Compliance laws boosting IT budgets

Gartner says corporate governance, compliance laws are leading to higher IT spending by companies.
Written by Dinesh C. Sharma, Contributor

Corporate governance and compliance laws are driving up information technology spending by businesses, Gartner reported in a study released Thursday.

The research group expects an increase of between 10 percent and 15 percent in IT budgets in 2006, up from about 5 percent in 2004. Companies are diverting large amounts of discretionary resources to support compliance with the U.S. Sarbanes-Oxley Act (SOX) and similar regulatory measures in other countries, it said. The poll included 326 audit, finance and IT professionals in North America and Western Europe.

"Projects that were not aligned with compliance and corporate governance were delayed or cancelled, and SOX efforts inhibited the purchase of large amounts of software related to building new technologies and deploying new projects," French Caldwell, a research vice president at Gartner, said in a statement. "However, by the second half of 2005, increased interest in IT solutions to ease the burden of compliance has begun to drive new spending."

The compliance-related IT expenses mainly go into services focused on consulting, audits, process management and workflow, documentation, and planning, though not much for purchase of new software. However, new software includes functions like business process and corporate performance management, document and records management and security.

Gartner said companies should go for solutions that support multiple regulations and multiple business units. Otherwise, companies will spend 10 times more on IT solutions for compliance than those taking sustainable approach, it said. Gartner analysts said IT organizations should work with financial, legal and business operations to manage operational risks.

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