The global recession is undoubtedly going to affect the IT industry, as it is affecting all market sectors. We have already seen warnings from Google, Yahoo and eBay, with reductions in annual growth rates.
However, this does not mean that IT opportunities will dry up completely over the forthcoming months and years, as there are still plenty of companies that rely on innovation, and research and development, an will require new blood to bring in new ideas.
One group of IT professionals that may experience an increase in demand are system integrators and consultants, as mergers and acquisitions across the banking sector with result in the need for various separate accounting and trading systems to be synchronised.
All companies aim to operate just one accounting system across the board, however vastly different technologies often mean that upgrading the main accounting system may require server upgrades, and reconfiguration of all satellite systems, not to mention business contingency and disaster recover considerations.
All of this could mean that there will be a lot of new business in the IT sectors once companies decide how they are goign to restructure and realign their businesses.
Another growth area is likely to be the “pay as you go services”, which include products such as software-as-a-service (SaaS), fully hosted service providers, cloud computing providers and hardware leasing.
All of these areas could experience an increase in demand as newly restructured companies may be forced to rent their IT solutions while top management is still agreeing on how to re-engineer the business.
“Most financial institutions will cut back on IT spending. At least half of them will freeze spending or reduce it to the extent that they can for the next six to 12 months.” Rodney Nelsestuen, Tower Group Financial Analysts.
It is predicted that new projects will be hardest hit, as about 22% of IT budgets from financial institutions will be impacted. Most of these budget cuts will result in cancelling new projects, to enable companies to continue to effectively manage and improve current systems.” Ellen Joyner, SAS Institute.
Although there will be some new opportunities in IT, the general trend will be a downturn and reduction in demand for IT professionals. Some sectors of the securities industry have already seen large reductions in hourly rates for contractors, with some companies capping the hourly rate.
IT professionals could once command extremely high rates, often earning more per year than the directors of some companies, but this is certainly no longer the case in many companies. IT spending in the USA is expected to fall by almost 15%, and 29% of leading companies expect to cut or stop IT spending in the fourth quarter of the 2008.
However, Nelsestuen is relatively optimistic, in that business will not grind to a complete halt, saying that “the business must go on, and companies will need to spend on and support what they need in order to conduct their business.”
Back office data and systems integration will become more important as a result of recent mergers and acquisitions in the financial industry.
Chris Boorman from Informatica said: “The first thing that happens in an M&A is they have to bring together things like general ledgers and then customer service capabilities so they have a single view of the customer, bringing together data from disparate systems.”
Another area that is likely to see a rise in demand is business analysis. “Activity costing and profitability management solutions will help corporations optimise where they should put their spend and where the major costs are – this will be one of the hotter areas in the short term.” SAS Institute.
Overall, the only certainty is that there is going to be a lot of change within the financial sector. The nationalisation of banks could see a return to less aggressive development of IT infrastructure in the short term – or there could be massive contracts for the right IT companies to win to rebuild systems.
As seen previously with NHS systems, government budgets seem almost endless – in 2004 when the NHS started building a new system, costs soared to between £18.6bn and £31bn ($40-$60bn). many people were critical of the costs, claiming that much of the money was wasted, however the IT industry did well, and will do well again.
