It's no surprise that analysts are predicting technology spending will slow as a result of the current market turmoil. The sub-prime mess has caused strife on Wall Street - apparent in the ongoing investment banks announcing additional write downs, to the recent bailout of Bear Stearns by JP Morgan, to more anticipated layoffs on Wall Street. Analysts say these financial woes will affect technology spending by financial services firms.

Larry Tabb, cofounder and president, of TABB Group says he sees a "ratcheting down" from a robust 8% CAGR in 2007 to a more modest 3-4% CAGR this year.

There will be some clear winners and losers. Risk management technology will see the largest increase in spending at 13.6% increase (CAGR 2007-2012), Tabb says. That should be no surprise considering most of the current market issues have been related to poor risk management.

Tabb also says that financial services firms will continue to invest in trading and connectivity. He estimates telecom will have a 7.5% CAGR, infrastructure 4.5% and trading/sales at 4.8%. Firms can't afford to not spend on these areas or they will risk falling behind their competitors, he says. With the current pace of change in technology and the essential nature of technology coupled with trading, investment firms have to keep their trading desk on the cutting edge or they will lose their edge.

Technology investments will also continue on the prime brokerage side, with an estimated 6.1% CAGR. Areas where investment will not be as strong include: retail brokerage and wealth management, which in TABB Group's opinion will be the biggest loser when it comes to technology investment with a -6.5% CAGR over the same period. The back office, market data and business continuity planning/disaster recovery will also see a negative growth in spending.

Click here for a detailed account of where the money will fall.