AMR Research estimates that companies will spend $5.8 billion on meeting Sarbanes-Oxley Act (SOX) requirements in 2005. Despite initial thoughts that Sarbanes-Oxley spending would be a one-time expenditure, 36 percent of companies plan to increase spending, 52 percent will maintain current levels, and 12 percent will decrease SOX spending.  These results are based on a recent study conducted by AMR Research in which over 200 business and IT leaders were surveyed on their Sarbanes-Oxley and broad compliance spending priorities.

The initial deadline for public companies to comply with Section 404 of the Sarbanes-Oxley Act is November 15.  Section 404 demands that companies document, control, and secure business processes that directly and materially contribute to reported financial results. Over the next year, AMR Research estimates expenditures will occur in four key areas: 42percent on internal labor/headcount; 29 percent on outsourced services; 28 percent on technology; and 1 percent on other.

Though only 28 percent of the total SOX budget, technology spending is increasing by the largest percentage: 43 percent from $1.13 billion in 2004 to $1.62 billion in 2005.  Technology used in Sarbanes-Oxley compliance assists businesses with managing compliance records, securing data, ensuring accuracy and integrating other applications. The spending will provide a much needed lift to an ailing enterprise software market.

AMR Research has also identified the technology markets to directly benefit from spending. The top five spending priorities in technology supporting SOX compliance in 2005 are document and record management, internal and external security, business process management, applications compliance management software, and enterprise and financial application suites.

AMR's research also found the following SOX compliance facts:

  • 33 percent of companies say the risk of non-compliance is driving their investment.
  • 81 percent of companies with an operational solution in place plan to add to or improve it
  • 98 percent say 2004 spending has been higher or at the level anticipated.
  • Spending on SOX is 42 percent of overall IT compliance budgets.

AMR Research will release a detailed report on Sarbanes-Oxley Act spending in December.

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