Thursday, October 30, 2008

IT opportunities in the current financial crisis?

I'm not optimistic, but here is a fact: For more than 20 years (since the 1987 crash) or in some cases since the usage of computers in companies, the IT budgets of financial institutions (banks, insurance companies, stock markets etc.) ALWAYS go up.
In the meantime, technologies went from Mainframe, to Client/Server, to Web 1.0, to Web 2.0, to SOA, to Virtualization and now Cloud Computing. But in spite of all the technological advances, IT budgets ALWAYS go up. I've given consulting services to many banks and insurance companies, and one thing got increasingly clear: If you're trying to sell a software that will reduce their IT budget... Forget it!


Of course, the financial institutions' needs from IT increased in the last 20 years. They want to setup new services and products (online banking, new policies, new mortgages :) faster than their competitors. But the increase in end user demands is an order of magnitude lower than the technological advances in hardware and software. IT budgets should have gone down, and insurance premiums and bank fees also. But no - IT budgets ALWAYS go up.


I think the main reason is Wall Street. If you are Bank of America, and someone finds out you're reducing your IT budget... Your stock will go down immediately!


A month ago after 20 years of IT budget increases all the CIO and IT department in financial companies have a huge amount of cash fat.
Where the fat goes?
  • Buying hard to install and unmaintainable software (you need to keep all these engineers) from BIG vendors.
  • Buying low performance hardware for incredible amounts of money.
  • Of course, a big team of developers and system engineers to oil down the cranky machines.

And now, for the first time all the CIOs have only one goal: Reduce your IT budget!
IT department in financial companies will never be the same!

From my knowledge, and experience with theses companies their IT budget is about 3 to 5 times bigger than it should be. I don't think they will go all the way and slash 80% of the IT department, but what's for sure, they'll slash the vendors, and contractors.

I think one big software/hardware company will suffer big time from this change because it's living and breathing of this fat. The saying was that a CIO choosing IBM will never get fired for his choice (even he wasted time and money on a failed project). Today that thinking changed.

So, where are the opportunities?
Well, now you can really sell and prove the advantages of modern technological advances to financial CIO. They will be sensitive to TCO, developer productivity, software quality and maintenance.
The issue is that no CIO will start a costly migration project now! So the current state of IT will be frozen for some time. But, some companies will really analyze what's going on and make a decision to go with open source, agile and distributed all the way.

Things will change in banks and insurance companies IT departments, let's hope WebsFear does not blackmail their customers again...

Originally posted on dzone