SYDNEY, 8 OCTOBER 2008 - Australia's information technology industry has been told to expect a sharp slowdown in computer and communications spending as shockwaves from the Wall Street meltdown reverberate through the local banking and finance industry.
The warning comes after business software bellwether SAP said investment in information systems had dropped dramatically since the collapse of Lehman Brothers last month.
SAP chief executive Henning Kagermann yesterday said the slowdown meant the company would log 13 per cent revenue growth for the three months to September 30, down from forecasts of 24 to 27 per cent growth in July.
"The market developments of the past several weeks have been dramatic and worrying to many businesses," Mr Henning said.
"These concerns triggered a very sudden and unexpected drop in business activity at the end of the quarter. Unfortunately, SAP was not immune from the economic and financial crisis that has enveloped the markets in the second half of September, causing us to report numbers below our expectations."
The turmoil in the US financial services sector has led analysts to forecast that North American spending on computer and communications products and services could drop 20 per cent, or $US4.3 billion ($5.8 billion) in the banking industry alone next year.
Australian technology companies had previously hoped to come through the crisis relatively unscathed as banks and telecommunications companies continued to pump billions of dollars into projects.
But Frost & Sullivan Australia and New Zealand information technology practice head Andrew Milroy said the events of the past few weeks meant local firms needed to lower expectations.
"Australia, just at a general level, is not immune from what's happening in the rest of the world.
"The rate of acceleration [in the slowdown] increased in the past few weeks and I think people have taken a while to fully get their heads around that."
Mr Milroy said project budgets were likely to be hardest hit, while areas such as outsourcing and green IT should remain comparatively strong as businesses chased reductions in operating costs.
"One of the big issues behind sustainable IT is the way companies are looking at controlling costs with technology," he said.
"Maybe some of these offerings will be marketed differently, but I think some of the sustainable IT offerings will be less severely impacted."
Foresight Securities dealer Matthew McCloghry said the main pressure point for local IT companies was public sector spending because of soft federal government investment.
Mr McCloghry said the change of government and the Gershon review of commonwealth computing and communications expenditure had put a prolonged dampener on the market.
The commonwealth is one of the country's largest consumers of IT and telecommunications equipment and services.
