Expect more cuts to come in financial technology

To many technology analysts and headhunters, UBS's decision to axe 500 IT staff was unsurprising. Banks are looking to save tens of millions by reducing running costs and technologists are a prime target for cuts.

While the number of people affected by UBS's redundancy plan is relatively large, at 5.7% it's a small proportion of its overall IT headcount. Many banks employ an army of technologists - JP Morgan employs some 19,000 programmers, UBS has 8,700 technologists and Goldman Sachs has around 9,500 IT staff.

"Banks are making their IT functions more efficient. While this means a lot people will lose their jobs, the proportion of total headcount reduction - at an average of around 10% - will be smaller than other areas of the business," says Ralph Silva, an analyst at research firm SRN.

Therefore, while IT teams are likely to remain broadly in tact, there's still a lot of pain to come, with the potential for thousands of job losses globally within a single bank. The recent Morgan Stanley/Oliver Wyman report into the state of investment banking predicted that there would be 5,000-7,000 redundancies in IT.

Part of the reason, says Silva, is investment banks' increasing willingness to buy-in third-party technology, rather than build in-house, meaning that the number of people required to maintain these systems (which usually consumes the lion's share of tech budgets) is likely to be reduced.

"Even three years ago, most banks wouldn't have considered a third-party system to gain a competitive advantage, but they've come on leaps and bounds since then," he says.

Headhunters in the IT in finance space suggest that current conversations with chief technology officers are all about downsizing rather than expansion.

"There's a move to weed out the generalists, where skills are becoming commoditised and easily performed in cheaper locations. Some banks are talking about a reduction of 2,000 technologists globally," says one headhunter who declined to be named. "That's not to say banks aren't still hiring - specific domain expertise or deep knowledge of core banking software is still in demand."

It does, of course, stand to reason that if banks are spending more on third-party systems, the tech vendors that service the industry could expand on the back of a surge in business.

"There's a definite opportunity for technologists to work for a vendor or even an outsourcing company, but they're much more efficient organisations than banks," says Silva. "I'd estimate that if 10% of IT staff were made redundant within banks, around 7% could find re-employment in a technology vendor."