The catastrophic events in the UK financial services sector have forced financial services firms to rapidly change their IT strategies.
Those that have emerged unscathed are still focusing on using IT to steal a march over the competition, but many are rapidly switching their focus to cost cutting.
Recent cost cutting has seen Bradford & Bingley close a mortgage processing centre with the loss of 300 IT jobs. HSBC has slashed 1,100 jobs including IT in its investment banking division, and Barclays is expected to cut IT jobs after announcing it will no longer offer new loans through its FirstPlus loans business.
"Banks that are struggling to survive are focused on cost cutting, banks that are going through acquisitions and mergers are focussed on integration and those that are not in trouble are focussed on efficiency and innovation," says Peter Redshaw, analyst at Gartner.
Tony Rawlinson, managing director of financial services at sourcing consultant Equaterra, says, "The focus is on survival and not efficiency for struggling banks."
"Outsourcing and offshoring are also showing signs of growth as companies attempt to cut costs and focus on their core businesses," he says.
Citigroup selling its back office support operations to Tata Consultancy Services for £291m, and outsourcing the service to the same company, is a recent example.
Banks struggling with mergers and acquisitions, often as a result of involuntary consolidation, face massive disruption to their IT strategies.
IT integration projects in the finance sector are complicated enough under normal circumstances, but when conducted at short notice with little advanced planning they are "a headache for CIOs," says Rawlinson.
"Fortis for example was one minute planning the integration of the parts of ABN AMRO it acquired and the next minute it was being rescued by another bank."
Lloyds TSB's government-brokered takeover of HBOS, for £12.2bn, is in doubt as a result of the ongoing crisis.
Banks that remain strong will use IT to strengthen their position and capitalise on their competitors' struggles. "They will continue to invest in IT for efficiency and look at short term innovations to help them take advantage of their struggling competitors," Redshaw at Gartner says.
These banks are in a strong position to acquire rivals, says Rawlinson. "Some banks are seeing this as a buying opportunity and they will continue to invest in IT for innovation and efficiency as well as looking to roll out their technology platforms into other banks."
Santander, which acquired Abbey in 2004, has agreed takeovers for UK firms Alliance & Leicester and Bradford & Bingley. The Spanish bank plans to integrate these into its core banking platform.
Bob McDowall, analyst at Towergroup predicts that stronger banks will invest in IT to take advantage of their strong market position.
"I do not think they will make major strategic IT investments until the dust settles but they will invest in short term tactics to take advantage of struggling competition," he says.
When the dust does settle, firms will be forced to invest in IT to reflect the requirements of a wave of new regulations that are expected to follow. The regulations are likely to demand investments in software to make reporting more transparent and real time.
Financial services firms are the biggest business consumers of IT and whether struggling, merging or attempting to grow, their CIOs will be put to the test.
Credit crunch fall out hits UK shores
Lloyds TSB agrees to acquire troubled bank HBOS for £12.2bn
Bradford & Bingley's savings business to be acquired by Banco Santander for an agreed £612m
Government announces part-nationalisation of some large banks