SOX Brings New Business Opportunities
By Martin Sinderman
THIS YEAR’S EXPANSION of federally mandated financial reporting requirements to include publicly held small to midsize businesses (SMBs) has not only opened up new business opportunities for smart channel partners, it can also help them become better organizations in their own right.
In keeping with Section 404 of the Public Company Accounting Reform and Investment Protection Act, aka the Sarbanes-Oxley Act (or simply ‘SOX’), managers of public companies with a market cap of $75 million or less now face a looming December 2007 deadline to file reports asserting the effectiveness of their companies’ internal controls and financial reporting procedures. And starting December 2008, these assertions have to be backed up and attested to by outside auditors.
In addition to creating a new cadre of compliance consultants and helping to grow a lot of existing accounting firms, this expansion of SOX “has generated a wave of technology products,” says Andrew Levi, founder, president, and CEO of Dallas-based tech solutions provider Aztec Systems Inc.
SECURITY, CONTROL ARE KEY
Thanks to SOX, demand among SMBs (as well as their larger corporate brethren) is growing for solutions “that fundamentally boil down to security, access control, user authentication, and business records management,” says Eric Linxweiler, senior vice president for sales and managed services at Logicalis Inc., a Bloomfield Hills, Mich.- based provider of technology solutions.
“SOX is all about security, transparency, and process controls,” Linxweiler explains. “It is about making sure the right people access information in the right places, and only when you want them to.”
Growth in the use of mobile devices such as PDAs has made enterprise systems management (ESM) tools an especially vital component of today’s SOX-related IT solutions, adds Levi. “Corporate data traveling around on PDAs that get lost in airports presents huge opportunities for security breaches and compromises,” he says. “That makes ESM tools that manage data and devices as important today as ever.”
A GROWING MARKET
There’s apparently room for growth in the market for more and better information technology tools and expertise to guide SMBs through the intricacies of SOX compliance.
“The IT solutions out there are still evolving,” says Chris Kyriakakis, a partner in the Atlanta-based accounting firm Frazier & Deeter LLC. There’s room for growth, he notes, “in providing solutions for companies to automate processes for monitoring potentially fraudulent/erroneous transactions, logging, and creating the audit trail necessary for them to demonstrate that the controls they have implemented are indeed working.”
Most of the SMBs required to comply with SOX “have checked that box,” says Levi. And the ranks of the compliant are going to grow as more private SMBs get with the program, he notes. “The private SMB cannot ignore SOX,” Levi says. “Many of them are interested in being acquired by a public company at some point. But if their [financial controls] house is in poor order, they are not going to be attractive candidates for acquisition.”
At the same time, many companies large and small are voluntarily complying with SOX, according to Linxweiler. And that’s because it’s the right thing to do.
“A lot of companies resisted SOX at first; I know we did,” says Linxweiler. “But when more people came to understand its goals–improved transparency and having the right controls in place–they realized that, in reality, it’s just good business.”
Martin Sinderman
