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10 ways the credit crunch will hit IT
Will the industry survive the fallout?

By Nick Heath

Published: Tuesday 16 September 2008

Faster shift of jobs from the West to the 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 says 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 joblessness rate among IT contractors has risen from a two-year low of 4.4 per cent, at the end of 2007, to 5.5 per cent in March 2008. Fears over job security are also growing, it 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 crunch.

Financial Services divisions will take a hit
Supplying IT infrastructure and back office services for financial services companies is a multibillion-pound industry. Large suppliers with substantial FS arms, such as Fujitsu and IBM, will likely 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."

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

The EIU's Rapoport said the IT industry is diverse enough worldwide to guarantee areas of growth to compensate for other weaker tech areas.

She said: "There are lot of strings to the technology industry's bow.

"For example, look at the emergence of smart phones 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."

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

And 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.