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CFO as SOX Coach

News, trends, and research that drive IT strategy.

Despite survey after survey suggesting that the Sarbanes-Oxley Act of 2002 will not touch off an IT spending spree, software and hardware companies continue to insist that technology is a big part of the answer. So, too, does the consulting community.

A report from Forrester Research (dubbed the “CFO Playbook”) urges CFOs to educate CIOs on the requirements of the law so that CIOs can build proper systems of internal control, workflow, analytics, and more. Echoing a theme that is likely to be sounded more often now that the deadline for complying with certain Sarbanes-Oxley requirements has been extended, Forrester’s Jennifer Chew says that CFOs should view the legislation as a catalyst for financial change and an opportunity to improve shareholder value. But she admits that the extended deadline may pose its own issues.

“Initially companies didn’t consider IT solutions, because time was so short,” she says. “Now that they have more time, they may decide to invest down the road, not now.”

If they did invest in IT, such as an “electronic controls library,” she says, companies could rise above the static (and often ignored) paper-based controls processes—the so-called tidy binder—and take advantage of the Internet to connect people and information. For example, instead of booking sales directly into the general-ledger application, workflow software could post certain types of revenue into deferred accounts pending approval for high-risk line items that often get companies into revenue-recognition trouble. An electronic controls library could also act as a repository for rules governing T&E expenses or procurement, automatically rejecting requests or transactions that don’t satisfy those rules. The library could be augmented with analytics software that could predict credit risk, search unstructured data for hints of material events, and otherwise sound alerts before the month-end close turns up problems.

While apparently not eager to fund such projects at the moment, CFOs do seem the likely candidates to offer some coaching across the enterprise. At 55 percent of the companies we surveyed, the CFO is the person deemed to be at the helm (with the controller or assistant controller assuming that role at another 32 percent of respondents). But whether finance tells the IT department to go long on technology or make an end run in the name of fiscal restraint is an open question.

Offshoring Goes On and On

A recent study of IT outsourcing found that 42 percent of all engagements have an “offshoring” component, meaning that work is done in other countries where labor is generally cheaper. The study, a joint effort by IT research firm IDC and TPI, a sourcing advisory services firm, determined that even if global economic conditions improve, offshoring will continue to grow. As it does so, it will drive down prices for IT services.

That fact is not lost on the Information Technology Association of America, an IT lobbying group that urged its members in August to avoid protectionist steps and instead increase training and “constant retooling” of U.S. workers so that the States can maintain its leading role in global IT expertise. The group wants to see some foreign markets it deems restricted opened up to American IT products and services.

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