Pressured by fines and threats of imprisonment for noncompliance with federal and state regulations, IT executives slowly are deploying systems that archive their e-mail and instant-messaging communications.

The incentive to comply is high:

• Last year, five Wall Street brokerages agreed to pay $8.25 million in fines for discarding e-mail related to customer transactions.

• In July, a court found that UBS Warburg was responsible for paying as much as $300,000 to restore e-mails required for a gender discrimination case.

• A 2003 study by the ePolicy Institute, American Management Association and Clearswift of 1,100 U.S. companies showed that 14% of respondents had been ordered by a court or regulatory body to produce employee e-mail.

• Specific language in the Sarbanes-Oxley Act of 2002 says "whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies or makes a false entry in any record, document . . . with intent to impede . . . shall be fined under this title, imprisoned not more than 20 years, or both."

While the compulsion for companies to archive e-mails is overwhelming, the Radicati Group found that only 37% of organizations have an e-mail archiving policy.

"Sixty percent of the critical information a typical user needs to do his job on a daily basis is somehow stored in the messaging system," says Michael Osterman, president of Osterman Research. The ePolicy Institute study estimates that the average employee spends 25% of the workday on e-mail.

For example, experts say a number of steps need to be followed in setting up an e-mail archiving system.

Every company should form a committee to look at its e-mail system and determine an e-mail retention policy.

"You need to understand the user base, the architecture and make a decision from there," says Priscilla Emery, president of e-Nterprise Advisors in Altamonte Springs, Fla. "No. 1, you need to have your e-mail administrators involved because they are the ones who are going to have to live with the system. It also helps to have your records manager, legal counsel and compliance involved, especially if you are dealing with legal [or regulatory] issues."

Linda Glover, records management coordinator for Caterpillar Financial Services in Nashville says her company is using the Six Sigma methodology to iron out the company's e-mail strategy. Six Sigma uses data and statistical analysis to measure and improve a company's operational performance by identifying and eliminating defects in business processes.

"The team consists of me, the records management coordinator, an e-mail IT person and a communications person," Glover says. "We have flow-charted the process and are now looking at [a step in Six Sigma's plan called] 'voice of the customer' - we are interviewing and using a survey about how many e-mails they get each day, how many e-mails they get with attachments or Web addresses, and what their problems are."

A variety of regulations are causing organizations to look at e-mail archiving. Among the regulations that affect public companies are Sarbanes-Oxley, the Heath Information Portability and Accountability Act of 1996 (HIPAA) and the Uniform Electronic Transactions Act, which says e-mail can be used to form contracts. In addition, the threat of a lawsuit for offensive comments or behavior or for corporate wrongdoing is a concern.

"We first went to IT to ask for a [$500,000] e-mail archiving system, but they wanted to do a cost-benefit analysis," says Greg Long, an electronics records analyst for UnumProvident in Chattanooga, Tenn. "Then we went to legal, which asked us how much putting in KVS' Enterprise Vault was going to cost. Legal said if we were to go to trial on any cases we would blow through a million in two weeks, so let's just buy KVS and install it now."

Meanwhile, deciding which e-mail needs to be archived is no easy task. It involves assessing the different business units in the company and deciding not only which departments' but also which employees' e-mails need to be retained. Although some companies fearing litigation elect to archive all e-mails, Osterman says most companies fall into three categories of archiving.