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Compliance systems: SarbOx Inc.
Okay, it's not quite what it seems. Silicon Valley isn't looking to Washington for financial aid or trade protection. But with corporate and consumer tech spending still sputtering, the long-suffering sector is grasping at anything that remotely resembles a growth market -- and an increase in regulations has clearly spawned one.
Look no further than the Sarbanes-Oxley Act, which in the wake of the Enron Corp. bankruptcy and other scandals imposed the most extensive corporate governance reforms since the 1930s. Since President George Bush signed the law last August, public companies have been grappling with its rigorous accounting, accountability and disclosure provisions, including a requirement that chief executive officers and chief financial officers personally certify the accuracy of published reports.
Sarbanes-Oxley compliance calls for a veritable assembly line of audit controls, document management and policy enforcement -- at speeds and volumes that simply can't be handled manually.
That has opened the door for a small army of salespeople from database giants like Oracle Corp. and Sybase, storage technology leader EMC Corp. and a cadre of upstarts like Nth Orbit and Protiviti. All are peddling automated tools to deal with SarbOx confusion.
Corporations have been seeking advice not only from their traditional accounting, law and management consulting firms. They are also turning to technology consulting firms like Stamford, Connecticutbased Gartner.
"Calls from clients have really started to build in the past couple of months," says Lane Leskela, a Gartner research director in Seattle who focuses on compliance issues. "Sarbanes-Oxley is at the top of everybody's list. Senior management has to be paying attention to it -- and has to prove it is paying attention to it."
That process is as much technological as it is behavioral, argues Vani Kola, CEO of San Jose, Californiabased Nth Orbit, which released Certus, its Sarbanes-Oxley compliance system, at the end of May.
Kola believes the challenge is one of business-process management, a discipline that flowered in the dot-com era but must now be tailored for corporate governance. "I didn't know the law was coming when I founded the company [in December 2001]," says Kola, who had previously started two other e-businesses. "We were assuming that the next level of corporate effectiveness would lie in greater timeliness and transparency of data, and that has turned out to be a Securities and Exchange Commission requirement."
Kola won't disclose her customers, who are mainly in the manufacturing sector. But Nth Orbit is far from alone in offering data aggregation tools along with the digital equivalent of a control panel to set and monitor policies and compile reports that top managers can approve and certify.
Among the other entries are Cleveland, Ohiobased compliance software company Axentis; Protiviti, a Menlo Park, California, internal audit firm; Westford, Massachusetts, knowledge management specialist OpenPages; and two providers of financial reporting and business intelligence systems, Decision-Point Applications of San Mateo, California, and Princeton, New Jersey's Sterling Management Solutions Corp.
These relative unknowns don't lack credibility or traction. Protiviti, for example, is a subsidiary of employment firm Robert Half International; DecisionPoint has sold systems to the likes of BT Group and Sony Corp., and Sterling has sold them to Bank of New York Co. and Charles Schwab Corp.
Yet SarbOx may not be a slam dunk. Two other laws -- the Health Insurance Portability and Accountability Act of 1996 and the USA Patriot Act of 2001 -- raised expectations among tech executives but disappointed many. And Debra Logan, a London-based Gartner analyst, warns buyers to beware of vendors hyping products that "have only the most tenuous connection to Sarbanes-Oxley."
"Don't spend money just to look like you're doing something," advises Logan. "This is fundamentally a records management and business-process management problem, and if you lose sight of that, you may not have the money left that you'll really need for Sarbanes-Oxley."