As the U.S. stock market continues to fluctuate and Wall Street's biggest firms wait to see if a bailout package will arrive on their doorsteps, there's the question of what will happen to IT budgets as credit becomes scarce and worries mount about the overall health of the economy.
While analysts believe it is too soon to tell whether IT budgets will be impacted by what has been happening on Wall Street since Lehman Brothers declared bankruptcy on Sept. 15, it seems clear that there will at least be some slowdown in spending, especially when it comes to purchases of PCs, server systems and storage arrays. How big of an impact this will all have is still unknown.
In a report, IDC said it believes that the financial sector accounts for about 20 percent of all IT spending in the United States, and that the latest calculations suggest that these firms may cut about $3 billion in IT spending in 2009. This is likely to have an impact on purchases of servers and PCs since it is generally easier for IT departments to delay hardware purchases than software purchases.
Still, just because a firm such as Lehman Brothers goes into bankruptcy does not mean it stops spending on IT. Stephen Minton, an analyst with IDC, said large portions of Lehman Brothers still function and will continue to do so even after they are sold to other financial companies. In that case, Minton said, spending will continue, although IT spending and IT projects may be consolidated or curtailed.
"When a company gets acquired or part of a company gets acquired by another, obviously there will be certain elements of tech spending that will be consolidated," Minton said. "Whether that means consolidating data centers or removing how many licenses they need for software, it will have a dampening effect on tech spending overall. As far as putting numbers around it, it's too early."
What is important to remember as the Wall Street crisis continues is that spending on IT has been slow since the beginning of 2008. The slowdown in spending on Wall Street started as early as the latter part of 2007, when the first signs of the subprime mortgage fallout began to appear. This chain of events was factored into how IT budgets and projects for 2008 were developed and approved, which means IT spending outside of Wall Street is likely to continue and it could take some time before the impact of the financial troubles of Lehman Brothers, AIG and other companies is felt.