Why It's Important: TowerGroup estimates that Wall Street's 2009 IT spending will be 14 to 16 percent below 2008 levels. Celent projects a dismal 30 to 40 percent drop in new IT investment for the industry in 2009. But, "Part of that is the fact that there are fewer companies — Bear Stearns and Lehman Brothers are not there anymore," explains Celent senior analyst David Easthope. He predicts that front-office IT will be hurt the most. "When business growth slows, the front office loses its high-priority status," he notes.

Yet there are opportunities for IT heroism. "If you can tell the COO you can cut 20 percent of your cost by moving over to a single platform quickly and efficiently, you're a hero," Easthope says.

Where the Industry Is Now: Sell-side firms have already become quite cost-conscious. "In September, as Lehman went bankrupt, firms had to revisit their IT budgets, but they were already tight -- there hasn't been a heck of a lot to cut back," says Tom Secaur, managing director of Citisoft.

Cost-conscious IT has been a "vigorous thought process" at Wachovia, says Richard Mattox, SVP and senior director of technology, architecture and business services. Two of the firm's cost-efficiency strategies to date have been virtualization and telepresence.

At start-up fund administrator Atlantic Fund Administration in Portland, Maine, "We're relying on workflow and imaging tools to ensure that our environment is as paperless as it can be," says Stacey Hong, president of the firm's accounting group. New account applications, shareholder correspondence and trade tickets are among the documents that are imaged using SunGard software and routed automatically to the right workers. Hong estimates this saves about 10 to 15 percent of human labor. The firm also has implemented low-cost VOIP (from Cisco), and thin clients and Citrix servers provide workstations that are 55 to 60 percent less expensive than full-blown desktop computers, Hong reports.

Focus in 2009: "2009 will be about finding ways of doing the same amount of business with dramatically less overhead," Celent's Easthope says. "Firms will be looking at the existing infrastructure ... [to] find out ways you can cut maintenance spending."

Although rationalization, or consolidation of platforms, can come with heavy integration and training costs, "In this environment you can go back to the vendors and say, 'I'm a big client of yours — we have this contract that limits us to X number of seats; why don't you go ahead and throw in more seats?'" Easthope adds. "Vendors are seeing their business dry up. You can negotiate on price, whether it's for maintenance, number of seats, training or implementation."

At Wachovia, "We're looking to create savings through technology modernization," the bank's Mattox says. "We're seeing huge cost by holding on to old technology, through maintenance and repair." One initiative on Wachovia's drawing board is consolidation of cell phones and desktop phones: one cell phone would work for business and personal use, and telecom devices would no longer have to be installed at users' desks. The firm also plans to improve the cost-effectiveness of its virtual desktops by assigning more virtual desktops per server.

Citisoft's Secaur believes more firms will outsource middle- and back-office work in the year ahead.

Industry Leaders: Among large firms Wachovia has been a leader in efficient IT strategies for the past two years. It will be interesting to see if its acquirer, Wells Fargo, continues the trend. Credit Suisse and Morgan Stanley have also taken a disciplined approach to selective IT investment.

Technology Providers: Middle- and back-office outsourcing is offered by State Street, Northern Trust, Citi and J.P. Morgan.

Price Tag: Being the one with the ideas that save money and jobs? Priceless.