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Complacence On Compliance?

Though business-technology managers know they have to stay in line with the law, spending on compliance is lagging.

Of all the high-priority discussions and debates that took place in 2003, perhaps the hottest topic was regulation compliance. Whether the topic was Sarbanes-Oxley, Basel II, the Patriot Act, E-mail regulations, or the Health Insurance Portability and Accountability Act, everyone was talking about and strategizing over how their respective organizations can not just comply but also prosper in this era of regulatory compliance.

With all this debate and demand, IT vendors were waiting on the sidelines licking their chops for the opportunity to finally take advantage of a business driver that would lead to incremental IT expenditures. Some said it was Y2K all over again. One by one, press releases came pouring out about how specific vendors provided robust products and services to help you, the business-technology professional, handle this essential challenge.

In the most recent InformationWeek Research Priorities study, we asked 400 business-technology professionals: "How will your company's spending to be compliant with government regulations in 2004 compare with '03?" Fifty-three percent say spending will be the same, 41% say spending will increase, and only 6% say spending will decrease.

But while business-technology managers realize they need to address compliance issues and IT vendors have plenty of solutions to offer, spending on compliance is actually lagging! In fact, Meta Group just released research that shows 57% of business service providers and IT vendors have been disappointed by or have failed to see substantial sales movement resulting from companies' need to comply with Sarbanes-Oxley regulations.

Ken Fitzpatrick, chief marketing officer at FileNet, is witnessing the same thing, but he says the delayed spending is just that: a delay. "Sarbanes-Oxley has not, to date, been a source of significant IT spending. However, we are not surprised and in no way feel that this is the result of complacency on the part of customers. In fact, we are seeing significant activity and focus around Sarbanes-Oxley. Customers are simply pursuing a natural, evolutionary path to address compliance and have been focused on ensuring the accuracy of their financial reporting and documenting their internal controls."

It seems the discussion of compliance cannot be separated from the overarching topic of governance. Fred Studer, VP of applications marketing at Oracle, sees this issue evolving into a two-stage process. Stage 1 is becoming compliant and making sure there's financial visibility and credibility within your organization. Stage 2 is addressing how compliance can lead to increased performance where you "simultaneously address the people, processes, and technology to make sure they are aligned with the company's regulatory ecosystem."

In a similar fashion, FileNet's Fitzpatrick says, "At the end of the day, a compliance framework delivers much more than compliance. It enables true customer-process innovation, delivering organizational flexibility and agility to better respond to the ever-changing regulatory environment."

We have certainly fallen into the trap before of hoping that technology investment equates to an automatic fix. But, as Oracle's Studer aptly puts it, "Technology does not guarantee compliance." You want a guarantee? Well, I'll guarantee that if a few more cases like HealthSouth occur, IT spending will quickly accelerate toward this initiative.

What do you think? Is the compliance issue impacting your business processes and your overall IT spending? Please send your thoughts to me directly at mfrieden@cmp.com. To sweeten the deal, the best answer will receive a complimentary registration to the InformationWeek Media Network Conference titled Compliance Challenges & Governance Strategies held in New York, May 18-19.

Michael Friedenberg is a VP at CMP Media and the publisher of InformationWeek.


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