20 years of Dell in Nashville: How computer maker paved way for city's exploding tech sector - Southern Business Review

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Monday, July 1, 2019

20 years of Dell in Nashville: How computer maker paved way for city's exploding tech sector


On the first day of April in 1999, news broke that Dell Computer Corp., the third largest computer maker in the world, was scoping out Middle Tennessee for its second U.S. location. Within three weeks, then-Nashville Mayor Phil Bredesen had outbid neighboring counties and lured the company to a large parcel of land by Nashville International Airport in what was seen at the time as one of the largest economic development coups in the city's history. 


Dell, headquartered in Round Rock, Texas, was expected to bring 3,000 employees to the Nashville area within five years as it invigorated the region's dwindling manufacturing sector and gave life to the local tech industry. And those jobs were just the beginning, as Dell and government officials forecast as many as 10,000 positions to come from the fast-growing company in the years ahead. 


"It was a tech company, a computer company, a new, exciting, young entrepreneur company," said Courtney Ross, chief economic development officer at the Nashville Area Chamber of Commerce, who worked in the state's economic development office at the time. "It was all these things that Nashville had not seen. It was a huge economic development win for the region."




Two decades later, in a tech industry that looks vastly different from the 1990s, Dell remains in Nashville with 1,750 employees at the same campus by the airport. While the company's jobs impact has fallen short of its target and of local government leaders' lofty expectations when the deal was first made, Dell has made its mark as the city's first and critical foray into the tech industry that has since thrived in Nashville, especially in recent years.


"We were really, fundamentally the only significant tech footprint in Middle Tennessee," said Eric Coffey, a vice president and executive site manager of the Nashville office who started with Dell in Nashville in 2001. "Now, here we are 20 years later, and the tech business is booming. ... When you sit back and look at the sheer ripple effect of what this organization has had in the community, we are proud of that."




Mayor David Briley's office praised the company's contributions to the Nashville community and underscored the role the company played in the past 20 years of business development.


"Dell was one of the first — if not the first — major international corporations to bet on Nashville’s success, bringing significant jobs and investment to our city," Briley spokesman Thomas Mulgrew said. "They helped set the stage for what our economy is today — a diverse, thriving place for businesses ranging from tech to manufacturing and more."


A controversial incentive package


When Dell began negotiations with Middle Tennessee leaders, it was generating $18 billion in annual sales and $1.5 billion in net income. The company included 24,000 employees in 36 countries and enjoyed global notoriety for its prodigy founder Michael Dell, who created the company at age 19 in his college dorm. During the 1990s, the company's shares had soared some 91,000% in the stock market, the L.A. Times reported.


By launching a viable tech sector in Nashville, Dell would diversify the local economy and help boost the state's overall business brand. Business leaders compared Dell's arrival to attracting Nissan in Smyrna and to HCA, both of which employ more than 10,000 workers in Middle Tennessee today.


Dell chose Middle Tennessee for its central location, and while Rutherford and Williamson counties were seen as the front-runners for a Dell site early on, Bredesen's aggressive negotiating swayed the company. 


Bredesen's incentive package, designed for 5,000 jobs, stirred controversy in the months that followed the deal, with critics calling it corporate welfare and then-Gov. Don Sundquist accusing Bredesen of overbidding. It came on the heels of large incentives offered to Columbia/HCA and Gaylord Entertainment and large investments in a downtown arena and a football stadium, all part of a strategy to help put Nashville on the map for prospective businesses.


To attract the tech icon, Nashville offered Dell a 140-acre property near Nashville International Airport, valued at $6.5 million, a property tax abatement that would last 40 years — as long as jobs remained above the 1,500 mark — and an annual cash grant of $500 per job.


Based on city data, the deal has cost Nashville roughly $39 million so far. While property tax values and employee counts going forward are unknown, the deal could cost about $33 million more over the next two decades, for a total of $72 million. The estimate falls well below previous forecasts of $122 million that were based on the company employing 3,000 people each year for 40 years.


It is the city's most generous property tax abatement deal to date. Years later, when the business momentum was further underway, the city approved $66 million for HCA's expansion, $56 million to keep Bridgestone Americas in Nashville and $103 million for Omni Nashville through tourism taxes. Most recently, under Briley, $17.5 million was approved for Amazon to bring 5,000 jobs.




In return, Davidson County would gain 3,000 Dell jobs, $100 million in facility spending and $240 million in wages in five years. Dell cited a study by the University of Tennessee estimating an economic impact of $690 million and 8,000 indirect and direct jobs in the same time period, and Bredesen predicted a $97 million profit from the deal over a 40-year period. A more immediate production facility was also planned for Lebanon.


The company's size in Middle Tennessee has ebbed and flowed since its 1999 arrival. The company had hit its jobs target by 2001, with 3,400 employees reported, and by that point, more than a dozen suppliers had already followed Dell to the area. All local Dell manufacturing moved to Wilson County in 2002, and Ceva Logistics took over the Dell distribution center in Nashville in 2010 before moving to Mt. Juliet two years later.


In 2013, when the company struggled with market share and became private again through a massive buyout, the company's Nashville jobs counts had fallen below 1,500. The count dipped to below 1,100 in 2016, and the city has charged Dell portions of its property taxes in the past four tax years as a result of the company falling short of the 1,500-employee threshold.


