By David Furlonger, Gartner Banks throughout the world, and the vendors that provide products and IT services, are reeling from the crisis that has gripped financial markets and the economy. Most banks are cutting IT spending while they regroup to consider their strategies for 2009 and beyond. The impact of this financial upheaval on banks has been greater than most observers expected and trust of banks has been eroded to a degree that few could have foreseen. The brokerage segment, which accounts for nearly a quarter of financial services IT spending, will be hit the hardest, followed by the banking segment, which accounts for nearly half of global financial services spending. Gartner believes the slowdown in IT spending by financial institutions will persist through 2009 and likely linger for 12 to 18 additional months. In this current environment, firms are ruling out discretionary spending and most new capital expenditures. Financial services CIOs are telling Gartner that they will lengthen the replacement cycle for PCs and servers, except for mission-critical activity, such as securities trading. While all types of technology investments will be under pressure, the biggest cuts will be initially in internal bank staffs and then in layoffs at large IT services firms. However, there is a significant downside to layoffs. Most banks, and the IT vendors that support them, boast significant intellectual property among their staff. Other actions to take include: In all your business cases for any type of IT spending, stress the business benefits to be derived. Determine how your organization can produce short-term returns on investment and cost controls. Plan for all contingencies. Your firm might acquire a failing institution or be acquired. You must ensure that your IT environment is able to accommodate that uncertainty. Be flexible and supportive. You must reassure the business side that you can address latency and support issues at a time when business growth is critical to survival. Assess your skills inventory. Prioritize new hires (if you are in a position to add staff) and identify jobs that deliver the fewest cost-benefits and that can be eliminated with limited risk. Keep an eye on your vendors. Bank CIOs should be careful not to make knee-jerk reactions in assessing vendor viability or demand excessive concessions from vendors. Not all financial services firms will stand on the sidelines. Executives at some financial firms see an opportunity to increase market share. Innovation cannot be ignored - it will still separate winning or surviving firms from losing firms. This article can also be found at AmericanBanker.com. David Furlonger is a vp and distinguished analyst in Gartner's Industry Research group. He leads Gartner's worldwide research agenda for the banking and investment services industry with responsibility for technology and business research.
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