The Sarbanes-Oxley Act (SOX) has rightly earned a degree of notoriety: it is a blunt tool whose provisions have placed a huge burden on US corporations and multinationals with significant US operations.
But another acronym is set to induce the same wincing reaction among senior business and IT executives in 2007: FRCP.
Changes to the US’s Federal Rules of Civil Procedure (FRCP), which came into force on 1 December, will require businesses to build rigour into their electronic archiving processes so they can locate information held in Word documents, emails, voicemail and instant messaging sessions on demand.
That demand will largely come in legal cases: once a federal lawsuit is filed, the FRCP dictates that parties will have between 60 and 90 days to agree a discovery process. In effect, warns Mike Lynch, CEO of search vendor Autonomy, “the computer ate my homework excuse no longer holds.”
This is by no means a local issue. According to Debra Logan, a vice president at IT advisory group Gartner, FRCP will have ramifications for companies “worldwide”, especially in industries where litigation is commonplace, such as pharmaceuticals and the financial services sector. “If I was in British American Tobacco or Philip Morris, I’d be taking this very seriously,” she adds.
Clearly this is “bad news” for many companies, notes John Mancini, president of user group the Association for Information and Image Management (AIIM), as most have “a long way to go” to develop the kind of information management infrastructure that will support the required access levels.
AIIM has recently conducted research examining corporate readiness for the new regulations: the numbers make alarming reading. Of the more than 800 users polled, only 57% have a formal policy to help them classify records; just 36% have formal policies to govern preparation for litigation; and 47% reported no spending plan related to managing information in the context of litigation.
Yet the prescription of better information management can be seen as an opportunity, says Gartner’s Logan. Whereas many of the actions companies have taken to comply with SOX have added little or no value, FRCP could help impose best practice in an area that has clearly been neglected, she says. “The sheer costs involved in litigation these days are enormous. If you can reduce the time spent on discovery – the time you’re paying outside counsel – even just by a fraction, this stuff pays for itself.”
Technology vendors have been quick to spot a sales opportunity, with a whole wave of companies purporting to offer complete e-discovery capabilities. But it would be a mistake to assume that there is a ‘magic bullet’ capable of classifying corporate information, implementing information management and electronic discovery policies, says Logan.