Dell, citing an IHS Markit study, says it has contributed to nearly 5,900 additional Tennessee jobs, which include suppliers, contract workers and third-party vendors, and has spent $289 million with local suppliers. Philanthropic contributions in 2018 reached $625,000.


Longtime Nashville officials stand by the value of the deal. The chamber developed a strategic plan in the 1990s that focused on the importance of luring headquarters and tech companies to the city, and Dell was a critical part of carrying out that strategy that has reaped significant returns as evidenced by regular, major economic development wins today, Ross said. In the past year and a half, those include Amazon, AllianceBernstein, Mitsubishi Motors of North America, EY, Pilot.com and SmileDirectClub.


"It was about building the foundation," Ross said. "Between a handful of companies —Nissan, Dell and a few others — those were really what jump-started getting our brand out there, making us more visible as a place where companies would like to relocate or open a significant office."


Austin, Texas-based site selector Angelos Angelou, who did labor analysis on Nashville for Dell in 1999, also emphasized the value of the Dell brand in addition to the more tangible benefits of jobs and wages. The deal paved the way for the city's economic success today.


"Dell was the biggest brand and biggest name in the business," Angelou said. "At the time, the incentives were appropriate. ... You have to see the brand value they have added to the major high tech community, to the point where you have also attracted Amazon. They are all interrelated."


Building a talent pipeline




Nikki Gibson, Dell Nashville co-site leader and human resources consultant, was at Dell's opening day at the Lebanon location in August 1999, along with Michael Dell. She was hired as a building services coordinator and greeted guests in her role. It was not lost on her or others at the time the significance of Dell operations in Middle Tennessee, she said.


"We were a very small group of individuals who were part of something really big and we knew it," Gibson said. "Everyone was so excited. We knew we were part of a bigger company, and being outside of corporate headquarters, we really had an opportunity to make an impact early on."




About 190 Dell employees from Austin had transferred to the Nashville area to start a manufacturing site in Lebanon so they could teach new team members to build desktops, she said. Gibson recalls it as a chaotic but thrilling time as the company developed operations. 


Shortly after, in 2001, Coffey accepted a job in Nashville after graduating from the University of Louisville. He took a temp job at Dell as he waited for the original job to begin, but decided to stay at Dell, where he saw greater opportunities. The Nashville site had been operating for less than a year, and the excitement of working for a global tech firm in Middle Tennessee remained.


"That buzz was certainly palpable," Coffey said. 


Coffey has since climbed the ranks from small business inbound sales phone queue to  vice president and executive site leader. The path from entry to executive level is not uncommon, he said.


Other early employees have gone on to make their mark at other Nashville-area companies, many of which represent the next wave of local tech companies. That these individuals have stayed in Nashville to help develop new companies and lead other business initiatives is more evidence of Dell's impact on Nashville, local business officials said. 


Erin Tomlinson, now Eventbrite's Nashville general manager, worked at Dell from 2000 to 2013 and moved here for the job from Michigan. Michael Brody-Waite, now CEO of the Nashville Entrepreneur Center, began at Dell at a kiosk at Opry Mills before working in sales and eventually leaving to start his own company. Crissy Wieck, now a senior vice president at Western Express truckload company in Nashville, was also among early Dell team members and worked in sales for more than 10 years. She was hired straight from college and became site director by age 30, leading a team of 2,500 people.


"We were able to move very quickly," Wieck said. "I got to be a CEO before ever having to have the responsibility. Now I'm running my family business with my dad and my brother. It absolutely helped." 


Dell today 




As Dell has evolved globally in the past two decades, the focus of its Nashville office has also changed. It began with a call center and manufacturing. Today, the Nashville company is largely a sales organization, along with logistics, fulfillment, human resources and marketing.


At the Dell campus, which hosts its own data center, sales reps meet with customers in a solutions center in the lobby and other casually dressed Dell employees move through cubicles or huddle together for small meetings. 


The company boasts a meritocratic culture that rewards top sales employees with international trips, prioritizes diversity and offers an array of benefits — from 12 to 20 weeks of parental leave, to flexible work arrangements to transgender transitioning. Employees stay on average 6.5 years, and 25% of workers at the Nashville office have been employed there for 10 years or more.


"For a heavy sales organization, we are very proud of that," Carnell Elliott, co-site leader and inside sales director, said. "People tend to come and stick around for a while."




In 2018, Dell returned to the public markets after buying EMC, a move that allowed the company to expand services beyond computer sales. The Nashville office has felt the positive impact, and last year the company added 460 employees. In some ways, the growth and energy at Dell mimic that of 2001, Coffey said. 


"When I started in 2001, Dell was primarily a PC and server company," Coffey said. "We have now become a full, end-to-end, complex IT solutions provider. ... That breadth has been staggering. It has triggered another round of enormous growth."


Coffey said the company remains committed to Nashville and he expects local operations to further strengthen in the years ahead.


"We are continuing to position Nashville as a center for growth for Dell Technologies," Coffey said. "We are continuing to hire here. Our role locally is to ensure that the Nashville operation is well run, is successful, has a great culture and great talent so we can continue to grow."


Reach Jamie McGee at 615-259-8071 and on Twitter @JamieMcGee_.