A growing number of US companies are looking to India's outsourcing firms to cut the cost and time needed to comply with a US corporate governance law that calls for timely and accurate reporting of financial accounts.
The Sarbanes-Oxley corporate governance law, passed after a series of abuses by greedy and unscrupulous corporate executives and their advisers, requires US public companies to report on the strength of their internal financial reporting controls to prevent fraud and ensure the accuracy of company filings.
Over a year into the gradual implementation of the law, companies say compliance with Sarbanes-Oxley is costly and complicated, prompting them to outsource the work to India.
Some Indian outsourcing companies said their Sarbanes-Oxley related business is growing more than 50 per cent a year, aided by costs that in some instances are a third of those of the US accounting firms, the Washington Post said in a report on Thursday.
Public companies in the US spent about $5.5 billion last year to comply with the new law and are likely to spend $5.8 billion this year, according to AMR Research, a technology research firm in Boston.
On Tuesday, Infosys Technologies Ltd said Sarbanes-Oxley related orders contributed to its more than 35 per cent profit growth in the quarter ended June 30.
Patni Computer Systems Ltd, another large software and outsourcing company, is helping US clients follow the new rules by building and testing new computer systems that track transactions and approvals, said Bill Benton, the firm's "principal solutions architect."
ExlService Holdings Inc, an outsourcing specialist headquartered in New York, which has operations in India, said 18 large clients of the company had come to it with compliance problems.
It estimated that more than 5 per cent of its revenue is Sarbanes-Oxley related.
That percentage is likely to grow, said Rohit Kapoor, the company's president.
"Doing this kind of business advisory service is becoming an integral part of our growth."
The Post quoted analysts and companies as saying that the compliance projects are often part of broader system upgrades.
More work could be up for grabs over the next few years as smaller and, finally, foreign companies, will be required to comply with the law, first in annual reports and then in quarterly reports.