Article from Information Week on how companies will spend money on IT budgets when year 2000 problem is solved. Article discusses plans of Ford Motor Co., a leading customer of Bay.
informationweek.com
August 17, 1998
The IT Renaissance
Forget the doomsayers predicting layoffs and budget cuts
once the year 2000 problem is fixed. A new InformationWeek
Research study indicates companies will devote freed-up
resources to strategic initiatives.
By Marianne Kolbasuk McGee with Jennifer Mateyaschuk
f you believe some industry alarmists, IT
organizations are headed for an apocalypse. The
theory goes something like this: IT executives have
been spending enormous sums to fix or replace
systems unable to handle dates beyond Dec. 31, 1999. Once the
date-field problem is mended, they will slash their budgets and lay
off staff en masse.
Obviously, none of the so-called experts espousing this view spoke
to Bernard Mathaisel, executive VP and CIO at Ford Motor Co.
Mathaisel has spent the past several months developing plans for
Ford's IT department after it fixes the year 2000 problem. Instead of
scaling back Ford's IT operations, Mathaisel is drafting an
ambitious strategy for reallocating the hundreds of workers and
millions of dollars now being devoted to the company's year 2000
work.
Once all Ford systems are year 2000 compliant--testing is
scheduled to be completed in 1999--the "conversion centers" Ford
set up worldwide to do year 2000 work will be turned into "centers
of accelerated maintenance" that will support existing applications
and take on new projects. "We've treated year 2000 as a
maintenance project, and coming out of this, we will use the skills,
process, and tools to keep far better life-cycle management of our
portfolio," says Mathaisel. "We're working on using Internet
technology in marketing and selling cars, and new kinds of
technologies to design cars."
Ford isn't the only company with big IT plans extending beyond the
millennium. In fact, an InformationWeek Research survey of 250 IT
executives indicates that far from melting down when year 2000
work is completed, IT organizations may experience something of a
renaissance, with companies shifting money and people toward
making legacy applications accessible via the Web, customizing
enterprise resource planning software, building E-commerce
systems, and tackling other strategic projects. A lingering question:
Will Cobol and Assembly programmers, mainframe support staff,
and other year 2000 specialists be able to make the transition to
new tasks and technologies?
Some companies have delayed
strategic IT initiatives as they try
to cope with the year 2000
problem. Of those surveyed by
InformationWeek Research,
37% say year 2000 remediation
work has had a high impact on
the rest of their company's IT
projects, while 41% say the
impact was moderate. But
they're beginning to look beyond
the problem; 53% of respondents say they have or will develop an IT
spending plan for the year 2000 within the next six months. Another
10% will create a spending plan in seven to 12 months.
Half of all respondents say they expect no reduction in their IT
budgets after their year 2000 remediation work is completed--and
35% actually expect to see an increase in IT spending. On average,
25% of the IT budget at respondents' organizations is currently
being sapped by year 2000 projects. At companies that are behind
in their year 2000 efforts, the figure is far higher (see Behind the
Numbers). That means an enormous amount of financial capital will
be freed for other initiatives when those projects are complete.
The financial resources will be matched by a wave of human
resources. Meta Group Inc. estimates that a half-million IT workers
are now devoted to year 2000 remediation. Survey respondents say
that, on average, 78% of their company's year 2000 work is being
done in-house, and 98% indicate they have no plans to let go of
internal year 2000 workers when their remediation efforts are
complete. Only 23% say they will likely lay off some year 2000
contractors when all systems are year 2000 compliant.
Strategic Redeployment
So where will year 2000 workers be redeployed? One project
international companies will be forced to tackle is the conversion to
the euro, which will become the only legal tender used in European
Union countries starting July 1, 2002. Ford plans to reallocate some
of the people working on its year 2000 projects to the euro
conversion, CIO Mathaisel says. But analysts say euro conversion
work won't be as labor-intensive as year 2000 remediation. It also
requires programmers to have a greater understanding of the
business functions of the applications, so companies may have to
provide additional training or find other workers for that project.
Many companies are
identifying other strategic
projects they want to tackle
when the year 2000 problem
is licked. Among the top
priorities identified by survey
respondents are setting up a
data warehouse, enhancing
corporate Web sites,
ensuring system availability,
making legacy applications
accessible via the Web,
replacing PCs, and
developing E-commerce
systems (see chart. left).
"Business units have been queuing up their project requirements
while companies have been focusing on year 2000," says Steve
Curd, CIO of strategic business services at United HealthCare
Corp. "The backlog of projects will be at a historical high."
United HealthCare, a $12 billion health services provider in
Minneapolis, now devotes about 22% of its IT resources to year
2000 work. But it expects its remediation to be largely completed by
the end of this year, and it's already looking to the future. "We have
311 new projects under development this year, and in 1999 there is
a full plate of enhancements planned," Curd says.
One key project that will get more resources once
year 2000 work is done is an automated adjudication
system, which uses artificial intelligence to process
health claims. About half of claims are still processed manually.
Curd's goal is to reduce that as much as possible, so United
HealthCare can process more claims faster, more consistently, with
fewer errors--and fewer chances for fraudulent claims to be paid.
Another goal is to integrate the company's Web sites, so a
company's benefits manager or an employee covered by a United
HealthCare plan can link to appropriate information, which should
reduce customer-service calls. Curd sees little problem converting
year 2000 workers to these projects because United HealthCare's
practice has been to offer employees training for new skills as they
embark on new projects.
