With cost-cutting the name of the game, technology is set to go on the back burner in 2009, but certain sectors are likely to remain in strong demand.

2009 WILL BE A GOOD YEAR FOR….

Change managers/integration specialists

In the immediate aftermath of the recent wave of financial sector consolidation, technology professionals have suffered. Merrill Lynch-Bank of America, Lehman-Nomura, Lloyds TSB-HBOS – all either have, or are predicted to, lay off IT staff.

In 2009, however, it will be time to knit together the disparate IT systems of the merged banks and look what should be kept or decommissioned.

This is likely to throw up a lot of work for change managers and integration specialists, who are often brought in on a contract basis to carry out the work.

Andrew Keene, director of technology recruiters Thomson Keene Associates, says: “If you look back at RBS and ABN Amro, there was massive demand for project managers and business analysts around the integration space. I think next year will provide a lot of work for these specialists.”

FX

Foreign exchange has provided some much-needed cash for investment banks throughout 2008, and the ongoing investment in technology has produced a healthy pipeline of hires.

However, Credit Suisse suggests that the above average returns enjoyed in the FX and rates space in 2008 are beginning to drop away, due to the effects of the deleveraging of global hedge funds.

This doesn’t seem to have affected appetite for technology, however, and 50% of European FX dealers plan to spend more in 2009 than this year, according to a survey at the FX Week Europe 2008 Congress.

This reflects a desire to spend more on technology to improve liquidity and credit risk management.

“We are seeing a demand for using the technology to access liquidity in more intelligent ways,” says Yaacov Heidingsfeld, COO at liquidity management platform provider TraderTools.

Low Latency

The demand for low latency infrastructure can’t exactly be described as a new development.

However, in spite of the reduced number of major investment banking players, the current market volatility is actually driving low latency further up the agenda, reckons Rik Turner, a senior analyst on Datamonitor’s financial services technology team.

“Low-latency infrastructure for asset classes such as equities, options, derivatives and FX is still something of a cottage industry,” he says.

AND 2009 WILL BE A BAD YEAR FOR….

Budgets

The days of the escalating IT budget are gone. How long the spending slump lasts is debatable, but 2009 is sure to be a year of cutbacks.

Celent predicts that spending on technology on the sell-side within the US will slip by 12.4%, while Europe is likely to reduce budgets by 5%.

“Every investment bank is reconsidering what they had planned as recently as six months ago,” says Robert Iati, partner and global head of consulting at the Tabb Group.

It doesn’t look that rosy within asset management either, an industry that was ramping up IT spend until recently. A survey of 17 top investment management firms by consultancy Investit found that 75% plan to reduce IT budgets, and the cuts could be as deep as 15%.

Hedge funds

Obviously, with all the investor redemptions and slumps in performance, hedge funds have had a pretty torrid 2008.

In fact, Citigroup predicts that they could lose $1 trillion in outflows by the middle of next year, and the number of funds falling by the wayside is increasing.

Not surprisingly, the previously buoyant technology budgets within the hedge fund sector are likely to fall dramatically. In fact, research by the Tabb Group suggests the IT pot is likely to shrink to $882m in 2009 – or 40% less than this year.

The humble developer/support analyst

In this age of cost-cutting, having the technical skills alone is no longer good enough and an understanding of the likes of Java or C# is becoming increasingly commoditised.

In fact, a lot more of these roles are being shipped out to cheaper, offshore locations.

Support analysts in particular have traditionally produced a large volume of roles, says James Richmond, sales director at IT in finance recruiters Cititec. This has fallen sharply in 2008, and he expects a similar story in 2009.

“These IT support and development roles aren’t going to be entirely redundant,” he says. “But those skills have become commoditised to some extent and the cheaper labour market in these offshore locations will absorb more of them in 2009.”

Rory Ferguson, managing director of financial technology recruiters JM Group, says: “The generic developer roles are going to be less in demand and harder to get headcount sign off on. You need the business knowledge as well and I think you’ll see much more of that in 2009.”