Study: Operating corporate back office in Providence cheaper than Boston, NYC

A NEW STUDY showed that operating a corporate back office in Providence, at an estimated cost of $10.5 million, is less expensive than in San Francisco, New York City and Boston. / COURTESY THE BOYD COMPANY
A NEW STUDY showed that operating a corporate back office in Providence, at an estimated cost of $10.5 million, is less expensive than in San Francisco, New York City and Boston. / COURTESY THE BOYD COMPANY

PROVIDENCE – A new global study that examined the cost of operating back offices of the financial sector shows Providence is among the least expensive locations between the New York and Boston markets.
The study, prepared by Princeton, N.J.,-based The Boyd Company Inc., looked at 45 cities throughout the globe with populations of at least 500,000 people in the metropolitan area.
Using a model of a 30,000-square-foot back office employing 125 workers, John A. Boyd, company principal, estimates the annual operating costs in Providence totals $10.5 million per year.
Boyd said cities included in the report are selected based on requests from clients, which is a good sign for Providence.
“The brick-and-mortar labor presence in major cities, like Boston and New York, are shrinking,” Boyd told Providence Business News. “The back offices and more of the labor-intensive work is going to secondary, lower-cost markets and Providence fits nicely into that category.”
Gov. Gina M. Raimondo has said recently she’s actively trying to recruit back-office operations from the Boston area to come to Rhode Island, including from General Electric Co., which is moving its headquarters to Boston.
Boyd says her approach is smart because there will be thousands and thousands of back-office jobs that will not fit – space-wise or economically – within the seaport district in Boston.
Of the six New England cities included in the study, Providence is the second least expensive city for back office operations. Portland, Maine, is the least expensive city with a total annual operating cost totaling $10.1 million. Boston is the most expensive at $11.1 million.
Back offices typically provide select support functions, including accounting, finance, IT, customer service, human resources and marketing. Decentralizing the operations from corporate headquarters has become increasingly popular among large companies looking to cut down on overhead costs.
“As headquarters themselves become more mobile – as seen in the recent high profile headquarters relocation of GE from Fairfield, [Conn.], to Boston – there are more and more spinoffs of back office functions,” according to the report.
The report said the financial industry is leading the movement of decentralizing back office operations, as Montreal – the least expensive North American city named in the report – recently attracted about 2,000 jobs from State Street Corp. in Boston and Morgan Stanley in New York. Morgan Stanley announced last month it would cut up to $1 billion in costs by 2017.
“While back office moves by financial services firms to cities where operating costs are a fraction of financial capitals like New York and London is not entirely new, the pace is at an unprecedented level and is putting lower cost regional markets in the sphere of New York City and Boston – like Providence – in play for new back office investments and jobs,” according to the report.
The Bank of New York Mellon is moving a portion of its workforce from downtown Boston to a less costly satellite in Everett, Mass.
In the report’s breakdown of costs associated with running a corporate back office, Providence is less expensive compared with Boston in every category except amortization and sales tax costs. Providence is less costly in every category compared with New York City ($12 million) except electric power costs.
The most expensive city to operate back offices is San Francisco, totaling $12.5 million. The least expensive city is Tunis, Tunisia, totaling $3 million.
The other New England cities cited in the report include:

  • Stamford, Conn., totaling $11.1 million
  • Springfield, Mass., totaling $10.7 million
  • Hartford, Conn., totaling $10.5 million

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