Sadly banks are still slashing IT spending

Any fintech professionals who might have thought things are beginning to look up are set to have their hopes shattered, according to new reports that suggest financial services firms are continuing to cut back on IT.

Two separate reports by technology consultancies Gartner and IDC say that overall IT spend is likely to (slightly) increase this year after all...but not within banking and financial services.

Both of the consultancies say that worldwide IT spend in 2009 will rise by 0.5%, but that financial services is likely to see the biggest contraction of any industry at -0.7%.

While algorithmic trading, complex event processing and system integration work may be providing some much needed hiring, it's looking pretty bearish elsewhere.

Aaron McPherson, practice director, financial services at Financial Insights (part of IDC), says: "All indications are that financial institutions have indeed stopped spending on all projects but those with the most immediate payback. More significantly, a paralysis has hit the industry, with many projects that have not been cut having been delayed until the second half."

Of course, this bleak outlook will come as no surprise to those techies already threatened with cuts at firms like HSBC, Merrill Lynch, JPMorgan, Citi and Credit Suisse, among others.

Bob McDowell, research director at TowerGroup, suggests that IT professionals could account for 25% of all job cuts within the financial sector.

The buzz word within these research documents is "negative growth" within financial services, which means cutbacks to you and me.

In fact, UK banks could be in the eye of the storm, according to research from Datamonitor. It tips them to slash IT budgets by up to 7% this year and that they could remain depressed until 2012.

Gartner research vice president John-David Lovelock says: "Internal spending, hardware, and system integration in the financial sector were particularly hard-hit in 2008 and will continue suffering through 2009."

The main reason the pot looks significantly smaller, though, is because the traditional big spenders are tightening their belts, says McPherson.

"Many of the top 20 banks will be afraid to pursue significant spending initiatives, and these are the banks that account for the majority of IT spending."