Are we headed for a nuclear winter?

Caroline McCarthy's post on News.com describing the juxtaposition between the party atmosphere underpinning Web 2.

Caroline McCarthy's post on News.com describing the juxtaposition between the party atmosphere underpinning Web 2.0 and the views of certain veterans poses awkward questions:
Amid the drunken revelry and pulsing electronic music, one prominent tech-industry veteran at the party was asked exactly what Chi.mp is. "I'll tell you what Chi.mp is. It's venture money getting set on fire," the jaded observer replied. Surveying the buoyant crowd, he added, "This feels a little like 1999." The atmosphere was radically different during the day at Web 2.0 Expo, as talk of economic recession was unavoidable. TechWeb's Jennifer Pahlka, one of the expo's organizers, told attendees in a welcome address on Tuesday that she thanked them all for coming to the conference "in this time of budgets that are being scrutinized, and some bad headlines." Veteran entrepreneur Marc Andreessen was grilled in a keynote interview on his use of the term "nuclear winter" as a justification for his start-up Ning's new round of venture funding.
Yesterday, I saw a worrying story on Finextra. Entitled Crunch to squeeze sell side spending on technology, it said (my emphasis added):
David Easthope, senior analyst, Celent securities and investments group, says: "In line with moderate expectations for growth and a decreased appetite for grandiose IT projects, operational efficiency and cost-reducing initiatives will be the centerpiece of many brokerage firms' IT plans."Risk management, compliance, and portfolio valuation also continue to be high on the IT list. Meanwhile in Europe MiFID will drive some spending on technology over the next few years. To be well positioned for the short and long-term, IT vendors will have to meet the sell side's needs for cost-efficient and flexible services and systems in lean times, says Celent. Flexibility in software and services delivery will be an important differentiator for vendors in the years to come.
Financial services has always been a tech spending bell weather so when I hear reports like this, I see it as code for battening down the hatches. There are many ways to skin the efficiency cat but consumer grade innovation isn't it. Earlier in the week I was speaking with OpenPages. They have about half their risk solutions business in financial services. OpenPages estimate growth in the near term running at 10-20%, a pretty healthy clip but nothing like the rates I had expected for this nascent industry. But is it all as bad as it seems? Technology that adds business value is still receiving decent levels of investment. Obopay recently  received $20 million in series D funding to support growth for its mobile bank account management platform. The investment was led by the telecomms arm of Essar, an Indian group with many interests. Earlier in the week, Forrester was bullish about growth in so-called Enterprise 2.0 expenditure but as Vinnie Mirchandani said in a waspish post that attacked Forrester's definition:
With that broad definition, any tech vendor would qualify. I mean fire your entire marketing team if they cannot get Forrester to call them Enterprise 2.0. That is if you want to fight for a measly $ 4.6 billion Forrester estimates for the category out of annual technology and telecom spend of over $ 2 trillion.
And therein lies the real crunch. While onlookers may bemoan the party bills at Web 2.0 events, the real problems for enterprise spend lay elsewhere. When I look at the margins vendors like Oracle make on legacy maintenance, it's easy to see where fat can be cut and oxygen released for the kinds of innovation that drive value. Or what about the mad dash for governance, risk and compliance consulting projects at premium rates? Then there is the whole problem of delivering value from social networking applications. Regardless of what you think about social networking applications, it is becoming increasingly evident that internal projects will require significant spending on change management. Where will that come from? If we are heading into a spend crunch, then these will be the first projects to be killed off.