Today we conducted our Euro Crisis Webinar. 416 participants were surveyed about:

• Whether their enterprise had plans in place to deal with a worsened euro crisis
• Whether the euro crisis has impacted their IT budget
• Whether the euro crisis would influence investments in innovation

Results of the polling revealed that 50% of respondents covering all industries have no contingency plans in place to manage a worsened euro crisis. We urge clients to better prepare themselves via accessing existing research available on http://www.gartner.com/ and setting alerts for upcoming research using the search term “euro crisis”.

Existing published research includes:

Peter Redshaw Jan 18^th: Euro Crisis and the Threat to Outsourcing

Andrea DiMaio Jan 18^th:Examine Six Risk Dimensions of IT Preparedness for the Euro Crisis

Alistair Newton Jan 16^th: Expect the Euro Crisis to Adversely Affect Payment Systems and Industry Supply Chains

Keith Harrison Jan 13^th: Euro Crisis: Issues and Recommendations for Electric Utility IT Functions

Mim Burt Jan 11^th: How Retail CIOs Should Respond to the Unfolding Euro Crisis

Mark Raskino Dec 29^th: Euro Crisis: Key Questions CEOs and CIOs Should Ask Each Other

Stessa Cohen Dec 27^th: Euro Crisis Offers Banks Opportunity to Revise Social Media Strategies to Engage Customers and Innovate

Dave Aron Dec 23^rd: Ensure Your IT Strategy Is Ready for a Euro Crisis

Andrea Di Maio Dec 22^nd: What the Euro Crisis Means for Government IT

David Furlonger Dec 20^th: The Euro Crisis: Four Scenarios and How CIOs Can Prepare for Them

David Schehr Dec 20^th: The Euro Crisis Will Mean More and Different Customers for Wealth Managers

David Furlonger Dec 6^th: CIOs Should Address the Impacts of the Euro Crisis on Their Enterprises Now

David Furlonger Oct 1^st 2010: The European Crisis and Market Impact: Situation Remains Dire

David Furlonger Apr 17^th 2009: The Financial Market Crisis: Storm Clouds Over the Euro

We also asked webinar participants about their IT investment plans:

• 52% of respondents believe IT budgets will remain unchanged
• 15% expect an increase
• 9% expect a decrease of <5%
• 25% expect a decrease of >5% in their IT budgets

Clients should watch for forthcoming research from analyst Kurt Potter: Actions to Fight Cost Optimization Fatigue during the Euro Crisis, for additional guidance on how to work through reduced IT budget scenarios

Lastly, we also asked webinar participants about their views on how the euro crisis will impact investments in research and development and discretionary spending on innovation:

• 17% revealed that discretionary spending would increase
• 69% suggested there would be no change
• 14% voted that discretionary spending investments would be cut to zero

Those clients who expect no change in their innovation spending patterns or who anticipate a cut can gain further insight into the importance of maintain an innovation focus during crisis by reviewing an upcoming note from David Furlonger: Euro Crisis Innovation Remains Critical to Survival and Growth

We thank everyone for their participation today and welcome client enquiry and continued interaction on this important subject. An archive of today’s material can be found on the Gartner Webinar website.

An interesting article appeared on Reuters yesterday: Financial repression is here and may be helpful.

It discusses and supports the potential for greater control over the financial markets by governments, including a continuation of the current schemes that print more money for central banks to lend to banks who then buy more “risk free” government debt. Throw in a little inflation and the long-term debt load depreciates. Merkel is calling for more money for Greece and I note that the US debt ceiling has been nearly reached – again. (Where did that last U$1tn get spent anyway..?) The suggested alternative to financial repression via regulation is considered far worse. But is it?

Admittedly austerity packages don’t help either and are creating popular unrest at levels considered worrying enough for several commentators to point to previous historical conditions that led to bloodshed.  Nevertheless, structural reform doesn’t even seem to be on the agenda, and certainly lacks political will.

