Don't trust your IT partners says study

Stan Beer
Wednesday, 12 July 2006 11:48

IT Industry - Market

Ninety per cent of IT businesses that undertake a review of their self reporting relationships (SRR) discover under reporting by their partner or customers, according to a new report. 

The KPMG study ‘Contract compliance in the high-tech industry,’ surveyed 155 high tech companies worldwide on their SRRs (a trust-based arrangement which requires partners and customers to report information such as sales under license and license maintenance upgrades to their providers).

Maurice Pagnozzi, Asia Pacific Leader for Contract Compliance Services, KPMG said the study found billions of dollars are unaccounted for in the IT industry because businesses place too much faith in their SRR arrangement.

“Of the 155 respondents we surveyed, 72% indicated they were in a SRR, yet only 6% said they audit even half of their relationships.

“Their reasons for this were mainly concern over potential damage to relations with partners or customers and uncertainty over the likely benefits of a more comprehensive audit program,” Mr Pagnozzi said.
 
“While verifying accounts may risk offending a business partner or customer, the risk of not doing it is even greater. 

KPMG’s experience shows the vast majority of companies that do review their SRRs are likely to improve their compliance, partner or customer relationship and revenues through better enforcement of contract terms and improvement of their business processes to manage assets.

“Most often the misreporting is not intended or malicious, it’s simply because of poor compliance processes and controls or original contracts that are too vague and therefore easily misunderstood.

“Done properly, relations with partners and customers can actually be improved.

“If companies can see benefits in better control of their intellectual property as well, the arguments for bringing SRRs under proper control begin to look overwhelming,” said Mr Pagnozzi.

Relying too heavily on trust can also lead to a weakening of a company’s own intellectual property rights, through grey market activity or even piracy.

This was confirmed by the study which found nearly 60% of respondents agreed that by not auditing their partners’ reports they risked encouraging grey market activity in their products.