Software Market: Hurray for More Regulation!

To software vendors and business users alike, the growing regulatory climate represents an enormous opportunity.


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With doom and gloom dominating the news, and that’s only on the economic front, one hopeful scenario that can be dragged out of the current disintegration of laissez-faire capitalism is the growing recognition that we need more regulation, more oversight, and just a little bit more control over Adam Smith’s now infamous unseen hand.

Welcome to the regulatory economy.

Why I think this scenario is a hopeful one is, of course, based on its impact on the enterprise software market – vendors, the IT community and the business user alike. To these three constituencies, the growing regulatory climate represents an enormous opportunity to sell more software, buy more software, consume more software, and, happily for all, run a more effective and efficient business in the process. I’ll admit this may seem to be a controversial position to take – advocating more regulation, and cheering its impact on the enterprise software market – but there’s a method to this madness. It goes like this:

First, there’s the problem that is necessitating the regulatory economy. It turns out, in case you hadn’t noticed, that Smith’s unseen hand, which everyone assumed would magically act to curb excess and manage risk, has of late been dope-slapping a generation of deregulators with the reality of what unbridled greed and excess can do to an interconnected global economy.

This realization, of course, is playing havoc with the formerly prevailing wisdom that less regulation is better than more. To give credit where credit is due, one of the reasons the proponents of de-regulation were so adamant in their opposition (other than because the crooks among them wanted free reign to pillage and plunder) was that regulation is expensive, complex, and largely useless.

Admittedly, this perspective rings true for the many legitimate business people who actually play fair, and it’s a legitimate argument to say that burdening the honest with an onerous regulatory burden is an unfair form of collective punishment. While I don’t believe that regulations by themselves impinge innovation and entrepreneurialism, I do see some validity in trying to limit the burden placed on the innocent in our pursuit of the guilty.

Here’s where enterprise software rides to the rescue. The trick to being able to afford large amounts of regulation at a relatively low cost is to automate the processes that monitor, report, verify, and audit regulatory compliance. This is, of course, the modus operandi of the governance, risk, and compliance (GRC) market, which was birthed in the aftermath of the last economic binge/purge cycle, a.k.a. the dotcom bust. It turns out that GRC, which got its start as a means to meet the Sarbanes-Oxley regulations that were put in place post-dotcom bust, is one of the ways in which we can ease us into the regulatory economy without excessively burdening those the new regime means to protect.

But GRC isn’t the only tool for the regulatory economy. Business intelligence – which I consider a superset of GRC – is finally reaching a level of domain specificity that allows it to contribute directly to solving the cost/complexity problems of the regulatory economy. Indeed, the verticalization of BI, once the exclusive purview of largely horizontal tools, is poised to play a significant role in driving regulatory compliance. Verticalized BI solutions, which have been a major focus of vendor activity in recent years, will by their very nature be easily pointed at the problem of managing the regulations at force in a given industry.

The reason BI gets to play this role is that these tools provide a window into the vast amounts of data captured in enterprise software systems, data that, in terms of sheer quantity, is exactly what the regulators are looking for. BI’s role will be to elevate the quality and usefulness of these data to meet the regulatory market’s requirements, and that will include integrating data from outside partners and customers as well.

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Tags: software, IT, economy, Enterprise, Sarbanes-Oxley

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