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Cost of Sarbanes-Oxley
The Sarbanes-Oxley Act (SOX) is perhaps familiar to readers mostly for its detrimental effect on the clarity of MR industry league tables. However, the cost to others is rather greater: US companies will spend an estimated $5.8 billion on meeting its requirements in 2005, according to AMR Research.
The initial deadline for public companies to comply with Section 404 of the Act was yesterday, November 15. Section 404 demands that companies document, control, and secure business processes that directly and materially contribute to reported financial results.
According to Vice President of Research John Hagerty, it was initially thought that Sarbanes-Oxley spending would be a one-time expenditure, but in fact 36% of companies plan to increase spending, 52% will maintain current levels and 12% will decrease SOX spending.
AMR estimates expenditure over the next year under three key headings:- 42% on internal labor / headcount
- 29% on outsourced services
- 28% on technology
.Other costs account for the remaining 1%. Technology spending is increasing fastest, up 43% from $1.13 billion in 2004 to $1.62 billion in 2005. AMR suggests that spending on this technology will actually provide 'a much needed lift to an ailing enterprise software market', with the main beneficiaries in document and record management; internal and external security; business process management to integrate disparate business systems; applications compliance management software; and enterprise and financial application suites which standardize the compliant business practices.
98% of respondents say that 2004 SOX spending has been higher than or at the level anticipated. Spending on SOX is 42% of overall IT compliance budgets. Two hundred business and IT leaders were involved in the survey.
AMR, which specialises in research and advice for executives tasked with delivering enhanced business process performance and cost savings with the aid of technology, will release a detailed report on Sarbanes-Oxley Act spending in December. The company is online at www.amrresearch.com
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