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The Sarbanes-Oxley Act has put increased attention on IT and fixed asset management Compliance with the Sarbanes-Oxley Act of 2002 and other new regulations is spurring more companies to automate their information technology and enterprise asset management (EAM) efforts. "Before Sarbanes-Oxley, those of us involved in IT asset management had to do a lot of evangelizing," says David Dworkin, IT financial management solutions executive at IBM's Tivoli Software unit. "Now, for the first time, CXO-level executives are getting a tremendous amount of pressure to not only show that the company has control of their assets, but they have to understand how they are being used, and who's using them." Fixed assets can be a large part of the balance sheet at many companies, but these items are not always properly accounted for. To ensure that companies can provide an accurate financial picture of their operations, they need to have accurate fixed asset records. They also need to comply fully with tax regulations regarding the depreciation and disposal of assets. Under SOX, companies must be able to attest that they actually own all of the assets they claim on their balance sheets, and that IT assets that hold financial data are controlled and secured. Other regulations, like the Health Information Portability and Accountability Act (HIPAA) also have security requirements that affect asset management policies. According to ARC Advisory Group, this complex regulatory environment has contributed to the growth in the EAM solution market, and vendors in this space are beginning to add specific compliance functionality to their product offerings. ARC expects the EAM market (including IT assets) to grow at a compounded annual growth rate of 5% through 2010. "In the past, the asset management responsibility resided in the accounting department," says Alden Snyder, president of Asset Systems, an asset tracking solutions provider. "This new approach forces control farther out into the field organization. Therefore, more people are involved, and they have more accountability for those assets. People realized that the traditional method did not provide them data that was accurate or easy to audit." "I think Sarbanes-Oxley has caused a lot of people to do things that they know they should have been doing before, for very good business reasons," says French Caldwell, research vice president for governance, risk and compliance at Gartner. "In the past, it's been difficult to get executive-level support for investments in IT asset management, but now they are hearing from auditors that they need to address this." According to Snyder, high-tech and financial companies have made the most progress on automating their asset management systems to meet SOX requirements, because they typically have expensive, highly mobile assets that frequently contain sensitive company data. This increased regulatory pressure is also creating synergy between EAM and IT asset management systems that had previously operated independently in most organizations. "You cannot effectively manage assets with a silo mentality," says Dworkin. "That's one of the big pitfalls. EAM and IT had been run separately, but now they are starting to converge. I'm not saying that IT managers are going to be managing robots on the floor of General Motors, but they will have a joint platform. They will share a data repository and share a reporting structure." Many companies have not conducted the types of comprehensive inventories or implemented any type of automation to ensure they have an accurate picture of their IT or other fixed assets. In some cases, this might mean that assets aren't depreciated correctly; at other companies, there might be "ghost" assets on the books that have long since been destroyed or disposed of. "[We] found that since the Sarbanes-Oxley Act was passed, most companies--especially large, geographically distributed enterprises--have failed to recognized that software and hardware technology investments are a major part of their overall financial profile," says Lori Sechio, CEO at IT asset management software and services provider TekMethods. "As a result, many companies have inaccurate financial and tax statements, exposing the organization and its executives to potentially costly fines and penalties." However, the importance of asset tracking can vary from company to company, depending on how material those assets are to the company's operations. A manufacturer might place more emphasis on general capital asset tracking, while IT assets might be more materially relevant to a financial services or technology company. Spending Increase Compliance spending is on the rise, which may benefit asset management programs. But this increased spending is also putting the squeeze on budgets, particularly in IT where budgets are already tight.
AMR Research predicted that overall compliance spending in 2006 would reach $27.3 billion, with $6 billion (or 22%) allocated to the Sarbanes-Oxley Act. Spending will increase even more this year, with companies devoting $28 billion to compliance initiatives. "Spending on Sarbanes-Oxley is only the visible tip of the compliance iceberg," said John Hagerty, vice president of research at AMR. "Any expectation that compliance spending might moderate is just wishful thinking as companies in all industries grapple with increased regulatory concerns and stricter governance and risk policies within their own firms." There are benefits to be gained from deploying a robust asset management system, including potential tax savings through better depreciation, improved asset utilization, and more efficient procurement processes. This is especially true in the area of IT asset management. Not only can an accurate record of retired assets help keep you in compliance with SOX, HIPAA and other regulations, it can also lead to tax savings, and savings in license agreements and maintenance. "I don't see Sarbanes-Oxley alone as a primary driver for implementing these programs," says Caldwell. "It's one part of the business case, but it's the element that's going to get some attention. You still have to have a solid business case, however." "Clients have figured out that asset management can be a self-funding activity," says Dworkin. "This doesn't have to be a drain on you financially." According to Dworkin, one of the biggest paybacks on the IT side comes from better managing software licenses. "You will find a huge savings on software that's underused, not used, or redundant with other software," he says. Technology Solutions On the technology side, many companies have turned to bar codes to help speed the inventory process, and improve tracking of fixed assets across the enterprise. While RFID is staring to make headway in logistics and healthcare applications, cost has prevented the technology from being widely adopted in other areas. "There hasn't been much pick up of RFID," says Peter O'Neil, principal analyst at Forrester Research. "That technology requires installing many expensive sensors and the application of RFID to IT assets is not yet compelling." Companies are increasingly turning to EAM and IT EAM software tools to help manage their compliance efforts. These software tools can help create auditable IT processes, ensure security for IT infrastructure used for financial data, improve license management, create an accurate analysis of IT assets for financial reporting, and reduce compliance costs. IT asset management tools can also speed the inventory process through automatic discovery of all assets on the network. Enterprise resource planning (ERP) vendors have begun to address this part of the market, but don't always provide full asset management functionality. And EAM systems do not necessarily address IT asset management requirements. "Enterprise systems tend to be sort of at the high level," says Snyder. "They almost universally offer a fixed asset accounting component that has a database design that's helpful to asset management. They don't get down into the trenches as far as identifying the assets, or creating the software platforms needed to manage that data." "Enterprise asset management systems concentrate on the financial aspects of the life cycle. Booking purchase costs, depreciating and getting it off the books," says O'Neil. "ITAM systems provide information and assistance for other life cycle elements -- total cost of ownership, servicing the assets, re-using assets, obsolescence planning." Technology will only solve part of the problem, however, says Snyder. Business must address process issues in order to make sure their asset management program is successful. "One of the biggest challenges is enforcing the procedure that's set up to make sure the organization complies with the requirement to enter all new assets properly, and to update records when things are moved or retired. Those sorts of housekeeping things are a perpetual challenge," says Snyder. "You have to invest heavily in training, and get the process set up and documented. Then you have to have a way to audit that process and make people accountable." Dworkin adds that companies must have the right technology tools in place, and have the right skill sets in their management team. Successful asset management programs also depend on executive-level support and comprehensive project teams that include representatives from each operational area and for each IT platform. "But process is a big piece of this," Dworkin adds. "It's not just smart people and good tools. You have to have outstanding processes."
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