In fact, the most recent Economist leader hinted rather as political posturing and included the repressive/protectionist impact of:

• The imposition of the Tobin tax on financial transactions (suppressing proprietary trading),
• Forcing houses that do clearing & settlement of derivatives that are denominated in euros to be located in eurozone,
• Forcing OTC derivatives to move to exchange-traded instruments

While maintaining market order, curbing greed and improving terrible risk management is important, protectionism and unnecessry regulation will only introduce artificial subsidies. Financial institutions will surely be wise to this as the costs of managing red tape increase eating further into profit margins. The euro crisis and political/regulatory meddling will therefore likely encourage Asian markets to be more aggressive with strategies to evolve their own platforms and tempt firms to move east.

Regardless of Europe 2020, a 2010 European Commission report highlighted more than 330 trade restrictions that included cross border challenges such as tariff increases, licensing requirements etc, as well as internal restrictions such as certification schemes, buy-national policies etc. A worsening euro situation leading to a meltdown or default scenario will only make matters worse: The Euro Crisis: Four Scenarios and How CIOs Can Prepare for Them, and likely bring about yet more “repression.”

Perhaps the most immediate form of any financial repression will involve protectionist initiatives designed to “protect” local jobs. This has two implications for CIOs:

• General enterprise HR sourcing and labour/talent mobility
• Ability to outsource

This will require CIOs to perform a risk analysis/containment and draw up contingency plans for all outsourcing contracts. Such planning will enable CIOs to adapt outsourcing strategies as needed. In the current crisis, these plans need regular review. The key question here is to ask: what contractual contingency has been taken in the event of a significant change to the business model of the firm due to meltdown or euro break-up?

CIOs should carefully consider their longer-term HR plans in terms of location of critical talent, training mechanisms, long-lining business support and the specific contractual requirements for IT staff and their jobs. Flexibility is key, as is increasing the institutional knowledge of non-eu locations, working practices and culture.

In terms of the ability to outsource, corporations and government departments have been under pressure in the press and from unions to reconsider outsourcing while simultaneously looking to make local redundancies in an effort to cut costs: Backlash leads Birmingham City Council to reconsider offshoring IT-jobs and Department for Work and Pensions staff begin industrial action. CIOs need to have in place communication and media management plans to address any public backlash from operational changes.

CIOs should also note that repression may not be overt. They need to prepare for additional administrative requirements, the impact of subsidies on ROI and potentially more foreign exchange rate manipulation that will impact the costs of products and services.  Note the last quarter’s Swiss moves in this regard: Swiss Franc Protectionism. Such protectionism will likely not occur as “one-off’s” at the moment annual budgets are set. This means CIOs will require financial flexibility from CFOs as part of ongoing project commitments.

Loading companies with more red tape will in the end just be counterproductive for all of Europe, especially at this moment of econommic malaise. However, CIOs must prepare for more protectionism, whether overt or hidden under the banner of market stabilization.

Remember to read our latest research:

CIOs Should Address the Impacts of the Euro Crisis on Their Enterprises Now

The Euro Crisis: Four Scenarios and How CIOs Can Prepare for Them

Ensure Your IT Strategy Is Ready for a Euro Crisis

Euro Crisis: Key Questions CEOs and CIOs Should Ask Each Other

What the Euro Crisis Means for Government IT

Euro Crisis Offers Banks Opportunity to Revise Social Media Strategies to Engage Customers and Innovate

The Euro Crisis Will Mean More and Different Customers for Wealth Managers

And remember to diarise our January 19^th webinar on this topic: Euro Crisis Webinar

On the weekend, I read a rather alarming commentary by David Stockman European Banking System is on the Verge of Collapse. While this analysis clearly highlights the fragility of bank balance sheets, it doesn’t dig deeply into the graver issue facing the Eurozone policy makers and indeed the world –  that of hypothecation. As has been highlighted in the past (MF Global may be apocalyptic for the eurozone), the deeper concern is the amount of leveraged collateral that exists in the markets that has very little, or zero underlying asset foundation. In the sort-term, such leverage should give our children cause for concern. However, perhaps this is just the beginning of a more slippery slope.

The almost constant press commentary and hype about mobility and mobile/internet payments causes me to consider a potentially similar situation of hypothecation and re-hypothecation occurring in The Future of Money.

While regulation is inherently expensive and potentially limits free market activity, it can also (if applied prudently) act as a sound governor of irrational activity – witness the lack of attention afforded to AIG, Lehman’s and MF Global in the UK, and their excessively leveraged use of collateral.