Ken Harris, CIO at Nike Inc., has spent the last several months
working with company executives to identify IT projects that will help
ensure the company's competitiveness well into the new millennium.
Nike's IT budget is set according to how much is needed to achieve
business goals over a three- to five-year period, so Harris can't say
whether the post-2000 budget will increase or decrease. But
several new initiatives are planned.
Over the next few years, Harris wants to make Nike's supply chain
more effective and improve customer services. Nike's internal IT
workers--including those now assigned to year 2000 work--will be
charged with accomplishing these goals.
"We will keep our year 2000 employees and 're-skill' them," says
Harris. "Having worked on year 2000, they know our business."
Much of Nike's supply-chain work will center around sharing
real-time inventory information with retailers and suppliers, including
those that provide materials used to make Nike footwear and
apparel.
GE Appliance currently has 120 IT staffers working full-time on year
2000 remediation. After that work is complete, they will be divided
among a variety of projects related to supply-chain management,
information warehousing and data mining, and the Internet.
Employees are expected to sign up for the training they need when
they seek to join new projects.
"We're looking at how the Internet can be used as a tool to replace
business processes," says CIO Greg Levinsky. GE Appliance
currently has an application called Customer-Net, which lets about
1,500 customers--retail outlets and home builders--place, pay for,
and track orders. "It's a low-cost way for us to connect to our
customers," Levinsky says. "After 2000, there will be more of those
types of applications."
Analog Devices Inc. began its year 2000 work five years ago as
part of the Norwood, Mass., semiconductor company's effort to
revamp its legacy systems. Analog Devices dumped its IBM
mainframes and brought in Hewlett-Packard 9000 Servers and
NetServers running SAP R/3 order- management, finance, and
human-resources modules worldwide.
Analog Devices has been providing training in Web-related
technologies for its IT staff. Once all systems are compliant, some of
the employees working on year 2000 projects will be used to make
the company's databases accessible via the Web within the next 18
to 24 months. The company says this should help employees make
better use of its customer information. "There's never a lack of
opportunities, but the emphasis will be on Web-based
technologies," says CIO Lawrence Loh.
continued...page 4 of 4
Others are less sanguine. "For some people, the
move from green-screen programming to a more
visual, graphical environment will be a shock," says
Joe Durocher, CIO of Hilton Hotels Corp. "Some will be able to
make the change, but for others, that switch in the brain required to
make the change won't go on." Durocher and others say many older
programmers will opt for retirement.
Broader Knowledge
Some talented people may be lost, but overall, year 2000 projects
may put both companies and individual IT workers on a sounder
footing moving into the next millennium. Remediation efforts have
given IT departments a clearer picture of where they stand today
and where they need to be to compete in the new economy. "Year
2000 made us more diligent than we'd otherwise be in getting an
inventory of what we have, what we need and what works," says
Ford's Mathaisel. "We should have been doing this all along."
Year 2000 work has also given project managers a broader view of
their company's businesses. Ann Coffou, managing director of year
2000 research at Giga Information Group, says that knowledge puts
the best of them in a position to become CIOs someday. "Not only
have these employees developed a wonderful knowledge about
their companies," she says, "they've built a rapport and
relationships with businesspeople throughout their organizations."
In addition, project managers, programmers, testers, and others
were exposed to the intricacies of their company's systems. Getting
an inside look at legacy applications should make it easier for these
workers to identify where improvements and links to new
applications can be made. Even consultants may have knowledge
of companies' systems that may be valuable as IT departments take
on new projects.
"There's a lot of knowledge out there that's been gained by
consultants, testers, and coders who have been involved with
clients' year 2000 work," says Stephen Frycki, managing director of
year 2000 projects at DMR Consulting, the IT professional services
arm of Amdahl Corp. Knowing a company's systems gives the
consultants a head start when the company launches other projects
that have been put on the shelf, such as the development and
implementation of ERP, E-commerce, and customer-management
systems.
Computer Horizons, an IT services company, currently generates
31% of its $335 million revenue from year 2000 remediation work
for clients such as Prudential Insurance Co. of America. David
Reingold, a senior VP at Computer Horizons, says he expects there
will be plenty of work for his 900 year 2000 workers and anticipates
few problems transferring them to other types of work. "We can take
Cobol mainframe and client-server people and put them on other
projects," he says. "We actively train our people so they keep up
with the technology."
The Best-Laid Plans
Of course, not every company will be ready to redeploy year 2000
resources on Jan. 1, 2000. Glitches will need to be rectified, and
companies that patched their systems may need to introduce
permanent fixes. Some consulting firms predict year 2000 work
may not fall off until 2002 or 2003. "Many companies that
addressed their year 2000 problems with Band-Aids, bubble gum,
and bumper stickers will be busy replacing these systems after the
year 2000," says Giga Group's Coffou.
A sharp downturn in the economy could also affect IT budgets and
delay new developments. But Meta Group research fellow Howard
Rubin says the current backlog of IT projects is so big that even if
there's a recession, IT departments won't face huge budgetary and
staff cuts. He points out that when companies experience flat or
decreasing revenue, they often turn to IT for ways to improve
productivity and reduce costs.
Of course, some companies may choose to apply funds that had
been going to year 2000 projects to their bottom line--a sort of
peace dividend for the new millennium--but they do so at their own
peril. Their competition will be gearing up projects to give them an
edge in the market. And given the amount of resources that will be
available for those initiatives, those who don't keep pace may never
catch up. |
