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Regulatory compliance deadlines aren't spurring purchases, report says

Vendors using the threat of compliance deadlines to sell products are wasting their time. A new report says chief execs aren't driven by fear and are not buying into the hype.

IBM and others could be barking up the wrong tree by playing off the CEO's fear of regulatory compliance deadlines, according to a recent report. Upshot: CEOs aren't buying products to meet regulatory compliance requirements.

Contrary to the intense marketing hype surrounding the Sarbanes-Oxley Act and other new regulations, compliance is not the most important driver to making sweeping changes in business processes, said Craig Schiff, president and CEO of BPM Partners Inc., the Stamford, Conn.-based consulting and research firm that produced the report.

Rather, executives are putting internal processes in place in order to improve their businesses -- not just to meet compliance regulations. Granted, compliance is a byproduct of implementing what Schiff refers to as "business performance management" (BPM) initiatives, but the objective of many executives is to simply get a better handle on what's going on in their businesses.

Almost half of the respondents were from large companies, with a large percentage coming from the financial services, manufacturing, high-tech and telecommunications industries. Responses from industry vendors and consultants were omitted from the report.

Schiff said that it appears most businesses believe they're in a pretty comfortable position when it comes to compliance. "Many are now taking the approach that, if they're going to implement new business processes, they want benefits beyond compliance," he said.

Schiff defines BPM as a combination of business processes, select measures (metrics, or key performance indicators) and systems that enable an organization to understand, act on and influence its business performance. Budgeting, planning, consolidation, scorecards, dashboards, business intelligence (BI) and analytics applications all fall under the BPM umbrella. In addition, the addressing of regulatory issues such as Sarbanes-Oxley is considered a BPM application.

The Sarbanes-Oxley Act regulates the way companies report their finances and holds company executives liable for reporting irregularities. Companies are required to be in compliance by July.

Almost 40% of respondents to the survey questioned the accuracy and integrity of the financial data available to them from their existing systems.

As a result, vendors such as IBM, who are marketing their products as compliance solutions, are wasting their time, Schiff said. They'd be better off getting to the heart of the problem -- the desire to run a tighter ship.

Of course, this theory flies in the face of numerous other reports, including one from IBM that contends businesses aren't even close to being prepared to meet regulatory compliance deadlines, specifically Sarbanes-Oxley. Earlier this year, the Palo Alto, Calif.-based market research firm Radicati Group Inc. reported that there are thousands of businesses anxious to get a handle on meeting new government requirements that regulate the storage of electronic documents, such as emails and instant messages. The same report found that few of those companies are prepared.

CEOs are still thinking about compliance; it's just not the priority that some vendors and analysts would have the industry believe, Schiff said.

Schiff said that vendors should be marketing themselves differently. Playing off of compliance issues is a scare tactic, and customers aren't buying into it. Given the survey results, CEOs are more likely to spend money on something that's going to make their businesses more efficient and profitable, he said. Using compliance issues as a marketing tool is like "selling a car, not because it'll get you somewhere but because you can use the seatbelts."

"I don't think that the compliance fear is going to attract the customers; it's the lure of better business," Schiff said. "The people losing out are the vendors, because the customer isn't buying into the hype."

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