Financial IT spending cuts cause vendor crisis

Thirteen London-listed IT companies issued profit warnings in the first quarter of 2008, raising fears that the economic downturn was tightening its grip.

The consultancy Ernst & Young said that this reversed the trend from 2007, where profit warnings declined from 17 in the first quarter to nine in the fourth quarter.

Ernst & Young technology director James Bennet said that reduced IT spending by the financial services industry was to blame as firms undertook significant cost reductions due to the credit crunch.

"Technology stocks have been hard hit, with organisations selling to the financial services sector particularly feeling the pinch as many projects have been put on hold," Bennet said.

IT PRO recently reported that according to Gartner, global IT budgets would hold reasonably steady in the next year.