HSBC to move data tasks to Chicago
HSBC North America Holdings plans to move its primary and backup data center functions in Amherst and Buffalo to Chicago over the next two years, abandoning plans for significant technology investments locally over the next few years.
The subsidiary of London-based banking giant HSBC Holdings PLC will move a few jobs and its “data center functionality” to Illinois, including its systems and some equipment, said spokesman Wen Huang.
He said the bank has “developed a pair of very advanced data centers” in the Chicago area, where it also built a separate new corporate campus in the suburb of Mettawa, and believes that’s a better use of its resources.
“We want to combine a majority of data center functionality in centralized locations,” Huang said. “It’s more cost-effective and will improve operational efficiency.”
Most existing technology personnel here will continue to support the system from Buffalo even after the move to Chicago, Huang said. He said officials expect “only a few positions” will be impacted, but the exact number “is still being evaluated.”
The shift will take place gradually, starting this year and ending in 2010. However, officials have not decided what to do with the Amherst center afterwards, or even whether it will be used for technology purposes.
“We are still evaluating options on how to best utilize the Amherst facility in an effective way, but that decision is not expected for some months,” Huang said.
This is the latest move by HSBC — formerly Buffalo-based Marine Midland Bank — to shift some portion of its operations, staff or corporate presence out of Buffalo, as it has integrated more closely with the larger company.
It transferred its legal bank charter — essentially the “legal headquarters” of HSBC Bank USA — to Delaware in 2004, and moved its top executives to either New York City or Chicago.
And although the bank has maintained at least 5,000 employees in the Buffalo area — there are currently 6,000 — the jobs and functions have changed as it outsourced some back-office work to India and shifted hu- man resources and some other corporate functions to Chicago or New York.
Still, officials insist they are committed not only to the state, where it employs 13,000, but also to Buffalo “as an important hub of leadership, operations and customer service.”
“Buffalo continues to be a vital community in which we live and work, providing a range of financial services to our customers in the area, across the country and the globe,” the bank said in a statement.
The move also marks a blow for local economic development efforts, and a significant reversal for HSBC, which has operated data centers in Western New York for years. Until recently, the company had expressed a commitment to those local operations. The bank had previously spent $21 million to build and $47 million to equip the Amherst site.
The state and HSBC had announced more than two years ago that the bank would spend $27 million to expand and upgrade its Amherst facility on Park Club Lane and another $139 million to build a second technology site in rural Niagara County to supplement the first. The combination was to be one of four technology hubs for the company’s North American business.
The bank also planned to spend at least $1.5 billion — $100 million a year for 15 years — to maintain up-to-date technology at both locations. That’s $867 million for Amherst and $832.5 million for the Niagara site, which initially had been targeted for a 51-acre farm field in the Town of Cambria. The bank expected to create 56 jobs in Niagara County and invest $35 million on computer equipment there.
The Amherst Industrial Development Agency approved nearly $79 million in sales tax breaks for technology purchases, while the Niagara County IDA approved a 15-year reduction in property taxes and a sales tax exemption on construction materials and equipment. The bank would pay $14.5 million over 15 years, but would save $88.5 million in taxes.
The New York Power Authority also awarded the bank low-cost power, and Empire State Development Corp. agreed to provide an $800,000 grant to the bank for the two projects.
But the collapse of the mortgage market, followed by the financial crisis and recession caused HSBC to back off its plans in Niagara County completely, even before it had purchased the property.
And while the bank did invest in some “technical expansion” in Amherst to provide added capacity, it was only to meet short-term needs over the next two years since the facility was already operating at its maximum. Huang would not elaborate on what was done or how much was spent, saying the details are proprietary.
Meanwhile, the bank’s much vaunted technology infrastructure locally stumbled badly last summer, creating an embarrassment and headache for HSBC.
Bad hardware related to an upgrade of its disk storage system caused a complete crash of its core banking system nationwide. The result was weeks of turmoil for customers, as transactions weren’t posted and balances weren’t updated leading to uncertainty and frustration until the bank could catch up.
However, Huang said the decision to move the data center work is not related to that incident. He also said officials are taking precautions to ensure that no customer data is compromised or lost in the process of moving the operation.
“Information security is always very important to us,” he said. “We have taken very extensive security measures to prevent any data compromise.”
Officials from Empire State Development Corp. did not return calls seeking comment.
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