Rules To Buy ByRules To Buy By

Brokerage Stifel Nicolaus is in good shape. It spent just $20,000 recently to upgrade to Windows XP and add drives to its Hewlett-Packard optical-storage systems for E-mail and IM archiving. The midsize brokerage has been archiving E-mail for three years and stores 12,000 E-mails a day, adding up to 74 Gbytes of data. It's also started archiving instant messages, IT director Lee Blackmore says. Stifel uses products from Hyland Corp. and IMlogic Inc. for archiving. Blackmore expects the infrastructure to hold out for three years.

Even companies that are prepared for the regulations begrudge the effort and expense. Thomas Weisel Partners went from storing 400 Gbytes of E-mail between 1999 and 2001 to 700 Gbytes this year alone, which gives some clue to the challenge faced by many firms. The brokerage stores about 3,000 IM sessions a day, chief technology officer Beth Cannon says. Her systems store E-mail and messaging exchanges on a hard disk before routing them to a Hewlett-Packard optical jukebox. "If we weren't governed by those bodies, we wouldn't even keep E-mail" on disk, she says. "We'd just put it on tape."

Processes have to change, too. Financial planning and insurance company Minnesota Life is "moving in phases" to automate the storage and archiving of E-mail and IM data, storage administrator Jeffrey Deaver says. Since E-mail is now automatically deleted after 60 days, employees must save important E-mail as a document. "People can't say a case came up and we started trashing E-mail," Deaver says.

BancFirst Corp. has some concerns about how the rules will affect its small brokerage business. A big issue is "how much infrastructure it will take to store that information for all that time," says CIO Scott Copeland, adding that it's hard to be sure how much storage is adequate or how processes will have to change. "It's all additive," he says, "and often involves documents and processes you didn't deal with before."

Banks face additional regulations involving checks and customers. After bundles of paper checks were stuck in grounded airplanes for days after Sept. 11, 2001, Congress took up a bill to require that all banks transfer and clear checks electronically. The bill is expected to pass when the new Congress takes office next year. In addition, banks are dealing with laws that require them to keep records of the identity of customers who open accounts, as well as archive transactions, to make it more difficult for terrorists to launder money.

To accomplish all that, banks need imaging systems and the IT infrastructure to transmit and archive checks electronically. Industry analysts say only about half the country's banks-mostly the larger ones-meet those requirements. Once Congress passes the check-clearing bill, some banks will have to buy "some big elephants of storage," says Jeff Vetterick, VP of marketing at Advanced Financial Solutions, a check- and payments-processing vendor.

Sterling Savings Bank is beginning a pilot project to handle the process electronically. It expects to pay up to $600 per month for a new T1 line, around $5,000 for a new Windows server, and 2 to 4 cents per check for processing, based on volume, says Kade Peterson, VP of items processing. But there's an upside-the bank today pays 3 to 7 cents to process checks the old-fashioned way, and it takes up to four days to clear checks. That will shrink to four hours, and the bank will be able to respond more quickly to bad checks, too.

So the new laws and regulations that require additional IT spending and changes to business processes can also produce bottom-line benefits. For businesses struggling to accommodate these new rules with flat or shrinking IT budgets, that's worth smiling about-even if the joke isn't funny. -With Tony Kontzer, Marianne Kolbasuk McGee, and Rick Whiting