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 Thursday, October 5, 2006
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Spinoff jobs expected from HSBC's data center


Officials say it will lure tech-support firms

By JONATHAN D. EPSTEIN
News Business Reporter
10/5/2006
HSBC North America Holdings' $166 million data center project will likely bring more technology companies and jobs to Western New York to support it, officials said Wednesday.

The parent of HSBC Bank USA, together with Gov. George Pataki and other national, state, and local political leaders, formally confirmed before a sea of television cameras that it will spend $69 million to build a new 275,000-square-foot facility in Niagara County. The exact location has yet to be decided, but Pendleton is in the lead among at least four possible rural sites.

The bank will spend another $70 million on technology for the new building, and $27 million to upgrade a smaller facility on Park Club Lane in Amherst that was constructed in 2001. And it will spend more than $100 million a year for 15 years - over $1.5 billion in all - to keep the technology updated.

That technology capacity, in turn, will require enormous tech support from computer equipment makers and vendors, such as Sun Microsystems, IBM Corp., and others, bank officials said during the press conference at the Amherst Chamber of Commerce.

Those firms will likely set up field offices here, in surrounding buildings, to service HSBC's needs, creating new technology jobs locally and moving installation, maintenance, repair and other technicians from other parts of the country.

Once here, they can also work for other companies. And as other businesses outside the region learn of the concentrated capabilities that will be present locally, they will look at Buffalo as a place to locate their own back-office technology centers.

"This project reinforces the fact that we see this region, with its large, highly skilled, dedicated work force, as a great place for technology investment," said Martin Glynn, president and CEO of HSBC Bank USA, which is the U.S. banking unit of London-based HSBC Holdings Plc. "We believe it will serve as a catalyst for investment by other corporations as well."

Such technology-heavy data centers are the fastest-growing sector in the corporate site selection business today, according to industry consultant John Boyd, president of The Boyd Co. in Princeton, N.J. In fact, his firm currently has a backlog of such advisory work for clients.

Many projects are in financial services and health care, because of federal laws mandating how financial and health care institutions collect, store and transmit personal data. The USA Patriot Act has also contributed, as has the growth of identity theft. Boyd estimated that data security spending by the banking industry alone will grow by 17 percent this year, reaching $2 billion a year.

"These facilities are not only coveted in and of themselves, but they can generate additional corporate investment from suppliers and vendors," Boyd said.

For companies that want a presence in the Northeast, Western New York is ideal for a host of reasons, Boyd said. Buffalo has a long history of financial services and well-established skill sets, but at lower labor costs than other areas. And it's far enough away from high-profile terrorist targets in New York City and Boston, but close enough to be accessible.

Land and electric power also are much cheaper in Buffalo than in the major financial centers like New York City, Boston and Long Island. Data centers require a lot of land, including buffer zones around the buildings, and they use significant amounts of power, Boyd noted.

Finally, Buffalo is less prone to major natural disasters than other parts of the country, especially the Southeast and Gulf Coast, which are repeatedly hammered by devastating hurricanes that could flood buildings, knock out power and disrupt the work force.

"You're insulated from natural disasters by and large," Boyd said. "You do have a lot of snow, but the work force is used to it and the city has the equipment to move the snow. It's not like Atlanta, where there's an ice storm and the city literally shuts down."

Indeed, Glynn said, the local labor and resources played a role in the decision for HSBC. The two Western New York data centers will handle all bank transactions for HSBC in the United States and Canada. A separate pair of data centers - one existing, and one more to be built, both in suburban Chicago - handle non-bank transactions for HSBC's credit cards, consumer finance and auto finance businesses.

The proposed new data center will create 78 new jobs, on top of 5,830 HSBC has now in Western New York - including 850 in technology and services.

But unlike basic processing work, these new jobs are highly skilled engineering positions paying an average salary of $75,000 to maintain, operate and program the computers.


e-mail: jepstein@buffnews.com



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