Sarbanes-Oxley Spending Will Exceed $6 Billion in 2006 - AMR

Companies must focus on making compliance repeatable, sustainable and cost-effective, analyst says

Companies must focus on making compliance repeatable, sustainable and cost-effective, analyst says

Boston — December 5, 2005 — Companies will spend $6 billion on complying with Sarbanes-Oxley Act (SOX) requirements in 2006, on par with the $6.1 billion that will be spent in 2005, according to a new survey by technology consultancy AMR Research.

These findings are based on a recent study conducted by AMR in which over 300 business and IT leaders were surveyed on their Sarbanes-Oxley and broad compliance spending priorities.

In 2006, there will be key differences in how budgets are spent, according to AMR. Budgets allocated to internal headcount are expected to fall by 8 percent, while the technology allocation will grow by more than 13 percent in real dollars over 2005 numbers. External consulting activities, which do not include audit fees, are expected to hold steady in 2006. Overall, AMR expects SOX-related spending to break down as follows:

  • $2.3 billion (39 percent) - Internal labor / headcount

  • $1.9 billion (32 percent) - Technology

  • $1.8 billion (29 percent)  External consulting
Technology is playing an increasingly significant role in the integration of SOX compliance initiatives into business processes, according to AMR. Throughout 2005, companies reported that they were refining existing business and IT controls in preparation for automation efforts using technology.

"These spending predications support a long-term approach to SOX compliance," said John Hagerty, vice president of research at AMR Research. "Budgets are shifting from headcount to technology so that compliance can become repeatable, sustainable and cost-effective."

AMR Research also found the following about companies complying with SOX:

  • 39 percent of companies currently have an operational SOX solution, while 37 percent are implementing one in 2005. Even so, over 80 percent of companies plan to add to or improve on what they have in place in 2006.

  • 40 percent of companies have a specific budget for SOX compliance; the remainder fund efforts from existing operations.

  • None of the companies surveyed have spent less than anticipated.
In early January, AMR Research plans to release the detailed results of this compliance spending survey.

Additional Articles of Interest

— It's time to take Sarbanes-Oxley compliance to the next level for competitive advantage. Read more in "Sarbox: Setting a Better Organization in Motion," an exclusive.

— For more information on Sarbanes-Oxley, read Parts 1 and 2 of the recent series on Contract Management: Five Myths of Contract Management, and Contract Management: Improving Corporate Governance.

— SAS audits can help ensure that your supply base doesn't trip up your Sarbanes-Oxley compliance. Read about SAS audits in "Supplier Compliance: The Responsibility Lies with You," the Final Thoughts column the October/November 2005 issue of Supply and Demand Chain Executive.