HP eyes move of support facilities out of Colorado Springs

July 7, 2008 (Computerworld) Colorado Springs was recently ranked as America's fittest city by a fitness magazine, but it wasn't fit enough, apparently, for Hewlett-Packard Co.

HP recently announced that it's building new customer service and technical support facilities in New Mexico and Arkansas after those states offered multimillion-dollar incentive packages above what Colorado Springs offered.

With the deal struck, the question now is what HP's plans mean for Colorado Springs-based employees and HP's longtime support operations. The answers are not clear.

According to the local newspaper, The Gazette, HP has told 800 employees that they will lose their jobs unless they agree to move to Rio Rancho, N.M., home of one of the planned facilities. That report was based on interviews the paper had with employees who asked to remain anonymous.

HP, through a spokesman, isn't commenting on the report or on its plans for Colorado Springs. The company employs about 1,800 in that city.

While corporations can be like sports franchises that threaten to move the team if they don't get a new stadium, moving an employee base isn't the same thing. As a result, HP seems poised to hire many new employees in New Mexico.

New Mexico's incentives include $10 million that can be used to help pay the salaries of new hires while they are being trained. The money is only for people hired in New Mexico, not for relocated employees -- although the state would welcome the newcomers. "Certainly, we don't discourage companies that want to bring families from elsewhere," said New Mexico Economic Development Department spokeswoman Toni Balzano.

David White, an executive vice president of the Colorado Springs Economic Development Corp., the local agency that negotiated the deal for the city, said he knew that Colorado Springs' incentives weren't as rich as those from other states, but he is mystified by HP's actions. "Does it make sense to hire a brand new workforce?" he said.

The impact, if any, on HP support is unclear. Colorado Springs was also home to the former Digital Equipment Corp. facility. DEC, which developed the OpenVMS system, was acquired by Compaq Computer Corp., which HP took over in 2002.

The New Mexico facility will employ 1,300 and is expected to open next year. The state is offering $20 million in tax credits for high-wage jobs that pay over $45,000. Balzano said the state believes the wage median will be in the $58,000 to $60,000 range. The state is also offering $12 million in capital improvement financing, money that can be used for the facility.

HP's new Conway, Ark., facility is also getting significant incentives, including a new $28 million, 150,000-square-foot building that will be leased back to HP. Said state Gov. Mike Beebe about HP's move: "We will fight like the dickens all other 49 states and every country on the globe for economic development opportunities for our people."

Steven Landau, an analyst at the Economic Development Research Group Inc., a research firm in Boston, said this kind of competition among states doesn't necessarily increase employment. "Nationally, it's a wash," he said. But the push for incentives may mean that states divert tax revenue money for incentives that might be spent on other services.

Beebe cited his state's investment in education as major reason for HP's decision, but for Colorado Springs there's a bitter irony in that claim. The University of Colorado at Colorado Springs was established in the mid-1960s at the insistence of HP co-founder David Packard as a condition for getting HP.