Enterprises increase IT spend on corporate governance

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.