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02:45 PM
Greg MacSweeney
Greg MacSweeney
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A "Slowdown in the Decision Making Process" for Tech Spending

The continuing effects of ongoing economic turmoil have begun to drastically change the way Wall Street firms are going about their business.

Unfortunately, each time I have written this column in the past 14 months or so — dating back to August 2007 — the credit crisis has been the No. 1 topic that comes to mind. Each month, like many of you, I hope it will go away. Fortunately, other technology, regulation and compliance developments have emerged so that I haven't been forced to write each month about why the credit crisis happened, who is to blame, how it could have been prevented and so on. But here we are in October 2008, and the aftershocks of the subprime mortgage debacle, credit crisis, real estate market collapse and bank defaults continue to shake the industry.

As I write this, Lehman Brothers intends to file for bankruptcy and Bank of America has agreed to acquire Merrill Lynch. This follows the recent federal takeover of Fannie Mae and Freddie Mac, the nation's mortgage giants. Each month pundits say the credit crisis is on its last legs and the economy and the nation can finally close the books on the entire debacle. But each month the crisis surprises us with something new.

And it doesn't look as if the end to the crisis is near. Unemployment continues to rise and is currently at 6.1 percent (and rising), its highest level since 2003. Investors are wary because no one knows which bank will be the next to fail. Consumers have started to curtail spending, pulling one of the last remaining props out from under the economy that was so strong just a few years ago.

While Wall Street firms have drastically cut jobs across all parts of the organization, most publicly stated that they would not cut technology spending. Skeptics wondered, however, how IT budgets could be immune to cuts while almost every other department was asked to curtail expenditures. Many IT managers joked (or lamented) that although the workforce had been cut, the same amount of work needed to be done to keep the business running.

Now reports from technology vendors, outsourcers and industry analysts weave a much different tale about technology spending on Wall Street. Most are reporting a "slowdown in the decision-making process," which is industry-speak for "initiatives are on hold until the economy rebounds."

Will the markets experience a turnaround in 2008? Probably not. A lot still can happen, but for now, the best most observers seem to be hoping for is a quiet end to the year, with no more news about bank defaults or closings. If that happens, maybe I can start writing about 2009 as the rebound year many were hoping 2008 would have been.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio
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