Corporate cost-cutting is about to invade information technology budgets, and when the ax falls it will be felt by hardware, software and electronics vendors around the globe.

But it's difficult to say how the cuts, precipitated by the banking crisis, will trickle down. Paul Otellini, Intel's president and chief executive, summed up the situation during the company's earnings call Oct. 14: "As we look to Q4, it is hard to know what impact the financial crisis will have on end customer demand," he said.

In times of trouble, companies typically slash costs wherever possible. That means slowing down equipment replacement cycles--most companies turn over PCs every two to three years--and delaying big projects and any new project that won't boost revenues within one or two quarters.

These kinds of delays have ramifications across the global supply chain, from big-name server and storage companies to lesser-known companies that develop intellectual property embedded in microcontrollers and processors. Crack open the case on any server and you'll find myriad components from companies you've probably never heard of. And that's only the portion that's visible to the naked eye.

The inner workings of this supply chain are every bit as complex as the derivatives market that clouded the growing mortgage crisis. Technology has become so complex that no company can make all of its own equipment anymore. Most companies can't even make a single chip by themselves. They have research and development partners, subcontractors and separate manufacturers.

There is an argument to be made that IT budgets should be spared, of course. Upgrades to new equipment may offer huge long-term savings because of the lower-power requirements. And in some cases, technology actually can be used to save money and improve efficiency in the short term.

But more often than not, upfront capital expenditures are seen as low-hanging fruit for the CEO and CFO looking to rein in costs and keep company morale high. Should they put the purchase of new servers on hold or lay off several hundred people?

It's difficult to tell where the carnage will be. Many companies can be refocused, even though it's a painful process. In 2000, some technology component suppliers were almost entirely committed to communications hardware. When the bottom fell out of the market the following year, the survivors successfully redeployed in other industries.

Large equipment providers have a much harder time making that shift because of the massive retooling required. It would almost be like General Motors making cellphones. While broad-based component suppliers like Intel will do just fine--the computer chip maker is now diversifying into a variety of new markets, including embedded and consumer electronics--the companies that use Intel chips and other electronics components may not fare so well.

The impact will be felt initially by companies like Sun, the server divisions at IBM and Hewlett-Packard, and storage companies like Hitachi Data Systems and EMC.

From there, it will fan out across the component industries, slamming on the brakes across the supply chain. The big question is who will be left standing when the supply chain begins revving up again, and exactly what they will be selling and to whom?

• Velocity And The V-Shaped Recovery