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IBM’s Innovation Center taking shape in downtown Buffalo

In the north tower of the Key Center in downtown Buffalo, one of the quietest parts of the Buffalo Billion is taking shape.

Inside, on the fourth floor in temporary space that is less than half filled, IBM Corp. is slowly building what the company and state officials hope will be a key cog in efforts to build up the Buffalo Niagara region’s undersized tech sector, with a goal of creating 500 technology and support jobs by the fall of 2020.

For IBM’s new innovation center in Buffalo, it’s all about data.

Taking mountains of data.

Sifting through it.

Organizing it.

Making sense of it.

And ultimately, helping its clients, in both government and business, use all that information in a way that makes them more efficient, helps them develop new products or identify what works, and what doesn’t.

“We’re drowning in data. The key is using that data effectively,” said Jay Goodwyn, the executive director of the IBM Buffalo Innovation Center that is slowly ramping up its operations in the Key Center. “How do you use this information to become smarter? To do something different.”

From supermarket loyalty cards that record every grocery purchase to bar code scanners that allow factories to track a product through each step of the manufacturing process and even traffic cameras, businesses and government agencies now know more about what’s going on than ever before.

But knowing too much can be just as confounding as knowing too little.

That’s the crux of the plan behind the IBM technology center, which is being built with $55 million in state funding through Gov. Andrew M. Cuomo’s Buffalo Billion economic development initiative.

IBM has pledged to create 500 jobs by September 2020, either through IBM employees at the center, at other partnering companies that work with its clients or at firms that provide services to the center.

“Those are not necessarily all IBM employees,” Goodwyn said. “I think the majority will be IBM employees.”

The innovation center opened last year in temporary space in the north tower of the Key Center, with plans to move into a permanent home on the top six floors of the Key Center’s south tower that formerly was the headquarters of Delaware North Cos. The Buffalo food-service company moved out last summer, and the space has been gutted since then.

Work to build out the space is expected to begin shortly on the top two floors, with IBM expecting to move into its permanent home in early June. The remaining four floors will be built out as IBM ramps up its operations at the innovation center over the next four years. The company also operates a small data center on the third floor of the south tower, and is hoping to win a state contract next month to provide technical services and support for New York State, with that operation slated to be located next to the data center on the third floor, Goodwyn said.

“That would be a major addition of people and jobs,” Goodwyn said.

Bringing in talent

Equally challenging for Goodwyn, who joined IBM 31 years ago and developed the business plan for the innovation center, is building the center’s workforce.

“The skills we’re looking for are hard to find anyway. If we were sitting in the Silicon Valley, it still would be very hard to find,” Goodwyn said. A big part of IBM’s workforce development plan is to bring in a sizable number of entry-level workers by building ties with colleges from across upstate, from the University at Buffalo to the Rochester Institute of Technology and the University of Rochester, to Cornell University and Clarkson University, Goodwyn said. UB lacks a specific data analytics major within its computer science and engineering school, but other schools, like RIT and the University of Rochester, have it.

“That’s part of our business plan: College and university hires,” he said.

With such a small tech industry in the Buffalo Niagara region, finding data analytics experts is a tall task. So far, the center has brought in data analytics experts from Virginia, Seattle and Houston. “They can pretty much command their salaries ... but they have noted that their dollar goes farther here in Buffalo,” Goodwyn said.

“The problem with that is those are all entry level people. For this type of work you need some entry level people, but you need a lot of professional people who know what they’re doing and have been doing this type of work for a long time,” he said.

The center also is drawing interest from IBM employees, including Buffalo expatriates. Some, like Robert J. Kirk, the center’s infrastructure architect, lived in Buffalo but spent most of their time at IBM working at client sites in other states or countries.

“I used to be in a part of IBM where I’d leave on a Monday and come back on a Friday,” said Kirk, an 18-year IBM veteran who’s happy to now be working close to home. “It’s a grind.”

Finding the needle

One of the center’s first clients was a local manufacturer that was having costly issues with equipment being out of service on their assembly line. The company came to IBM, wondering if there was a way to predict when equipment would go down, so they could either fix it before it broke or move work around in anticipation.

The client brought in all of the data from the scanners on its production equipment, information about its products and manufacturing processes.

“They brought in a mountain of data on what’s going on with their equipment,” he said.

