Fearful tech workers tiptoeing along the shaky alleys of Wall Street -- and fretting about losing their jobs -- should take a deep breath. Of the more than 100,000 job losses expected as a direct result of the financial crisis, only a tiny slice will likely be from the tech ranks, figures Sean O'Dowd, an analyst at market researcher Financial Insights.
As with any market consolidation, finance companies "will look for redundancies and overlap," O'Dowd says. For IT, that means management, not programmers, admins, and other line staff. "I think [layoffs] will come out of the IT management layer such as CIOs, so you're looking at hundreds [of layoffs], not necessarily thousands. Companies will continue to need a lot of the rank-and-file IT folks."
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Greg Carr, CEO of consultancy McGat Enterprises and an IT finance veteran who now runs a Web site that helps IT finance professionals manage technology costs, says he recently talked to his 16 IT management-level advisors from Unisys, Wells Fargo, Deutsche Bank, and other firms, "and they are all nervous. … My friend at EDS is looking for cover right now."
Although Wall Street firms' general pool of tech employees may be relatively safe for the moment, the tech vendors who supply them will see job cuts as their revenues fall.
And over time, there'll be a glut on the scale of the dot-com bust of IT finance pros looking for work, predicts John Estes, vice president of staffing firm Robert Half Technology. "We're advising our IT candidates, especially the ones really freaked out by this, to dust off their résumés and be prepared to show accomplishments with tangible results" to potential employers, he says. Still, Robert Half Technology hasn't received a flood of calls from IT workers yet, he adds.
Death of the discretionary spend
Estes, O'Dowd, and Carr agree that the biggest hit to IT finance pros will come to those working on discretionary projects. "There is a slow-up of IT projects, anything from VoIP to replacing legacy equipment," says Carr.
Capital markets firms have traditionally led in the adoption of new technologies, but given the uncertainty of the future, they've made an abrupt about-face. Financial Insights reports financial services firms put 22 percent of their IT budgets toward discretionary projects. "For institutions facing bankruptcy or being acquired, we see that spend being put on hold," O'Dowd says.
Or worse. Robert Half Technology provides tech workers to a systems integrator in the Northeast whose client is an insurance company. "They just put the brakes on a new project -- not postponed but cancelled," Estes says.
Assessing how much your job is at risk
Generally speaking, tech workers in finance fall into four categories. Business-infrastructure folks handle everyday IT needs. Networking pros are focused mostly on connectivity and latency issues. Datacenter administrators must be skilled in heavy transaction volume, grid computing, and virtualization. And some IT workers and developers support proprietary trading activities.
The financial crisis will affect the last group the most in the near term. That's because the bulk of job losses from the likes of Bear Stearns, Lehman Brothers, Merrill Lynch, and others will come from shuttered lending units -- thus, IT folks solely supporting these lines of business may be at risk.
Coming from a position of strength
The upside is that most of these at-risk financial IT workers have specialized financial skills that will continue to be in high demand from financial companies of all sizes on the prowl to pick up this talent. Such IT people have been eagerly courted, making the supply low; the financial crisis may give second- and third-tier companies a shot at this talent pool, and perhaps for less money than in the boom times. Such highly valued skills include working at the application level on algorithmic trading programming, complex event processing specific to a trading environment, order management, derivatives trading, and evaluation applications.
Although their skills are not easily transferable to other industries, "these are valuable jobs that you're not going to see going out the door," says O'Dowd. "Business analysts won't be going anywhere, either."
O'Dowd also predicts IT workers in business infrastructure, networking, and datacenters have at least a year of job security, as finance firms work through the heavy integration process caused by the current wave of consolidation. It'll take some time before these firms figure out their needs from here on out.
But after that, all bets are off. "Once they've evaluated their ongoing needs, you might see a spike in layoffs at lower-level IT positions," O'Dowd says. Still, O'Dowd contends such IT workers shouldn't have a problem finding work -- if not in finance, then in outside industries. "IT folks in the financial services industry deal with firms that demand the greatest amount of performance, scale, volume and speed," he says, "and they have the ability to see things in worst-case, stressed scenarios -- there may be a premium for folks like that."
That premium, though, may not be as rich as in the financial sector, warns Robert Half Technology's Estes. Salaries and benefits likely won't be the same.