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Feb 05

The financial crisis: a silver lining for IT?

Posted by kcates in TechnologykcatesGartnercomplianceCommerce DepartmentCisco SystemsCelentArmanta


Look around a little bit and you find a horde of anticipation that corporate spending on technology - after a painful slump in 2009 - is destined for a rebound in this New Year, almost 10 percent spent already. Yesterday's banner headline in the WSJ trumpeted the news that Cisco Systems was hiring 3,000 people to keep pace with a surge in demand. The significance of the story came mostly from Cisco's stature as a harbinger of things to come.

That was before the Dow dropped 268 points on fears that the Eurozone is in jeopardy and that the global economy is sicker than the market thought. The jitters of 2008 have not gone away entirely, and one can sense the fragility of this oh-so-delicate recovery (today's unemployment report isn't going to help).

Still, facts are facts, and the Commerce Department last week reported a 13.3 percent increase among businesses in fourth-quarter equipment and software, "the fastest growth since early 2006," as the WSJ article notes. That was still almost 20 percent less than tech spending during the good times way back in late 2007.

Investment in technology - the very nuts-and-bolts stuff that integrates back offices, enhances trading and keeps corporate offices everywhere in touch and in tune with their public - is critical in part because it is simply what customers (and investors) expect now.  One lingering piece of the fallout from the market meltdown of 2008 is the loss of trust, faith, optimism - pick your word.   

A month ago, Armanta, a Summit, N.J.-based company that provides technical advice to asset- and wealth-management companies around the globe, cited "investors and regulators" as the sources of much of the impetus for modernizing data-management systems that have grown antiquated in the short space of a few years. "The financial crisis revealed that many, if not all, major financial institutions have patchwork infrastructures that make it extremely difficult to understand the firm's market and counterparty exposures," said Armanta's CEO. 

If banks, hedge funds and private equity firms don't "understand" what's going on and are even a half-step behind the fast-moving markets, shifting circumstances and evaporating liquidity that we've come to know all too well in the past year or so, where does that leave the investors, customers and regulators who are either watching or doing business with these institutions?  It probably leaves them peeved.

Businesses that don't keep up with technological changes will not be able to keep up at all, suggests a report by Gartner, the big U.K.-based research company, which was not encouraged by its survey of banks. "Through 2013, 75 percent of banks will lack the means to systematically identify and exploit potentially disruptive technologies," the report concluded.  "Technology - rather than products of services - will remain the leading enabler of sustainable competitive advantage."

A separate study, by a London-based securities-and-investment analyst for Celent, argues that technology is the key to supplying the very transparency that has become de rigueur these days. "Efforts have begun in earnest," the Celent report acknowledges.  "But for many firms ,a sustainable and scalable operation that is able to secure the confidence of an increasingly demanding group of stakeholders is still a work in progress."



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