Why is this relevant for the Future of Money and mobility? Mobile and Internet commerce have enabled the expansion of financial services activity beyond the boundaries of the banking industry and remit of regulators. Multiple participants (Telcos, Payment providers, Retailers and even private individuals) offer products and services that are bought, sold and financed outside of the traditional financial services market. They and their activities are unregulated and potentially unchecked due to the consumerization of IT and the power/reach of the Internet. Moreover, the enabling currency of these transactions is not necessarily fiat-based, ie government issued national currency.

As the euro crisis unfolds and individuals face difficult living conditions and austerity constraints, they may well turn to new, digital currencies (loyalty tokens, gaming credits, bandwidth etc) as a means of survival, continuing to conduct commercial activity, barter etc. And, much of this activity may be leveraged and the means of payment used as collateral.

So, now to the point of hypothecation and the question for our grand children:

• in a totally unregulated and poorly audited market,
• where digital content and value can be created and exchanged in real-time by anyone,
• without the frictional cost of an intermediary,
• where potentially there is no underlying asset to back the exchange for value.

Is the Future of Money facing an apocalypse of digital new money hypothecation?

Of course, this may be a stretch and is perhaps an insignificant concern in the current crisis. However, as policy makers debate the “solution” to the current malaise, keeping one eye on emergent trends may help defer an unfortunate legacy.

What does this mean for our clients?

• The rush to connect with innovative payment schemes, providers and commercial channels should not abrogate responsibility of senior executives to monitor carefully the viability of counterparty relationships, and the extent of any “new money” hypothecation.
• Applications to manage collateral must account for new mediums of exchange and systems must be capable of managing new money
• The criticality of developing a holistic strategy for mobile financial services incorporating the Future of Money is essential to maintaining sound fiscal management.
• Companies should emphasize their account services (statements, fraud protection, etc.) as they launch payment services that support digital content, social gaming, social commerce, etc

 Remember to read our latest research: CIOs Should Address the Impacts of the Euro Crisis on Their Enterprises Now and The Euro Crisis: Four Scenarios and How CIOs Can Prepare for Them, as well as attend the January 19^th webinar on this topic: Euro Crisis Webinar and contribute to our survey: Euro Crisis Survey

Today’s WSJ suggested the Euro currency was finished: Banks Prep for Life After Euro

This is another news article, in a continuing stream, that has become more intense over the last several months. The question is, are IT professionals, as opposed to economists and maybe politicians, prepared for a redenomination of a major world currency?

Our clients offer a mixed response. Some clearly have been running contingency scenarios. Others seem oblivious to the fact that full euro currency disintegration, or some form of eurozone realignment should influence their 2012 strategic plans. Many seem unsure of what they can do, regardless of the scenario that unfolds.

Certainly, this is more than just a financial services or governmental situation. Any organization with European interests needs to understand the impact on its business and critically IT organization should there be such a substantial a change in the political or financial environment. At a macro level, euro redenomination would also have a global impact, affecting trade flows and consumption patterns.

For CIOs it is essential immediate consideration is given to this crisis. Following initial research completed in 2009 and again in 2010, Andrea Di Maio (a Government analyst colleague – see) and I have written another research note to help guide our clients during this difficult period:

CIOs Should Address the Impacts of the Euro Crisis on Their Enterprises Now

Clients should view this research as just the beginning. Upcoming research will highlight alternate scenarios that may play out in the market and thence the IT implications that CIOs need to address. Gartner will also be providing specific guidance for various roles within the technology operation and a stream of research will be forthcoming over the next few weeks.

We also encourage you to attend a webinar (Gartner Webinar Schedule) that will take place in January.

We encourage your comments as we update you on this interesting and challenging environment.

Is this good or bad? Well, it depends for which purpose Financials Services Providers want to use Twitter. Those that take Twitter seriously can provide an additional service channel to their clients which can help to build stronger customer relationships. Those that consider Twitter only as a one-way communication or marketing tool haven’t understood the community nature of this service and will fail to provide any value.

And even if banks or insurers believe that Twitter is nothing more than a fad they should continue to keep an eye on this service. We have identified for example one example where an impostor tweeted under the name of a global investment banking and securities firm. This can seriously hurt your brand or confuse prospects and customers.  What do you think? Are you alrady tweeting and what? What’s your opinion about Twitter?