“It’s a needle in a haystack type of problem. We have a mountain of data, and we don’t know what to look at,” he said. “Are there some characteristics that we don’t see that will indicate that this equipment might go down. That’s really what the question is.”

It was so much data that it took 10 weeks for IBM’s staff, working alongside the client’s own tech experts, to load all of the data and make sense of it.

“They brought in a mountain of data on what’s going on with their equipment,” Goodwyn said. “Nobody knows the data better than our clients, so we work together.”

In the end, IBM was able to develop a model that allowed the company to predict that, when a certain series of indicators show up, there’s a high likelihood that equipment will go down, predicts when the downtime will happen and how long it will last.

“We could say that when you see this set of indicators that there is an 81 percent likelihood of an equipment downtime event, that it’s likely to happen within the next six hours and that it’s likely to last for two hours,” Goodwyn said. “This was incredibly valuable to them.”

And because the client, which Goodwyn declined to name, has 40 other plants generating similar data, he thinks the model could be as much as 98 percent accurate as more data is run through the model.

Growing tech sector

The idea behind the innovation center is to build up the Buffalo Niagara region’s undersized tech sector.

The information sector, which is one of the fastest-growing parts of the national economy, accounts for less than 3 percent of all economic activity in the Buffalo Niagara region, compared with 5 percent nationwide, according to data from the U.S. Bureau of Economic Analysis. The region had just 7,200 information sector jobs in January, and employment among those firms was flat during the past year, according to state Labor Department data.

Bringing IBM to Buffalo was an offshoot of the plan created by the Western New York Regional Economic Development Council shortly after Cuomo took office. One of the focuses of that report was the region’s dearth of entrepreneurs and its small technology sector. To lure IBM and the innovation center, the state agreed to invest $55 million in the project, including $30 million to acquire the software that the center will use, along with another $25 million to buy the seven floors in the Key Center that the IBM facility will occupy and then build it out and equip it.

“We identified that we were punching below our weight, so to speak, on delivering the innovation economy,” said Howard Zemsky, the development council’s co-chairman at the time and now the CEO of Empire State Development. “Addressing that is what led to investments to bring IBM and life sciences companies. It’s also what led to the 43North business plan competition. It was all about strengthening our region’s capacity to innovate, start businesses and create tech and life sciences jobs.”

Making sense of data

The IBM center is ramping up slowly. The center had hoped to have 50 workers in place by the end of last year, but Goodwyn said it fell just short of that goal.

During a recent visit, a half dozen workers met in a conference room for a conference call with an IBM client. Others tapped away on computers at individual work stations that snaked throughout the converted Key Bank office space. Almost a dozen workers from one of IBM’s strategic partners, Rochester analytics firm LPA Software Solutions also are working in the innovation center.

“We knew analytics were becoming more important,” especially among midmarket companies in fields like banking, health care and education, said Scott Hopkins, LPA’s president. The company hired about 13 new workers last summer, including 11 who work out of the IBM Innovation Center in Buffalo.

“We felt it was a good way to increase our presence in Western New York,” said Hopkins, himself a former IBM employee. “As more and more companies get deeper into analytics ... we envision companies in Western New York, as soon as they begin that process, will go to the center.”

Goodwyn hopes to see the center create 75 to 100 jobs a year, which would put it on a pace to meet its 500-job goal by 2020.

“So far, we’re tracking very well, understanding that we’re just getting started,” he said. “We’re just establishing ourselves here.”

Winning the contract to provide technical support and solutions for state agencies would be a big step in the center’s development, as would building up a stable of private sector clients, Goodwyn said.

And while the center expects to do some work that taps into IBM’s sophisticated Watson computer, much of the work will be centered around how to make sense of all the data its clients have collected.

Businesses today have lots of data – the amount of data collected is doubling each year – but making sense of it can be a challenge, especially since much of their technology is aimed at running the business, Goodwyn said.

“If you’re a retailer, you have all this product information. You’ve got customer information. Orders are coming in every second. All of your systems are designed to help you run your business,” he said.

“What they’re not very well designed for is how do you collect this information over time and make big decisions: What do I see in terms of trends? What products are selling the best? What products are selling the best but aren’t very profitable? Who are my best customers? What are customers buying that maybe I should think about in terms of product development?”