The Wall Street collapse is terrible for tech, obviously. But it could be worse.
Forrester Research says the financial sector’s troubled firms (Lehman, Merrill, Bear Stearns, AIG, Fannie, Freddie) all together equal about 2% of tech spending. Given Forrester sizes the US tech market at $572 billion, that’s about $11.4 billion dollars at risk.
But that’s not the worry, says Forrester CEO George Colony:
The biggest risk to the tech market comes, not from the Wall Street collapse, but from a collateral U.S. recession. Forrester expects a mild recession in the U.S. and Europe lasting through Q3 and Q4 of 2008, and Q1 of 2009. While tech spending grew 8% in the U.S. in 2007, we are forecasting tech purchases to be up 5% in 2008, and up 6% in 2009.
But government bailouts are keeping some of those firms and their billions of dollars in tech spending alive. And even in death banks like Lehman and Merill spur Wall Street IT spending. Colony again:
the rigors of mergers and integration could also be drivers of new tech spending. Bank of America, Barclays, and JP Morgan have 36 months of intensive technology integration work ahead — this will drive professional service, software, and to a lesser extent, hardware spending.
Translation: Bank of America took over Merrill, and Barclays bought Lehman’s data centres. The work to get technology and enterprise systems like general ledger and human resources under the same umbrella can be a bonanza for tech consulting firms like Accenture (ACN) or HP’s (HPQ) EDS. But there’s probably enough hardware to go around, so not much upside there for players like Sun (JAVA).
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