Sarbanes-Oxley windfall ahead for techs

A section of the Sarbanes-Oxley Act took effect on Monday, part of new accounting regulations that promise to be a multimillion-dollar bonanza for security companies.

Under Section 404 of the law, publicly traded companies must have policies and controls in place to secure, document and process material information dealing with their financial results. Vendors helping companies with compliance are expect to reap $5.8bn next year, with 28 per cent going to technology companies, according to an AMR Research survey released on Friday.

John Hagerty, vice-president of research at AMR, said in a statement: "Technology will play an increasingly significant role in the integration of SOX [Sarbanes-Oxley] compliance initiatives into the business process."

This year, companies and organisations are expected to spend $1.13bn on technology to comply with Sarbanes-Oxley. That is expected to increase to $1.62bn next year, according to the study.

Providers of technology for internal and external security are expected to capture a good slice of this business. Other sectors set to benefit include document and record management; business process management to integrate disparate business systems; applications compliance management software; and application suites to standardise the business processes for financial transparency.

Technology vendors have changed their marketing pitch as the regulations have taken hold, industry analysts have noted. The US Congress passed the Sarbanes-Oxley Act in 2002, aiming to counter financial scandals such as those at Enron or WorldCom, by imposing more transparency in accounting procedures.

Paul Proctor, vice-president of security and risk strategies at Meta Group, said: "A year ago, the vendors had ineffective messaging. They said their products were compliant and put a patina of compliance on everything they wrote to market them. Now vendors say their products address compliance."

Dawn Kawamoto writes for CNET News.com.