Financial Services, Retail Take Biggest Dives in IT Spending

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The declining economy is forcing businesses in all sectors to cut spending, but solution providers are seeing the biggest cuts right where you’d expect: among the verticals hardest hit by the recession.

Solution providers servicing the financial services, retail and SOHO sectors may want to expand their reach in 2009.

Those three verticals took the biggest dive in IT spending in 2008, according to the Channel Insider 2009 Market Pulse survey. The survey queried solution providers on myriad business challenges including revenues and profits, pricing and vendor and customer relationships.

Of the 180 solution providers answering the question, “Which three verticals, if any, have shown the greatest signs of a slowdown in IT spending?”, 41 percent named financial services as the vertical with the greatest slowdown. Retail ranked second, with 38 percent, followed by the small office/home office (30 percent). Rounding out the top five were manufacturing and construction, with 45 percent and 35 percent, respectively.

The results of the survey closely follow the economic results of the top two verticals, as both had their share of challenges in 2008–the most spectacular being the failures and subsequent bailouts of a number of the country’s largest financial institutions – including Citigroup, AIG, JP Morgan, Goldman Sachs and Morgan Stanley – to the tune of more than $200 (£137) billion.

Retail, for its part, saw a major decline in the last quarter of 2008. In December, retail’s year-over-year sales fell 3.1 percent, the largest decline in at least 16 years, as consumer confidence over the crumbling economy worsened.

“Retail is hurting pretty bad, and if they don’t sell they’re not making money,” said Erin Arnold, president of NextStep Networking, a Cincinnati-based managed service provider. “They are really looking at ways at cutting costs, including IT spending.”

The SOHO space also is experiencing a spending contraction, she noted. “Especially those home offices, they’re getting concerned about watching their pennies.”

Interestingly, the expected downturn in the SOHO space runs contrary to vendors’ actions in the market. Cisco Systems, for one, recently rolled out a new Cisco Consumer Channel Network, designed to help Linksys resellers infiltrate the home and SOHO markets. CCN resellers will receive training, tech support and marketing and sales support.

Hewlett-Packard, meanwhile, recently introduced a new line of lower-cost printers for the SOHO space, and last April unveiled an unlimited online storage program for the SOHO market, called HP Upline.

Still, Arnold said belts are tightening everywhere.

“Everybody is nervous. No one has their checkbooks open like we saw a year ago. Everyone wants to keep as many dollars in the bank as they can,” she said. “Before our selling pitch was ‘prepare for growth,’ now it’s ‘take your existing equipment, invest in it a bit and make it last longer to get you through.’ Clients like the fact that were trying to help them and not sell them on new hardware. We know buying is not feasible, so we’re looking at what can we do with what they have to get them through this period.”