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Sarbanes-Oxley Compliance: Lessons for Telecoms Operators' BSS and OSS
Analysys Mason Group, April 2005
Less than a year after initial reports have been filed, the Sarbanes-Oxley (SOX) Act appears to be prompting a sea change in corporate attitudes to IT. While achieving compliance for the first time may be a difficult and costly process, all companies implementing the requisite measures will in time benefit from better understood, better documented and integrated processes across their organisations. This paper examines the challenges the SOX Act presents for telcos' IT processes and systems, and draws lessons from their experience to date in adapting to comply with the new regulations.
The Sarbanes-Oxley Act (SOX) is a complex piece of legislation that affects all companies listed on US stock exchanges that have a market capitalisation of over USD75 million. Many European telcos are affected, and while their deadline for compliance has been extended to 2006, they can learn from operators in the USA, where the deadline has already passed. Those that are not affected by SOX may soon face similar legislation in the EU.
This report summarises some of the key requirements of the Act that are of particular relevance to telecoms operators. Section 404 of the Act deals with IT systems, and mandates that companies submit reports that show that all business processes that feed data into the company's financial reports are well defined and documented. External auditors must verify that controls are in place to ensure that processing is accurate and no falsification of accounting information is possible. Rectification of deficiencies must be reported on an ongoing basis. Chief executives must personally attest to the truthfulness of these reports, or face heavy penalties.
While telecoms BSS and OSS processes feed data into corporate accounting systems, introducing formal controls is challenging as telecoms legacy systems in particular suffer from over-complex architectures, composed of systems that were never designed to interconnect and that have very high data throughputs.
Each functional BSS/OSS process can be broken down into specific activities where controls may be introduced. Billing, revenue assurance and mediation are the main focus of telcos' compliance activities today. End-to-end order processing and inventory management are also coming under scrutiny. While the cost of compliance is high, particularly in terms of auditors' fees, this can be reduced by automating the extraction of representative groups of records at each processing stage for examination.
Less than a year after initial reports have been filed, the Act appears to be prompting a sea change in corporate attitudes to IT. While achieving compliance for the first time may be a difficult and costly process, all companies implementing the requisite measures will in time benefit from better understood and better integrated processes across their organisations. SOX is also encouraging telcos to rethink their OSS architectures, to bring them more into line with their financial reporting frameworks, as well as improve communications between the IT and finance departments. SOX could turn out to be the long-awaited catalyst for bringing telcos and their OSSs out of their old PTT mindset and into the 21st century.
This paper 'Sarbanes-Oxley Compliance: Lessons for Telecoms Operators' BSS and OSS' examines the challenges the SOX Act presents for telcos' IT processes and systems, and draws lessons from their experience to date in adapting to comply with the new regulations.
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