A Bloomfield Hills-based software firm plans to expand into Ann Arbor with an operation that will eventually employ 73 workers.

The firm, Lakeside Software, said today that its expansion is connected to the reception of a $731,244 tax credit from the Michigan Economic Growth Authority (MEGA) board, which was set to approve several tax credit applications this morning in Lansing.

The company indicated in its tax credit application that it would invest $6.1 million in an expansion at its existing presence in Bloomfield Hills and a new research-and-development operation in Ann Arbor.

Lakeside produces software to help clients improve remote working capabilities, enhance security and reduce computer energy usage.

Dan Salinas, Lakeside's vice president of business development, said the decision to expand in Michigan was a reversal from its previous thinking.

"We were looking to move to Palo Alto," Salinas said of the California tech hot spot. "In fact, we were pretty much going to move to Palo Alto."

Salinas said the company initially believed that California offered its best chances of hiring the software engineering talent to fuel its continued growth. But a meeting with MEDC and Ann Arbor officials opened the company's eyes to the talent available in this area.

"We hadn't really considered it," he said. "They showed us all the resources that they had available to them, from SPARK, from the city and all the talent pools that they have there, and we just became convinced that we could satisfy the talent we needed with staying in Michigan."

Lakeside has found success with a model in which the company's engineers generate software applications that are sold and distributed through corporate partners such as Hewlett-Packard and IBM, which package Lakeside's software into their own offerings.

Because of that model, most of the company's employees are dedicated to R&D, Salinas said. He wouldn't disclose how many employees the company has.

Lakeside has yet to sign a lease for an Ann Arbor office, but Salinas said the company's search is centering on available space between the Main Street retail district and the University of Michigan's Central Campus.

The company is simultaneously planning an expansion at its existing space in Bloomfield Hills with 125 new jobs planned for that facility.

In Ann Arbor, the new jobs will involve software engineering, high-level technical support and eventually product management, Salinas said.

Salinas and Lakeside founder and CEO Michael Schumacher are U-M grads, so "it didn't wreck our hearts to be located in Ann Arbor either," Salinas said.

Lakeside may be among the last companies to receive MEGA tax credits from the Michigan Economic Development Corp.

Gov. Rick Snyder has proposed eliminating most of the state's business tax credits, including the MEGA program, and replacing them with a capped annual pool of $75 million in incentives. MEDC would develop new programs and ways to distribute the $75 million.

Under Snyder's proposal, companies that have already received MEGA credits could keep the credits and continue to pay the Michigan Business Tax or they could give up the credits in exchange for the ability to pay the 6 percent corporate income tax that would replace the MBT.

Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.