Retention of electronic records is a hot issue for business and it has proven itself to be a big compliance headache. I have blogged on that issue here, here and here.

AXS-One is a global records compliance management company and this week I interviewed its chairman and CEO Bill Lyons about some of the issues.

SOX FIRST: How serious a problem do we have here?

LYONS: It is very serious. What we have found is that people have a lot of paper processes but they really haven't taken the time, or they are just beginning to take the time to get their electronic house in order. It really is important. In the States for example, 80 per cent of corporate records are now in digital form so it's ludicrous that we are sitting here 8 years into the new century and we don't have electronic archiving where you really can at a moment's notice figure out what you have on a particular topic, by executive, by time frame. We will find over the next half a dozen years that virtually corporation in the world will need software systems to help manage their electronic records.

SOX FIRST: Two years ago, you said email and electronic records were a legal Chernobyl. Can you expand on that?

LYONS: Morgan Stanley had their come-uppance a couple of years ago and the reason for that was that they were using back-up tapes and back- up tapes are historically incomplete and inaccurate records of exactly what happened. They kept on providing these tapes to the court system and saying: "This is all we have". That was really the Chernobyl because all general counsels in the US looked at that and said: "Oh my God, this could happen to me". Back-up tapes were not designed to provide a complete record of what happened between A and B.

SOX FIRST:What sort of processes should companies have then?

LYONS: If you think back on it, we were really living in the paper world when you said we'd like to check out the CEO, CFO and the top 10 executives and everything they had to say about client C over the last six months. It was a very simple thing to do. You just went to the executive assistant, they went to the file drawer behind, everything was sorted by date and by client. You took a look at all of those, you copied them, gave them to your attorneys and you provided it. Communication was more formal then, now we have emails and instant messages and clearly people are attaching contracts to emails. That really has become a corporate record but we haven't had the same vigilance in terms of ensuring this is done properly by the corporation. What's happened is we are in a transition mode, the transition between paper processes and moving to digital processes.

SOX FIRST:But there is a problem here. Email is being replaced by other forms of messaging. How do you get a process for that?

LYONS: I think that's the way of the future frankly. You're right, instant messaging to a great degree has replaced a lot of email. And with the way iPhones work, the messages are strung together in a conversation mode so it will be so easy that you will have to keep it. The problem with text messaging is that you are going to have to get it from your provider. If you have 1000 employee and 20 different ISP providers, you're going to have some issues. However, what we have beens speculating on is if you went to a company like Merrill Lynch and said if you buy all your phones from Verizon then we can ask Verizon to give us access to all the text messages. Then it's just a matter of archiving them. You capture them in the server before you delete them. That's going to be something people will have to reckon with in the future.

SOX FIRST: So how many companies actually have the right retention processes in place?

LYONS: I'd say it's around 10 to 20 per cent. That would be my guess in the US, and I think the US is ahead of most countries.