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ERP Journal: Article

Comply or Die!

Comply or Die!

At one point in my career I worked right across the street from Enron. I used to pass the big E on the sidewalk as I made my way to the account I was working on. Like most of us, the fall of Enron surprised and angered me.

One consequence of the Enron scandal and other accounting irregularities was the creation of the Sarbanes-Oxley regulations. This set of rules requires major corporations to ensure that their board is knowledgeable and aware of all of the ramifications of its financial position. It also makes the board members responsible and liable for financial proceedings within the company.

Accomplishing this task is no easy matter, especially for large corporations with multiple divisions and diverse management. Information that comprises corporate balance statements resides in hundreds of computer systems, none of which were designed with compliance in mind.

Which is where Web services comes to the rescue. The bad news of Sarbanes-Oxley is that the information required has to be very current - it can't take a year to put it together, it has to be timely. All of the old processes for generating corporate financial reports have to be sped up somehow. Web services promises to address this by removing the major cause of delay - impedance mismatch.

Accounting follows strict rules (well, okay, sometimes accountants play fast and loose with these rules, hence the Enron scandal, but the rules themselves are fairly straightforward). These rules allow accountants to produce standard reports (like a balance sheet) from myriad different sources. The problem that gives the accountants, and the systems guys, fits is trying to match up and correlate, federate, and aggregate data in different packages with different formats.

If this seems like a simple problem, think again. Even something as straightforward as a date can be problematic. Sybase, Oracle, DB2, and other databases all have different formats for dates. And SQL has been around over 30 years and has a standards body regulating it. Now imagine what it's like to try to get multiple accounting packages, ERP systems, management dashboards, and employee portals all pointed in the same direction and providing the same information. Most companies can't even come up with a single view of their customers. In some ways it's amazing that a balance sheet can be produced at all.

So the ability to remove many of these problems, assist in the mapping and correlations, and transform data from one format to another is a big aid in creating a timely flow of information. Of course, there's more to it than just compliance management. As a matter of course the improvements that occur as a result of compliance requirements flow not just to the board room, but to the bottom line. The ability to see deeper into the financial status of a corporation allows management to make realistic decisions and ideally helps to head off crises such as those that caused the accounting scandals.

But it's not just the board that benefits from system updates in the form of more timely financial information. The work necessary to implement better compliance management provides dividends in many systems areas. The ability to transform and begin to reduce the number of disparate views of things like customers and orders leads to shorter lead times and quicker fulfillment cycles - all benefits to the company and to the bottom line.

Web services won't solve all of the world's problems, whether we're talking about compliance management, order to cash cycles, or world peace (or alternatively, whirled peas). There's real work required to figure out what needs to be done with Web services capabilities, how best to expose services, and how to most efficiently combine them. Web services is a piece of the puzzle, but good design is still needed as well.

More Stories By Sean Rhody

Sean Rhody is the founding-editor (1999) and editor-in-chief of SOA World Magazine. He is a respected industry expert on SOA and Web Services and a consultant with a leading consulting services company. Most recently, Sean served as the tech chair of SOA World Conference & Expo 2007 East.

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Most Recent Comments
David 04/06/04 01:05:35 PM EDT

Sometimes the solution isn''t so complex, and web services, while great, are a vehicle for integration and don''t resolve anything at the semantic level.

My take is that companies cannot even comply with long-standing standards, much less agree on details like semantics of business language, nor should they. The US is all about competition, and once you lock into law something as fluid as finances or business reporting of their operations, you will kill the innovation that makes this country great. The more micromanaging, the more outsourcing and offshoring and companies moving to tax havens. You can''t bully people into spending their money, and people need to realize that the more regulations are put into place "to protect us," the more these businesses will simply move away to avoid the costs and burdens.

This is the double edge of "free trade." If companies can move away and still sell their products easily here, why be a US company at all if there are other countries to have your headquarters that won''t have the tax and regulations that are too high.

Simplicity is the real route to go, not detailed regulation. If all companies had to pay a small, but flat and easy fee on their revenues, say 1%, they would likely all pay it and not spend millions on lawyers and accountants and moving offshore. But when the tax rate is high, and when it only falls on "profits," the incentive to hide profits through expenses and the like increases. Besides, the real role of corporations shouldn''t be to fill the coffers of the US treasury, it should be to create and pay people for their work, who then pay taxes (income and sales and more).

The same simplication for personal taxes would also apply, since so many people avoid taxes because that''s the game the IRS has created. It''s a losing game, and the job losses and growing offshoring are the result of bad policies that believe they can pit the "rich versus the poor," this business versus that business, those who drive SUVs versus those that drive "green" cars. It''s endless class warfare and results in problems. A much lower flat tax of 15% on all sales, for example, would hit everyone fairly and would make taxing less taxing for people and businesses and the IRS. People would truly let free trade and their personal tastes drive their activities rather than avoiding taxes and regulations. Right now, people do things that they would not otherwise do if the laws were truly fair. Everyone feels they are getting the shaft, and that''s because the laws are truly fair.

Anyway, fluid motion is the key.