SarbOx Changes - Good for Corporates, Bad for IT Vendors

SarbOx Changes - Good for Corporates, Bad for IT Vendors

Summary: Eric Savitz in a Barron's Online blog reports that on Wednesday the SEC approved new guidance on how to implement Section 404 of the Sarbanes Oxley Act. Section 404 is the portion of SarbOx that required CEOs to sign off on the documentation and effectiveness of internal controls and processes that affect significant transactions.

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TOPICS: EMC, Hardware, IBM, Software
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Eric Savitz in a Barron's Online blog reports that on Wednesday the SEC approved new guidance on how to implement Section 404 of the Sarbanes Oxley Act. Section 404 is the portion of SarbOx that required CEOs to sign off on the documentation and effectiveness of internal controls and processes that affect significant transactions.

This is great news for US corporations as the result could mean a 2% rise in profitability, according to Gerard Hallaran of technology research boutique JRPG.com. He sees $35 billion in SarbOx related spending evaporating in 2008, which represents 7% of US corporate IT.

This is bad news for information management companies.

The first companies to feel the pain from lower spending on compliance, he figures, will be “body shops,” including Kforce (KFRC), Robert Half (RHI) and MPS Group (MPS). He also sees risks for companies that make content management and related analytics software, including Business Objects (BOBJ), Cognos (COGN), Open Text (OTEX), EMC’s (EMC) Documentum unit and IBM’s (IBM) FileNet unit. He’s not as worried about hardware sales, but in general advises simply avoiding investments in companies focused on enterprise technology. Says Hallaren: “I would want to be out of the enterprise.”

Topics: EMC, Hardware, IBM, Software

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  • Why is this bad?

    IT work for SarbOx is painful. I would rather be doing work that contributes to the bottom line. There is still plenty of this, especially for people who can do quantitative analysis. If I help executives understand their data, its both more fun and more rewarding.
    shis-ka-bob