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E-Sign on the Dotted Line

February 1, 2001
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ometimes it seems that today's onslaught of technology has created anetherworld for businesses. For centuries, secretaries dutifully squirreled awaypieces of paper in filing cabinets, and then pulled them out when the time cameto review or update information. Since people created these documents manually -first with a quill pen and later with a typewriter - everything made perfectsense. The order of the day was, well, order.

    Today's e-business systems create an electronicenvironment that greatly reduces the need for paper. As data flows from onecomputer to another, companies typically boost productivity and cut costs.Unfortunately, though, the road to utopia is paved with a major pothole.Managing legal documents, including contracts and agreements, is next toimpossible online. Most companies don't have the software or systems in place tolegally verify a person's identity.

    The end result? Organizations, and particularly humanresources departments, become islands of automation. While computer networks andworkflow route documents throughout an organization and beyond with lightningefficiency, there's too often a need to print out a piece of paper in order toobtain a signature. At that point, someone must either file the paper away in afiling cabinet or scan it back into a computer. Either way, it's a lot of wastedtime and effort simply to obtain a John Hancock.

    By now, you're probably aware that former president BillClinton signed the Electronic Signatures in Global and National Commerce Act(E-Sign) last June. On October 1, 2000, the law took effect, allowinge-signatures to hold equal footing with handwritten signatures as legallybinding documents for e-commerce transactions.

    The act doesn't tell anyone how to implement e-signaturesor what technology to use. It simply defines "Electronic Signature"broadly to include any "electronic sound, symbol, or process" thatsignifies a person's intent to sign a contract.

    Simply put, the law creates a basic standard for theentire United States. Previously, more than 40 states had defined some kind ofe-signature solution, and 16 states had approved laws to use e-signatures.

    In addition, many other countries have approved or adoptedelectronic signatures, including Finland, France, Thailand, and the UnitedKingdom.

    Although HR departments aren't exactly stampeding to enactdigital signatures, there's little doubt that E-Sign will lead to significantchanges in the months and years ahead. Human resources - which has blazed thetrail into employee self-service, work flow, and automation over the last fewyears - stands to be a huge beneficiary ... and guinea pig. "It will closethe loop on electronic commerce," explains Colleen Niven, vice president ofenabling technologies at AMRResearch, a Boston consulting company.

    At present, only a few companies, including VeriSign,Entrust Technologies, RSA, BioNetrix, and Veritel, have begun to venture intothe digital signature arena, though others are quickly following suit. Currentsystems consist mostly of add-on applications or independent systems that usebiometrics (including fingerprints, retina scans, and voice recognition) andpublic key infrastructure (PKI) technology that authenticates an individual.

    Enterprise resource planning vendor SAP and VeriSignrecently rolled out Go Secure! for SAP, which allows an organization tointegrate digital certificates with R/3 applications. At that point a companycan deploy secure extranet access, user authentication, and transactionencryption capabilities throughout the enterprise. VeriSign also offers GoSecure! for Lotus Notes R5 and Microsoft Exchange. The company's customersinclude Texas Instruments, Deere & Company, University of Pittsburgh, andUnited Parcel Service. BioNetrix has partnerships in place with the likes ofOracle, Microsoft, and Sun Microsystems.

    In addition, ERP vendors such as PeopleSoft and J.D.Edwards either are adding electronic signature tools capability or are likely toinclude it in future releases. "In the future, an array of HR applications,including benefits packages, supply-chain software, and procurement systems,will support e-signatures," says Niven. That includes the likes of Aribaand Commerce One, key vendors in the e-business arena.

    Of course, technology is only part of the challenge. Whileit's possible to put the mechanics in place, it's essential for people to usesystems effectively and efficiently. Overcoming the cultural barrier and weaningpeople off hard copy might be likened to convincing the public to use ATMs whenthey were invented in the 1960s. Although the technology worked just fine, ittook nearly two decades for the machines to become accepted and widely used.

    Niven believes that the rapid adoption rate for e-commerceis a positive sign, however. Only a few years ago, the public resisted enteringcredit card numbers online, but that nervousness has largely disappeared.

    How can you make E-Sign your ally? Michael Carlson, anattorney at banking and commercial law firm Faegre & Benson, believes thatE-Sign is no panacea. It "doesn't remove all the roadblocks associated withe-commerce...and even adds some new ones of its own," he writes. He pointsout that electronic agreements produce many of the same problems and concerns aspaper contracts, including opt-out clauses and consumer protection.

In addition, there are other requirements, such as the need to maintain secureelectronic records "in a format that can be accessed and accuratelyreproduced throughout the duration of the contract."

    Ultimately, "E-Sign merely establishes that usingelectronic media isn't sufficient in and of itself to invalidate thecontract."

    "The technology is in its infancy, and it has not yetbeen widely deployed," says Valarie King-Bailey, vice president ofmarketing for QUMAS, which offers digital signature technology among itscompliance management solutions. "It will have huge ramifications in humanresources as companies look to handle W-4s, employment reviews, disciplinaryforms, and benefits in a total electronic way." In addition, she pointsout, there are security issues, privacy issues, and practical matters that mustbe ironed out. And in the end, there's still no solution that's totallyhack-proof. "Companies should never let their guard down," she says.

    Yet the handwriting is on the wall, or perhaps more aptly,on the PC. Agilent Technologies, a test equipment manufacturer in Palo Alto,California, has issued digital certificates from VeriSign to 15,000 of its40,000 employees. That allows employees to use electronic signatures rather thanpasswords to access the firm's intranet, including an HR Web site. Othercompanies, including several in the pharmaceutical industry, are now usingdigital and electronic signatures. In fact, consulting firm GartnerGroup expectsthat up to 80 percent of large U.S. enterprises will test the use of digitalcertificates by 2003.

    When it comes to e-signatures, the deal is already signed,sealed, and delivered.

Workforce, February 2001, Vol 80, No 2, pp. 22-23 Subscribe Now!

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