “We look forward to continuing to work with DXC to expand their reach and reach.”
external force
DXC has undergone many changes since announcing its plans in New Orleans in 2017. In 2019, it had a new CEO who has been working to cut costs and shift the company’s focus to new service areas.
It has since sold its Medicare and Medicaid claims processing businesses. More recently, it has become an acquisition target. In early 2021, a French company offered to buy the company, but the deal fell through. Earlier this month, several financial publications reported that a private equity firm was in the works for the company.
DXC declined to comment on the reports.
If the deal materializes, it’s too early to say what the new owner will mean for DXC’s presence in New Orleans, but Hecht said he’s not worried about the local tech market.
He points to startups like Lucid, which sells for more than $1 billion, and Levelset, which sells for $500 million, as proof that New Orleans’ tech industry has a foothold.
“New Orleans has proven that it can be a diverse and fertile place for tech companies,” Hecht said.
In addition to homegrown success stories, there are other setbacks. The GE Technology Center in St. Charles Square closed in 2020, laying off 100 jobs. Economic development officials at the time blamed the shutdown on the COVID crisis.
Ricciuti said it was important to have a large multinational company like DXC or GE to anchor an emerging technology hub.
“When you have a big company, the real value is not just in the people they hire, but in who spins out of them to start their own tech companies,” he said. “That’s how it spreads. That’s why it’s important to have DXC.”