'Compliance' Apps: Real Solutions or Oversold Tools?

By Allen Bernard

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Shortly after Sarbanes-Oxley (SOX) first appeared in 2002, "compliance" applications hit the market in a big way. Companies from established players like Oracle and Documentum to start-ups looking for a piece of the action began marketing applications designed to take your company from the non-compliance darkness into the light of compliant, quarterly SOX reporting.

The problem is none of these "solutions" are complete solutions. Most are starting points that run the gamut from simple, spreadsheet-style reporting tools to applications that integrate into your ERP system and automatically pull out, record, document and track all events material to SOX compliance, including, in some cases, elusive threads like email and phone conversations.

But that is at the high-end of the game. Oracle, for example, provides these capabilities, as well as a compliance roadmap based on the COSO (Committee of Sponsoring Organizations of the Treadway Commission) enterprise risk management framework to help you get started, said Seamus Moran, Oracle's director of financial application development. It's easier to use, however, if you're an Oracle shop. Otherwise look for a lot of custom API work or manual data entry before things run smoothly.

Gartner Analyst Rich Mogull, for example, said the company no longer recommends Microsoft's latest entry into the compliance game because Microsoft failed to make Gartner aware of some important security vulnerabilities in the document-handling schema: Changes could be made to documents without any trace of who made the alterations. This is bad from a SOX point of view.

Although security seems to be a recurring problem with Microsoft products, shortcomings invariably are going to be found in most offerings. So, depending on a piece of software to become SOX compliance is not going to work.What needs to be done (preferably before any software is purchased) is a thorough assessment of your company's financial infrastructure from an IT perspective, said Moran. At one time, Oracle, for example, was running 90 accounting applications in 120 different countries. Today, the company fields just one.

"The applications can't help you if two-thirds of your world is run off of spreadsheets," agreed John Parkinson, Cap Gemini Ernst & Young's chief technologist for the Americas.

Basically, there are five stages to get to compliance, said Moran: documentation, analysis of risk, placement of controls, monitoring those controls and reporting. "And that's all assuming you've got a business model you can actually summarize like that," he said.

Compliance applications can help you with most of these challenges or just one, depending on the solution. But this is an ideal-world scenario, Moran said. In between each of these stages are most likely layers of business processes on top of layers of business processes -- and that's where things can get tricky.

"People are realizing that this is a more a services-, business-orientated process problem," said Mogull. "There's not a magic-bullet technology solution."

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