How has the credit crunch effected the IT industry
In the 1990s the IT industry boomed by placing an emphasis on expansion and continued high profits. The slump however has seen many high-street stores like PC World, Woolworths and Comet close down with more to follow. It is estimated that 10% of all retail staff will lose their jobs as a result of this recession with over 1,000 Woolworth's stores now closed. Larger companies who have been able to ride out the storm are mostly in parts of the industry where products are sold on credit such as BT Retail which relies heavily on monthly payments for services and can more easily compromise on price when offering deals.
Data-protection is another sector where high-street retailers are proving to be more vulnerable and having to invest in newer technology. The credit crunch has also seen a fall in business from private companies and clients with large deposits. Private banks have been forced to cut their IT budgets as a result of their move away from riskier financial products, which is one of the sectors that IT firms focus on e.g. the development of online trading platforms for banks and the international exchange sector.
Although IT spending is set to fall by 30 per cent, the industry still remains optimistic, with many companies focusing on improving productivity rather than increasing their numbers of employees. According to a research in 2008 by Capgemini, 77% of all companies surveyed would cut jobs as part of their business recovery and expansion plans.
The credit crunch has also seen an increase in the use of Open Source Software as banks and businesses are forced to lower costs wherever they can. Many firms who were previously tied into high cost proprietary software are now looking towards alternative means such as open source software which is often free or less expensive than its proprietary counterpart.
Customers are also looking for cost savings in the form of virtualisation technology that allows them to run applications on a desktop or laptop without the need for a dedicated server. Employees can easily use virtualisation software to run multiple applications on their own pc rather than having dedicated machines for each application. The use of virtualisation technology has been credited as one factor behind Google's phenomenal success with their free email service which uses only one machine to service millions of users worldwide. The use of virtualisation is set grow even more as the price of related hardware decreases following the credit crunch.
A final development that has taken place in the last years is the rising interest in cloud computing. This is a technology where data and applications are shared rather than stored on dedicated hardware which means there is little need for space on a local machine as every user has their own server. The use of cloud computing will probably grow even more following the credit crunch as storage and bandwidth costs fall.
Although the credit crunch has had many negative effects, IT firms are taking measures to survive and one of these is by focusing more on new innovations than payrolls. More companies are looking at regulation of products and services to prevent cybercrime (such as the recent "Operation Rockfish" in South Korea).
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Conclusion of the second largest merger in the pharmaceutical industry at the time, with an undisclosed sum of money paid.
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The merger between Lloyds and HBOS produces a new bank called Lloyds Bank plc.
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