Channel Partners

February 1, 2004

3 Min Read
The Analyst Corner - The Business Value in Sarbanes-Oxley Compliance

The Business Value in Sarbanes-Oxley Compliance

By Rob Daly, President & CEO of Bluespring Software

No doubt, most public communications service providers are scrambling towards
the looming June 15 deadline for Sarbanes-Oxley compliance, as required by the
United States Securities and Exchange Commission (SEC). Teams have been formed,
processes have been documented and internal controls are being put into place to
establish and maintain compliance with the Act.

It should be recognized, however, that there is a great deal of business
value to this exercise, too. Your internal audit committee should be more than
the "Sarbanes-Oxley police" and a charge to administrative overhead.
Your internal audit committee should be a profit center, looking at internal
controls as both a way to maintain corporate integrity and a way to heighten
operational margins.

Take, for example, the process in which enterprise customers are acquired.
Enterprise business makes up roughly 50 – 80 percent of a communications service
provider’s overall revenue. The overwhelming majority of deals that make up
enterprise revenue are based on non-standard arrangements (non-standard pricing,
non-standard terms, non-standard solutions). Because these complex deals are
treated as "one-offs," there are rarely internal controls over the
methodology in which they are formed and approved, creating a possible risk
environment of revenue restatement due to errors, leakage and/or regulatory
non-compliance.

The traditional view from an internal audit committee is that this represents
a "material weakness" in an internal process that impacts financial
reporting and should be addressed, and they would be correct. But, step back for
a minute and set aside the legal reasons for fixing this problem. What would be
the business benefit of standardizing the way in which you acquire enterprise
business?

From a sales perspective, non-standard deals represent a "headache"
because they are slow in being formed, require input from an unspecified group
of people and cannot be managed using existing systems and processes. From a
financial perspective, these deals leak up to 25 percent of their revenue. From
an order entry perspective, these deals contain error rates in excess of 90
percent, leading to large amounts of rework and customer rebates. Improving the
process in which deals are formed with enterprise customers would produce faster
sales cycles and prevent many of the errors that lead to revenue leakage.

Broadening the scope of this project beyond Sarbanes-Oxley means that any
investment made towards achieving compliance will also speed your time to cash
and prevent many of the errors that lead to revenue leakage.

While this represents only one example of the many processes being reviewed
for internal control, it does demonstrate the perspective that your internal
audit committee should have when justifying courses of action. "What is the
business benefit to establishing this internal control," should be the
question asked of every initiative pursued in the name of Sarbanes-Oxley. You
should expect to be able to have your cake and eat it, too.

About the Author

Rob Daly is the president and CEO of Bluespring Software.

In 1999, Bluespring Software was founded on a vision to assist communications
service providers evolve their customer acquisition strategy to embrace complex,
non-standard opportunities as a source of profitable growth. Bluespring’s Deal
Assurance solution is the result of years of customer-focused product
development, leveraging telecommunications operations maps.

For more information, please visit Bluespring Software at www.bluespringsoftware.com.

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