Special Report - March 2005

Even though The Sarbanes-Oxley Act has forced many companies to scrutinize their business processes and reporting policies, few have indicated that they will invest in technology to help ease the blow. New studies and research, however, suggest that this mindset is currently experiencing a 180-degree turnaround. A recent Forrester Research study dubbed, "Execs Change Sarbox Plans", found that 77 percent of respondents required to comply with Sarbanes-Oxley (SOX) will increase technology spending this year in response to the legislation. Results indicated that companies plan to buy software applications rather than turn to consulting services, with one-third of respondents planning to purchase ERP applications and 40 percent planning to invest in specialized process control technologies -- which could be considered trade promotion management.

SOX Spending to Rise
Rob Hand, CEO of Hand Promotion Management (HPM), agrees with Forrester's survey results and believes that spending on IT initiatives involving TPM will increase dramatically in 2005 and continue through 2006 for Sarbanes-Oxley compliance application technology. "There is no doubt that Sarbanes-Oxley will create a widespread need to review and replace, or at least bolster existing applications that manage the process and workflow, as well as data accuracy of trade promotion management."

While SOX was created to protect public investments, the foundation of the legislation, according to a recent AMR Research study called, "Landscape of Sarbanes-Oxley Compliance Tools", is to create financially stable, responsible businesses that are managed as ongoing concerns. "Winning companies will use this investment to gain a competitive business advantage over competitors," says the AMR study. Other key findings from the study include:

  • Enterprise companies see a future, not a market, and will thus incorporate this feature into next generation projects.

  • Auditors no longer participate in this market due to conflict-of-interest restraints.

  • A general compliance market will from by 2008, with SOX functionality as a feature of enterprise risk management.

The AMR study also indicates that even though it is vital for companies to commit to short-term SOX requirements, a multi-year perspective still needs to be maintained. It is therefore essential that buyers of SOX applications keep a close eye on how the technology matures over the years. "As SOX goes from one-time project to long-term process, manageability moves much higher in the queue of essential capabilities," says the AMR report. "The ability to stay on top of the compliance process will avoid a bullwhip effect where SOX related activities start and stop depending on the accounting calendar. Managing the compliance process continuously leads to a repeatable, sustainable compliance system."

Implementation Should Start Soon
AMR has found that the average cost to implement a SOX software package runs anywhere from $100,000 to $250,000 for 100 seats. The risk for non-compliance obviously runs much deeper and can include steep fines, reduction of brand and market value and also prison time. By 2008, AMR expects SOX functionality to evolve into an enterprise-wide application and therefore, companies can expect to spend three to five years on implementation. "While there are product differences, they are relatively minimal and primarily focus on workflow and reporting," says the AMR report.

Three Examples of Sarbox in Action

Altria Group Turns Pages
Altria Group, the parent company of Kraft Foods Inc., taps OpenPages technology to ease the burden of complying with Sarbanes-Oxley. OpenPages' SOX Express reduces the time and resource costs associated with ongoing compliance for Sections 302 and 404. SOX Express is a focused enterprise application that combines powerful document and business process management with flexible reporting capabilities in a user-friendly environment that enables CEOs, CFOs and financial management officers to monitor adherence to internal controls. Its dashboards can be used by project managers, documentation team members, internal auditors and external auditors to plan, document and test the internal controls of the company, and eventually to attest to the financial statements. With the added benefit of having an easy migration from Internal Controls Workbench to SOX Express, OpenPages will keep Altria's initiatives on track while significantly upgrading capabilities with respect to compliance.

New Method for PepsiCo
Built on a common, scalable and secure software platform, the Certus suite provides a tightly integrated product set designed to address immediate Sarbanes-Oxley compliance needs and long-term governance goals. Since corporate compliance is an ongoing effort, Certus enables companies to build a sustainable and cost-effective compliance practice through its unique configure, adopt and maintain methodology. "A key to our success is Certus," says Carole Cooke, manager, Special Projects, PepsiCo. "It allows us to pull together all the divisions of Pepsi into one centralized document repository and to report across our all of our diverse divisions. Because the deadline for compliance is now within a few quarters, we need Certus to do these things. We are confident we are going to get there."

GNC Powers Up Certainty
General Nutrition Centers, the largest global specialty retailer of nutritional supplements, has chosen to implement the Movaris Certainty software application to manage its worldwide Sarbanes-Oxley compliance obligation. GNC selected Certainty because it automates internal controls based on the roles of the control participants, and it ensures global participants complete control tasks in a timely manner. GNC evaluated multiple software solutions and ultimately was impressed with Certainty's ease of use.

Movaris Certainty offers complete support for the documentation, review, improvement and attestation phases of Section 404 and 302 certification. It integrates tightly with the COSO framework and, through automation of the control environment, ensures timely completion and regular testing of controls. If Certainty finds weaknesses in the control environments, it automatically escalates the issue to the appropriate manager and tracks the issue through to resolution, improving the overall financial control environment. In addition, Certainty produces the reports needed for compliance on demand.