Distraught ex-employees pilfering $600 chairs as compensation for worthless 401k plans. Angry stockholders demanding answers. Florid-faced lawmakers jockeying for TV time. The outcome is the Sarbanes-Oxley Act (SOA) of 2002 and nightly video of corporate officers doing the "perp" walk.
First come ripples in the IT pond
What does this have to do with you? For starters, when your Chairman, CEO, and CFO certify financial statements this year to comply with Section 302 of SOA, the numbers must be the numbers. Output from your information management systems will be subject to a higher level of scrutiny than ever before. By implication, your job is on the line, too.
And coming up, you'll be forced to comply with Section 404 of the SOA. Internal financial controls and processes must also be certified by auditors. Plus, under Section 409, companies will be required to provide real-time disclosure of material events that might affect performance. Bulletproof reports will be due at increasingly shorter intervals. The pressure will be on IT (once again) to work better, faster, and -- you guessed it -- cheaper.
Next comes the tsunami
As if corporate SOA compliance weren't enough to deal with, there's a tidal wave coming that will drown unwary IT managers and executives.
The principle behind SOA is to make the financial state of the corporation transparent to investors. In theory, this window on management performance enables investors to judge the value of the company. Accountability addresses the Wall Street demand to "show me the money."
The fact is, a lot of that money is going to IT. And even though every corporation needs IT to function, you know that IT costs take a big bite out of revenue. If you do the math, you'll see that the IT department budgets at some Fortune 50 companies are big enough to place them on the Fortune 500 list. That makes IT a juicy target.
It's your business
Think of IT as a company within your company. And you're going to be expected to run it like one. If you're like most IT managers I've worked with, you're consumed with keeping things up and running. When it comes to money and resources, all you know is that you need more. But Congress and the president have taken away any hope of getting what you want anytime soon.
Picture yourself explaining to an auditor why you purchased 10,000 operating system licenses for a rollout instead of harvesting from the 90,000 copies already on the books for your 60,000 desktop infrastructure. Or a pattern of overpayment for excess Internet access lines. Or missing $600,000 in credits for warranty replacement and repairs.
Believe that it matters. In the pre-SOA days, one large financial services client I knew faced assignment to a higher risk category because they couldn't account for their data and technology assets. They decided that the only way they could get control over their asset picture was to start over. The company took a $180 million hit and replaced all their desktops and laptops just to get control.
SOA makes the risk even more exciting by adding criminal prosecution to the consequences of mismanagement.
Get over it, and get on with it
Enough gloom and doom. The sooner you align how you account for IT infrastructure with the reporting needs of the financial people, the easier and cheaper it will be. Instead of waiting for the deluge, I encourage you to get your feet wet with the new asset configuration and IT process tools coming on the market. They can automate tracking and management and integrate your IT service delivery processes. With robust databases and interconnections, these tools can also improve your overall performance in virtually any metric you choose -- including financial reporting. So the warning that "SOA is like Y2K, only it never ends" need not apply to you.
Greg Lenox, an expert in the processes, methods and practices of IT operations for customer support, help desk, asset management, inventory management, telecommunications management and change management, is president and CEO of Entuition Inc., a maker of operations management solutions in the infrastructure logistics marketplace. At Entuition and in previous positions, he led several major re-engineering projects. His clients included SunTrust Banks, Citibank, Target, GlaxoSmithKline, Baxter Healthcare, Nations Bank, Wachovia Bank, First Union Bank, BB&T, CCNB, CNA Insurance and others.