NationsBank Corp. is putting the finishing touches on one of the industry's largest backup computer sites.
The new facility, which the bank and International Business Machines Corp. have spent at least two years building, will handle main processing functions should one of the bank's two data centers get knocked out of commission.
Executives said the construction cost of the Gaithersburg, Md., recovery site was equal to about 6% of NationsBank's annual technology budget, which may work out to about $20 million, according to Tower Group, a consulting firm in Wellesley, Mass.
The bank's willingness to spend such an amount attests to the central role that technology plays in banking today, executives said.
"Banking is an information business ... a company the size of NationsBank handles an enormous amount of information every day," said Hugh McColl Jr., chairman of the $192 billion-asset institution. "We must always be open for business," he said.
In a 1993 study, NationsBank found it could lose up to $50 million if one of its data centers were forced out of operation.
That figure does not include intangible damages - such as erosion of customer confidence - that a service outage could bring about.
"We knew of some very scary facts in the industry and the risks involved if you don't have an adequate business recovery plan," said William J. Douglas, senior vice president of NationsBanc Services Corp., the technology arm of the Charlotte, N.C.-based bank.
Previously, NationsBank's recovery arrangements called for the bank to restore critical applications within 72 hours of a computer mishap. But that plan has been revised.
When the new backup facility is fully functional - it is 85% complete now, according to Mr. Douglas - the bank can bring itself back to full processing speed within 24 hours of a computer failure.
Mr. Douglas said findings from the Gartner Group were part of the reason the bank was driven to amend its disaster recovery plans.
The Stamford, Conn.-based consulting firm found that 60% of businesses that failed to arrange for computer backup went out of business within two years of system-debilitating disaster.
Among the most common causes for such disasters are natural forces, such as snowstorms or tornadoes.
However, Gartner Group analyst Claire Gooding noted that banks' potential exposure to some distinctly unnatural disasters has increased in the last few years.
"The U.S. is waking up to what terrorism is really about - these are what we call 'man-made disasters,' said Ms. Gooding. "Most people realize that this can happen anywhere, anytime."
NationsBank's new data center already is backing up some of the bank's functions. When the facility - a "hot site" that constantly receives data updates from other centers - is fully operational by the end of next year, it will support retail services in nine states and wholesale services that are spread throughout the country.
IBM's "electronic vaulting" system will send batched information from the bank's two main data centers in Virginia and Texas to the new facility every 24 hours over high-speed communications networks. Another electronic remote journaling system will transmit certain transaction information in real time.
IBM has committed an average of 12 employees working on the project, while the bank itself has dedicated around 30 full-time staff members.
"NationsBank recognized, given their size and scope, that it needed to make sure their technology infrastructure was committed to their customers," said Ronald D. Martin, client solutions executive at IBM.