IT Spending Will Be Slow Through 2010

CU360
May 4, 2009 | COMMENTS

Not only are financial institutions reeling from the economic crisis, so are the vendors that provide information technology (IT) products and services. Most institutions are cutting IT spending while they regroup to consider their strategies for the next couple years.

The impact of this financial upheaval on banks has been greater than expected, and consumers' trust of banks has eroded to a degree few could have foreseen, according to IT research firm Gartner, reported in Bank Technology News . Gartner believes the slowdown in IT spending by financial institutions will persist through 2009 and likely linger for another 12 to 18 months.

In this environment, firms are ruling out discretionary spending and most new capital expenditures. Chief information officers (CIOs) will lengthen the replacement cycle for PCs and servers, except for mission-critical activity. 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. But there's a downside to layoffs. Most institutions, and the IT vendors that support them, boast significant intellectual property among their staffs.

Gartner's recommended actions for CIOs include:

• In making the case 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. If your credit union is contemplating a merger, make sure your IT environment is able to accommodate that.
• Be flexible and supportive. Reassure the business side that you can address support issues at a time when business growth is critical to survival.
• Assess your skills inventory. Prioritize new hires, if you're in a position to add staff.
• Identify jobs that deliver the fewest costs in relation to benefits, and which can be eliminated with limited risk.
• Keep an eye on your vendors. CIOs should be careful not to make knee-jerk reactions in assessing vendor viability or demand excessive concessions from vendors.

Not all financial institutions will stand on the sidelines, notes Gartner. Executives at some institutions see an opportunity to increase market share. To that end, don't ignore innovation. It will still separate winning or surviving institutions from those that fail