No end to the tech trimming
As firms look for quick ways to cut costs, the financial industry faces tumbling technology budgets going into 2009, and staff are likely to be made redundant.
These gloomy predictions emerge from two reports into IT spending in the financial sector, produced by consultants Financial Insights and Celent, which surveyed banks in October and November.
Tighter budgets were already in place for 2008, but banks are reporting that actual spend was lower than predicted, according to David Potterton, vice president of global research at Financial Insights.
Potterton says that spending will continue to fall for the next five years, with 2009 witnessing the sharpest decline.
The main source of cost reduction will be lower headcount, together with the delay of planned hardware purchases and the stalling of existing projects.
IT professionals were included in the 500 cut from HSBC last week and a large number of contractors - within technology as well as other sectors - are likely to be chopped in Credit Suisse's latest round of redundancies.
IT spend across other industries is likely to be hit, too, says the report, but the financial sector will be hit harder than most.
"Banks and capital markets are in the eye of the storm," says Jeanne Capachin, research vice president of global banking and insurance practices at Financial Insights.
David Easthope, author of the Celent report, says that tech spend will be subject to change in the future.
"All told, capital markets and wealth management IT spending, like the financial markets, may become more difficult to predict, with wild swings likely," he says.
He says there will be uncertainty about appropriate levels of staffing in development and support and a focus on bringing in projects that provide easy integration with existing applications.
He adds that ongoing consolidation in the banking industry is likely to lead to job losses.
"IT staff (particularly in the back office) might be the worst hit because headcount reductions are natural by-products of these mergers," says Easthope.
