Barracuda Networks plans to add up to 500 jobs in major expansion

Posted on June 15, 2011

Barracuda Networks, fueled by growth in the information technology security industry, is mapping out a major expansion in Ann Arbor with plans to hire up to 500 workers over the next several years — possibly downtown.

The Campbell, Calif.-based firm, which employs 100 workers at its operation on Depot Street, hopes to establish a 100,000-square-foot technology campus, confirmed today.

Executives told the company would prefer to build a new facility or purchase an existing building, rather than signing a lease. The building would serve as a base for its long-term expansion.

“Our investment has worked in Ann Arbor, so we’re basically looking to, as they would say in gambling terms, ‘double down’ and invest further,” Barracuda CEO Dean Drako said in an interview. “And if we can do that in a more permanent fashion where we have more control over our destiny, I tend to like that.”

Sean Heiney, Barracuda’s director of new product initiatives, said the rapidly growing company wants to “stay as close to downtown as possible.”

Drako and Heiney said Barracuda has run out of space at its rented 12,000-square-foot first-floor office at 201 Depot St., which is owned and leased by Ann Arbor-based First Martin Corp.

Heiney said the company needs to double its office space “immediately” and will need 40,000 square feet within two to three years. The rest of the company’s existing building is occupied by planning and landscape architecture firm JJR, which expanded into the five-year-old building earlier this year.

Within about five years, Barracuda wants to own a 100,000-square-foot facility in Ann Arbor with 300 to 500 new workers, executives said. The company expects that it may have to lease new property in the interim while it identifies a permanent solution.

Barracuda creates network security devices, provides email and web filtering products and phone system solutions, and monitors network attacks 24 hours a day, 7 days a week from its Ann Arbor office.

The privately owned firm, which has 700 employees globally and does not report sales figures, said in January that it had more than 130,000 customers in more than 80 countries.

If the company expands downtown, it would rank as downtown Ann Arbor’s largest private sector employer downtown.Google employs about 275 workers at its sales office at the McKinley Towne Centre at Liberty and Division streets, though Google has long said it plans to have 1,000 employees eventually.

“We want to create a more Silicon Valley-type campus atmosphere where our employees can hang out with recreational facilities as well as dining,” Heiney said. “We’re very happy with participation in the downtown culture.”

The company has already started its search for land or an existing office. Heiney declined to provide details of what locations the company has considered but said the firm wants to have a plan in place by the end of the year.

Heiney acknowledged “challenges” that could prevent the company from expanding downtown.

There are no existing downtown office properties with 100,000 square feet of space publicly listed for sale or lease. If the company wants to stay downtown, it may have to purchase a plot of land owned by the city of Ann Arbor or Washtenaw County to build a new facility.

Otherwise, the company may be forced to move toward the edge of the city or even to a surrounding municipality, where commercial space is more readily available.

“We like the idea of being downtown because it’s a little more convenient for lunch and activities, and people can walk to work or bike to work,” Drako said. “However, there’s parking issues and finding a building. … So we may end up being a little further out where we can get more space and some of those things are more easily handled. That’s part of the thing we’re trying to figure out.”

Barracuda’s Ann Arbor office operation includes a core of product development engineers who have delivered several of the company’s most important security offerings. But the firm is also expanding its technical support staff and has recently starting adding sales and marketing employees to its local office.

The company plans to hire more employees of all kinds. (Apply for jobs here.)

“Finding people who actually care about taking care of our customers is really what we want,” Drako said.

The company in 2008 won a tax credit from the Michigan Economic Development Corp.’sMichigan Economic Growth Authority (MEGA) board with a promise to hire 185 workers over five years. The company will soon have the option of giving up that tax credit in exchange for using the state’s lowered 6 percent corporate income tax, which Gov. Rick Snyder signed into law in May.

Heiney said tax relief from the MEDC won’t be ”a significant factor” in the company’s decision to grow. He said the MEDC tax credit has saved the company only about $100,000 so far.

Starting Oct. 1, the MEDC’s incentives will be limited to a pool of about $100 million after Snyder cut most of the state’s business tax credits

The company’s expansion comes as network security emerges as a key driver of the Ann Arbor region’s technology sector. Ann Arbor-based Arbor Networks, a University of Michiganspinoff, expects to grow from about 90 to about 120 workers by the end of 2011, after the firm was acquired by Texas-based Tectronix Communications.

Statewide, the network systems and data communication industry is considered Michigan’s fastest growing sector as measured by percentage job growth, according to a report last year by the Michigan Department of Energy, Labor and Economic Growth.

DELEG, which has been renamed Department of Licensing and Regulatory Affairs, estimated that the number of jobs in this industry would increase 38.2 percent a year from 2006 to 2016.

Drako said that the rise in digital attacks against corporations, governments and individuals is fueling a rise in interest and sales for network security products. He said Barracuda is also positioned to benefit from a surge of interest in security technology to protect cloud computing services, in which companies rent off-site server space.

“Security is just getting harder and harder and harder because the networks and the amount of stuff being put into computers and into the cloud is going up and up and up,” Drako said. “More and more money is being spent to try to make sure the data is not stolen.”

Although growth is fast-paced, Barracuda has previously reported some trouble in finding enough talent to keep up with the company’s growth in Ann Arbor, despite U-M’s highly regarded computer science engineering program. The firm was hiring new workers at a pace of 10 per month at one point last year.

Heiney spends much of his time recruiting — even chartering flights to Houghton, Mich. last year, for example — to seek out talent.

Nonetheless, he said he’s confident Ann Arbor can provide the base of talent to make the company’s expansion successful.

“We’ve got some ideas about establishing a more formalized recruiting program in Ann Arbor,” Heiney said. “With the establishment of a formalized program, we’re confident that we can keep this staffed with great smart grads from the region.”