DHL data center to relocate to Prague

DHL will move its entire U.K.-based data center and other operations from London and Basel, Switzerland, to Prague where its new IT operations headquarters for all of Europe will be built by May 2004. A source familiar with the negotiations said the new center would be located in Prague 4, in the new development of real estate investor and developer AIG/Lincoln. The project is called The Park and its total area will be 195,000 sqm. Among the reported tenants are also IBM, BP and GE Capital Bank. DHL made the decision after an extensive review of its options for delivering high-quality, cost-effective IT operations and other services to their business, company representatives said. DHL's global IT group will retain a base in both the U.K. and Switzerland. "This kind of investment contributes to [the] creation of the knowledge-based economy, which we'd like to see coming to the country," said Martin Jahn, chief executive officer of CzechInvest. The move to Prague is part of a huge consolidation process of the parcel, express and logistics businesses of giant Deutsche Post World Net (DPWN) under a single roof. "The existing U.K. data center isn't large enough to accommodate the needs of the combined DHL, Danzas and DPEE, so we were forced to look at other options," Stephen McGuckin, global chief information officer with DHL, said in a news release last week. The Czech branch of DHL International has been fast in merging the three businesses. Last year it finalized the merger of the Czech branches of Deutsche Post and Danzas and is now bringing the newly created company, Danzas, under DHL's wing (see, 'Deutsche Post World Net hopes merger will increase market share,' PBJ, June 16-22, 2003) The new IT center in Prague is to manage and support DHL's entire European IT infrastructure, consisting of the networks, hardware, operating systems, applications and specialist staff. DHL has two more IT centers-one in Malaysia and another in the U.S. DHL chose Prague for its advanced labor force, good air connections and infrastructure and because it received incentives from the Czech government, said Lucie Jandova, DHL's marketing manager in Prague. Ministry of Industry and Trade incentives included 25 percent subsidies for staff training. A core team of existing DHL staff will come to Prague in the beginning to help establish the center, which the company says will create 500 jobs in the first year of operations. DHL wouldn't disclose the value of its investment in Prague, but industry estimates were in the billions of crowns. "Some parts of Western companies, especially their logistics bases, could be much more cost effective [if they moved here]," DHL's Jandova said. DHL entered the Czechoslovak market in 1986 as the first express service. It operates a branch in Prague, established in 1991, and employed 400 at the end of 2002. In the Czech Republic, DHL International finished 2002 with Kc 1 billion in revenues. Another foreign direct investment deal was announced last week. American industrial manufacturer Eaton Corporation will invest Kc 450 million ($15 million) in a production facility in Chomutov, north Bohemia. Construction of the plant should start within months. It will employ several hundred workers. The project will have three phases, so the final number of jobs created and the total amount of investment will be many times greater, Jahn said. Eaton will also move some other parts of its production facilities from other places in Europe to Chomutov. But Jean-Pierre Lacombe, Eaton's vice president for Europe, would not be more specific about the plans. Eaton is the most recent in a series of car industry suppliers to enter the country recently. It will produce fluid connectors for automotive industry, mostly for export to, among other places, the new Slovak PSA plant in Trnava. "We're also looking at possibilities of research [center] in the Czech Republic," said Lacombe. Eaton employs 51,000 worldwide and generated sales of $7.2 billion last year. The Central and Eastern Europe (CEE) region was strong in foreign direct investment (FDI) in 2002 in sharp contrast with other parts of Europe. The regional trend is expected to continue this year, according to a prediction last week from the United Nations Conference on Trade and Development (UNCTAD). The Czech Republic was ranked No. 1 in the CEE region with $9.3 billion (Kc 278 billion) in FDI in 2002 and ended up in sixth place in increases in FDI globally. But Jahn said he expected that figure to drop by about half this year. The agency is in negotiations with several small IT companies. A few financial services companies are also interested in settling down in Prague. "I can say that all these are very serious projects, and probably by the end of the year we'll reach a deal with all of them," Jahn said. The CzechInvest head said that he also expected more car industry suppliers and reinvestment this year by current investors, although he wouldn't disclose the names of any potential investors. As the privatization potential of the country gets exhausted, so-called "after care" of already present investors will become CzechInvest's main focus. That includes trying to keep investors in the country when they're tempted by cheaper labor further east, a phenomenon that has cost Hungary some investors in recent years. "In the region we are fairly ahead of the other countries in after care, but there is a lot more to be done," said Jahn.