IT Opportunities in a Slow Economy

Although companies will reduce their IT spending because of the economic meltdown,
it’s not going to be all doom and gloom for the IT industry.

System integrators and consultants will get a boost from the crisis in the financial
sector, say analysts, as institutions that have taken over or bought others seek to align
their back end systems.

Vendors offering solutions for governance, cost and profitability analysis, and data
integration are also expected to benefit as companies figure out what to cut and how to
do it safely and to their greatest benefit, or merge and consolidate systems after an
acquisition or merger.

Meanwhile, analysts predict that pay as you go services, ranging from
software-as-a-service (SaaS) to hosted service providers to cloud computing providers to
hardware leasing, may see an uptick because using them will cost corporations less up
front than buying hardware or software outright.

“Most financial institutions will cut back on IT spending,” Rodney Nelsestuen,
research director of the cross industry group at the financial services industry research
provider Tower Group told InternetNews.com. “At least half of them will freeze
spending or reduce it to the extent that they can for the next six to 12 months.”

New projects will be the most heavily impacted. “About 22 percent of IT spend from
financial institutions will be impacted, but most of this will be discretionary spending,
like new innovative projects they were looking into,” Ellen Joyner, global banking
marketing manager at the SAS Institute, told InternetNews.com.

The overall IT spending picture
is not pretty
, with securities industry IT spending in North America expected to fall
by almost 15 percent, and 29 percent of leading companies overall expected to cut or stop
IT spending in the fourth quarter of the year.

Still, things won’t grind to a halt. “The business must go on, and companies will need
to spend on and support what they need in order to conduct their business,” Nelsestuen
said.

Data integration at the back end will also become important because of the mergers and
acquisitions in the financial industry. “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,” Chris Boorman, chief marketing
officer of Informatica, told InternetNews.com. “That means bringing together data
from disparate systems.”

Hanging On to the Cash

Also, consulting firms and systems integrators “will have great potential for work”
because most financial institutions that bought others “may not have the bandwidth to
execute on a full system integration,” Nelsestuen explained.

Another growth area that will emerge is in business analysis applications. “Activity
costing and profitability management solutions will help corporations optimize where they
should put their spend and where the major costs are,” SAS Institute’s Joyner said,
predicting that this will be “one of the hotter areas in the short term.”

That cost-cutting must be accompanied by strong governance to avoid breach of
compliance. “As IT gets cut back, institutions will have to make hard decisions about
what to do and what to cut, and they’ll need to manage their risk and analyze their
operational process better,” Nelsestuen said. “Governance will become very
important.”

Companies that have to get new equipment or software will look to SaaS and
pay-as-you-go strategies, Nelsestuen said, adding that they may lease hardware rather
than buy it although “the economic impact over the long run is equal whether you buy or
lease.” Big vendors such as HP, IBM and Sun Microsystems will benefit from the move to leasing, he added.

Although Salesforce.com , one of the best-known SaaS players and the only
one to make the
S&P 500, might be set to profit handily as enterprises begin to focus on SaaS,
company executives declined comment when contacted.

Another new technology that will attract interest is cloud computing, but it may not
benefit too much because “for institutions that are regulated and are looking to start a
cloud computing initiative, there’s a lot of risk involved and it’s not something to
undertake lightly,” Nelsetsuen said.

Article courtesy of InternetNews.com

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