Compliance Spending To Reach $28 Billion By 2007

Companies will spend $8.8 billion this year on hardware, software, and integration to comply with regulations and laws or requests from business partners, according to a study released Thursday.

Governance, risk management, and compliance have been on the minds of business and IT executives during the past few years, resulting largely from the Sarbanes-Oxley Act.

The survey of 325 North American companies reveals technology plays a significant role in the integration of compliance requirements into existing business processes. Seventy five percent said they will comply with requests to improve business performance.

While North American companies will spend $27.3 billion this year, up to $28 billion in 2007, complying with the Sarbanes-Oxley Act will take the biggest chunk of the pie, estimates AMR Research Inc.

Complying with Sarbanes-Oxley will cost companies $6 billion in 2006, with spending climbing higher in 2007, estimates AMR Research. In June, Sarbanes-Oxley requirements kick in for foreign registrants, which are defined as companies based outside the United States, but that trade stock or have debt within the U.S.Sarbanes-Oxley isn't the only compliance issue survey respondents said they will face this year. A plethora of compliance issues have surfaced from customer compliance to the Food and Drug Administration (FDA). Many focus on radio frequency identification (RFID) technology and other sensor networks.

Companies, for example, that participated in the survey estimate in 2006 they will spend $3.21 million to comply with customer requests, or $1.98 million to trace goods through the supply chain. "A company will spend $1 million for every $1 billion generated in revenue to comply with various laws and partners," said John Hagerty, vice president of research at AMR Research.

Companies that treat compliance as more than just a necessary budget item see unexpected benefits. Survey respondents ranked the top business benefits of compliance as streamlining business processes, 36 percent; better quality, 28 percent; secure information, 14 percent; supply globalization efforts, 11 percent; improved operational visibility, 10 percent; and other, one percent.