STAMFORD: Through
2008,investment in new technologies will slow as discretionary budgets are
diverted to regulatory compliance projects.
Increased corporate spending for compliance and corporate governance is having a
significant impact on IT budgets, according to Gartner, Inc. According to
preliminary results from Gartner's 2005 Financial Compliance Management Survey,
IT financial compliance management spending will increase to between 10 percent
and 15 percent of IT budgets in 2006, up from less than 5 percent in 2004.
In October and November 2005,
Gartner sponsored a financial compliance management survey of 326 audit, finance
and IT professionals in North America and Western Europe, who are knowledgeable
of compliance practices and efforts within their companies and organizations.
Preliminary results indicate that compliance initiatives, as defined by the
Sarbanes-Oxley Act SOX) in the United States and related regulatory mandates in
other geographies, are diverting a large amount of new IT project discretionary
resources to support corporate governance efforts.
"Projects that were not
aligned with compliance and corporate governance were delayed or
cancelled, and SOX efforts inhibited the purchase of large amounts of software
related to building new
technologies and deploying new projects," said French Caldwell, research
vice president for Gartner.
"However, by the second half of 2005, increased interest in IT solutions to
ease the burden of compliance has begun to drive new spending."
Although software is not
required to pass a SOX audit, Gartner analysts said it can help to significantly
reduce the compliance burden. The majority of the initial spending for SOX
projects was for professional services focused on consulting, audits, process
management and workflow, documentation, and planning. New software that will be
purchased for these projects will provide business process management, corporate
performance management, information access and decision support, document and
records management, security, IT operations management and storage using
established systems.
"Companies should look for solutions to
support multiple regulations and multiple business units," said Tom Eid,
research vice president for Gartner. "Sustainable compliance, that is, a
level of effort that is sufficient but not excessive, will only be achieved by
consolidating compliance efforts through a programmatic rather than project
oriented approach."
Gartner said through 2007, companies that
choose one-off solutions for each regulatory challenge they face will spend 10
times more on IT solutions for compliance than their counterparts that take a
sustainable programmatic approach. The pressure of meeting SOX deadlines may
have led many CIOs to implement one-off projects and miss opportunities to
secure long-term benefits for their businesses. This will, in some cases, mean
more budget will be spent to advance these projects in 2008 and 2009.
"IT organizations need to implement IT
controls for compliance management without increasing architectural complexity.
This requires that IT organizations work hand-in-glove with financial, legal and
business operations to manage operational risk," said Mr. Eid.
"Expanding compliance and operational risk demands offer an opportunity for
IT to build long-lasting value for the firm, or face the threat of becoming a
scapegoat for operational and legal deficiency."
More information is available
in the report "Sarbanes-Oxley Spending Continues to Disrupt Software
Purchases." The report can be accessed on Gartner's Web site at www.gartner.com/DisplayDocument?ref=g_search&id=487567.
The complete Gartner Financial
Compliance Management Survey will be available in January 2006. The report will
evaluate the impacts of financial compliance management on the IT organization
and its planning. The report will provide CIOs, IT compliance managers, and
audit, finance, compliance and risk managers with analysis that will help them
define the roles of IT and the IT organization in supporting their approaches to
sustainable compliance. Preliminary survey results can be found in the report
"Sarbanes-Oxley compliance hits 15 percent of the 2006 IT budget."
The report can be accessed on Gartner's Web site www.gartner.com/DisplayDocument?ref=g_search&id=487387.