Compliance gets more expensive for IT budgets

New study shows IT spending has increased in order to keep pace with the growing demands of Sarbanes-Oxley and other regulations. Analysts predict that this may lead to the canceling of other projects.

IT managers are digging deeper into their pockets to pay for technology that meets the demands of compliance regulations, and this means that other projects will likely be delayed or cancelled.

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A recent study from analyst firm Gartner reveals financial compliance management and corporate governance software technology spending will increase between 10% and 15 % in 2006. Analysts who conducted the study predict this pattern of spending will continue through 2009 and may come at the expense of other technology investments.

Gartner conducted a survey of 326 financial and IT professionals and auditors during October and November. French Caldwell, research vice president for Gartner, said the Sarbanes-Oxley legislation is a major factor in the drive for compliance. Companies are now spending IT money originally earmarked for other projects in order to comply with the law. This is a change, according to Caldwell.

"Overall spending is going down in other areas," he said. "For instance, instead of a consultant, companies are now using their own internal IT employees to do this work."

Caldwell also said compliance demands have led to the creation of new IT positions. He said many large companies now employ an average of five new people to handle compliance issues.

"Just a year and half ago it would be rare to speak to someone who would call themselves an 'IT compliance manager,'" Caldwell said. "Now that is much more common."

The increase in IT spending on compliance also means other spending has been reduced. The survey found 27% of CIOs had managed to find new funds to pay for compliance costs. But the majority of respondents, 65%, said they had delayed projects in order to pay for compliance. And 8% said they had canceled other projects altogether in order to absorb costs.

Caldwell said the results may mean bad news for vendors who are not manufacturing compliance-related products. He said respondents indicated a strong demand for tools that help with the management of compliance, such as records management and documentation products.

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