Compliance Toolkit

What the credit crunch means for IT

Tags:
Outsourcing,
Workers,
Savings,
Suppliers

Nick Heath silicon.com

Published: 17 Sep 2008 12:58 BST

…companies sought software to help them comply with the tough data-management requirements of the Sarbanes-Oxley Act.

Ward said: "The greater regulation in the financial sector will create opportunity for companies specialising in that area, and there are going to be massive system changes required."

"Sarbanes-Oxley presented great opportunities for companies specialising in business intelligence and you could see a similar demand for firms to extract and analyse data in a way they have not before," said Ward.

Faster shift of jobs from West to East
Expect the crunch to fuel the erosion of IT jobs from high-cost base areas in the UK and US to low-cost alternatives in the East, as companies seek to rebalance their workforce in favour of countries that promise lower wages and operating costs.

EquaTerra's Morris said: "You will see an increasing number of redundancies in the UK and the US. An example is the HP-EDS deal. Where there are redundancies coming out of integration, they are going to be in the countries where there are highest costs."

Contract workers will suffer
One of the first places the axe is likely to fall is on contract workers, which Intellect's Ward said makes them a good barometer for the credit crunch's overall damage to the industry.

He said: "If there is pressure on IT suppliers, then one way they can make immediate savings is by first getting rid of the contract work. That is the one area of IT that is usually most sensitive to these things."

Recent research from contractor services provider Giant Group shows the long-term jobless rate among IT contractors has risen from a two-year low of 4.4 percent, at the end of 2007, to 5.5 percent in March 2008. Fears over job security are also growing, the company added.

Leon Howgill, client relationship manager for IT recruitment company Advanced Resource Managers, said the organisation is "not seeing an impact so far", adding he believes the flexible nature of contract work will allow contractors to weather the credit crunch.

Financial services divisions will take a hit
Supplying IT infrastructure and back-office services for financial-services companies is a multi-billion-pound industry.

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Large suppliers with substantial financial-services arms, such as Fujitsu and IBM, will probably readjust their focus to more resilient areas, such as the public sector.

Ward said: "It is evident that those companies providing telecoms support and software as a service to financial institutions are going to be hit hard if their customers go out of business or tighten their belts."

"There is a big network of companies that supply into the financial-services market," said Ward.

Global IT spend will be resilient to the economic slowdown
Despite forecasting a fall in global IT spending, the Economist Intelligence Unit said the drop will be below the general spending decline.

Rapoport said the IT industry is diverse enough worldwide to guarantee areas of growth to compensate for other, weaker technology areas.

She said: "There are lot of strings to the technology industry's bow. For example, look at the emergence of smartphones that allow people to get on the internet in emerging markets."

"I do not think that people will have to worry about large job losses in the IT industry," Rapoport said.

More home workers
As companies shut office buildings and sell off business real estate to raise cash, more businesses can be expected to adopt a remote-working model.

With changes to the flexible-working laws expected soon, companies could find themselves with an additional reason to allow their staff to do their work without tying them to an office.

The growing penetration of broadband and the various secure virtual private network offerings will only make the model more attractive compared to the expense of running an office.

Credit: 10 ways the credit crunch will hit IT from silicon.com