State Street Corporation said it planned to reduce its technology staff by 850 employees, as part of a multi-year transformation of how it manages its information systems.
The provider of financial services to institutional investors said it will transfer employment of 320 State Street technology employees who do not deal with customers to two providers of computer and consulting services, IBM, based in the United States, and Wipro Technologies, based in India.
Another 530 persons will be let go over the next 18 to 20 months. They will receive severance and outplacement services.
This is in keeping with State Street’s intention, stated November 30, to cut 5 percent of its work force, as it accelerates its investment in new technologies such as "private processing clouds” and “lean methodologies” of operating.
Roughly 1,400 jobs, it said, would be trimmed, through the end of 2011 as part of a four-year program to enhance customer service, increase efficiency and support growth
At the time, State Street said it expected to recognize restructuring costs of approximately $400 million to $450 million over four years, beginning in the fourth quarter of 2010. It expects "slight pre-tax cost savings" in 2011. By 2014, the annual savings should be roughly $600 million.
Nearly all of the employees affected by Tuesday’s announcement are located in North America. State Street employs approximately 4,000 IT employees worldwide.
State Street said it would relationships with IBM and Wipro to support its technology infrastructure, application maintenance and support systems
State Street’s own people will be more focused on research and development, it said.
“Our business operations and IT transformation program reflects our commitment to maintaining an advantage that supports our continued growth in an increasingly competitive global environment,” said James S. Phalen, executive vice president and head of Global Operations, Technology and Product Development. “While making changes that impact a number of our employees is never easy, we believe that this move is a necessary step that will allow us to better deploy our resources in line with our core competencies, efficiently leverage the capabilities of our partners, and enable us to offer more sophisticated products and services to our clients.”
The firm expects to record approximately $110 million to $130 million of pre-tax restructuring charges in the second half of 2011.
State Street has $22.762 trillion in assets under custody and administration and $2.116 trillion in assets under management. State Street operates in 26 countries and employs 29,450 worldwide.
The announcement came as State Street said its second-quarter earnings rose 19 percent on higher fees, benefits from acquisitions and cost cutting.
State Street said it earend $513 million in the three months ending June 30, compared with $432 million a year ago.
Revenue rose 8 percent to $2.5 billion.
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