Intelligent Enterprise

Technology spending for Sarbanes-Oxley (SOX) compliance is expected to reach $1.713 billion, according to recent reports by AMR Research. This marks a 52 percent increase from the $1.13 billion in 2004, and a 1,000-plus percent increase from the $100 million spent in 2003. Moreover, nine out of ten companies surveyed by AMR expect to spend an equal, or higher, amount of money on SOX initiatives this year compared to 2004.

"Organizations have come to realize quickly that SOX [compliance] is something they're going to have to continue to spend on, and more importantly, they're going to have to spend more before they save money in the long run," says John Hagerty, vice president of research at the Boston, Mass.-based research firm.

According to Hagerty, many firms initially perceived SOX as a one-year ordeal. However, he believes that ongoing regulatory pressures have caused a current shift in thinking. "When people first started down the path of compliance in 2003, they all approached it as a project," explains Hagerty. "[But] as auditors began to weigh in on what this meant for the long term -- that this was going to be a process that had to be repeated quarterly and annually for the foreseeable future -- people realized that this wasn't going to be a one-time activity, but an ongoing process that would have to be part of their business. They started to think about how they needed to put in place a compliance framework that would allow them to really manage and monitor the process over time rather than simply fix it and leave it," he says.

Hagerty adds that this year, firms must increase their focus on strategic technology investments to cost-effectively sustain SOX compliance and improve their operational performance. "Key technologies can reduce the cost of SOX compliance upwards of 25 percent," he reports.

In order to raise compliance awareness throughout the firm, Hagerty advises investing in portals, dashboards and scorecards. "Invest in visibility on compliance so people understand what it means to them on a regular basis," he says. Hagerty also suggests increasing investments in technology that will enable the automation of internal controls. "If you were to implement technologies that will automatically look at certain business scenarios and watch for certain conditions, you'll take a large percentage of people [out of the process]," he says. "We view automation of control testing as probably the biggest-bang-for-the-buck investment that companies can do."