Sleep well....
Subj: Because software does not rust -- Robertson Stephens reports on the Year 2000
Date: 97-06-06 17:10:48 EDT
From: AOL News
SAN FRANCISCO--(BUSINESS WIRE)--June 6, 1997--The Year 2000 date
problem is more than an information technology issue.
It will affect businesses as a whole. Millions of applications
in use today will be impacted.
Robertson, Stephens & Co. research analyst Paul Dravis has
tackled the problem of the Year 2000 (Y2K) date problem in a new
report which offers an intelligent overview of the situation and
issues, as well as insights into investment opportunities -- which
companies will benefit from the transition.
"We believe that the Y2K problem has significant implications
for both investors and business managers," Dravis said.
For starters, it's going to cost a lot more than currently
anticipated. Said Dravis: "The costs to fix it will be in excess
of the frequently quoted $300 billion estimate, and it will place a
significant strain on the Information Technology budget of many
corporations."
As corporate spending increases and managements allocate more of
their time to deal with the complexities, both known and emerging,
of this problem, it is likely that the development and introduction
of other technology initiatives will be extended, delayed or
canceled, impacting other technology companies totally removed from
the problem. Not only will purchases of other software and hardware
products slow, but for companies that don't become Y2K compliant in
a timely fashion, the outcome could be catastrophic.
Dravis believes the Y2K problem will definitely reshape
information technology (IT) spending patterns through the end of the
decade. "The average Fortune 500 company will spend $30 million in
the quest to become Y2K compliant," Dravis estimated.
"We believe the potential consequences for organizations that do
not address the Year 2000 data issue may be major -- financial loss
from business disruptions, litigation expense, even business
failure," Dravis wrote.
The problem is pervasive. Suddenly, numerous technologies which
automate daily activities will be at risk, ranging from
manufacturing process control systems to elevators, medical
equipment, trading systems and telephone switching systems.
Imagine the possible legal ramifications and costs. Liability
issues alone are wide-ranging. Poor financial performance as a
result of systems failures could potentially put corporate directors
and officers at risk. The estimates of $1 trillion or more to
address Y2K legal settlements and related costs exceed the dollar
estimates to fix the problem!
IT Overload
Corporate IT staffs, already challenged by technological change,
product upgrade cycles and a changing business climate, now must
deal with one of the largest projects they have ever confronted.
This formidable task must be completed in a timely fashion without
previously budgeted resources.
"In our view, the question is not whether a firm has to spend to
fix Y2K, but rather when will spending begin and which components of
the IT budget will come under pressure in order to fund these
efforts," Dravis said. The challenge will be in determining what is
mission-critical, as the definition will vary among firms and
industries.
"The magnitude of the problem and the limited time horizon in
which to deal with it will drive many organizations to rely more
upon third-party solutions -- prepackaged software, systems
integrators, and outsourcers and software tools vendors," Dravis
said. Managing conversions, testing and correcting problems or
providing new business software to replace non-Y2K-compliant
applications all represent opportunities for strategically
positioned companies on the forefront of providing solutions.
The Winners
Growth in the Y2K software tool sector has already started to
accelerate. Firms focused on Y2K include Data Dimensions and
Viasoft. Others provide tools as a part of a larger set of product
offerings -- Computer Associates, Compuware, MicroFocus, Sterling
Software and PLATINUM technology.
Prepackaged software firms who could be beneficiaries include
Baan, Oracle, PeopleSoft and SAP. The resource-intensive nature of
the Y2K problem should drive growth in the professional services
sector as well, as outsourcers and systems integrators benefit from
the sheer human resource demand to analyze, test and convert
Y2K-affected programs. Dravis feels that firms with an established
practice of providing COBOL expertise should have an early advantage
(Compuware, Computer Horizons, CIBER, Information Management
Resources and Keane).
Millions of business applications will be affected, 30% of which
can be replaced by new Y2K compliant software or information
services, Dravis estimates. "The problem also impacts PC,
mini-computer and client/server based applications," he noted. Not
just mainframe programs. "Approximately 50% of the applications can
be repaired," Dravis said. "But the work will be labor intensive,
requiring assistance from professional services firms. Software
tools are needed to manage the process, test and convert programs.
"While there is considerable doom and gloom surrounding the Y2K
process, one positive note is that as organizations examine their IT
processes, it could lead to more efficient information technology
operations for them longer term," he added.
As Dravis noted, "it's a lot of money to spend to fix a problem
that appears to have limited potential for positive return on
investment -- thus the procrastination and denial by many
organizations. But it's a problem few can avoid, as Father Time
marches on towards the millennium."
More Questions Than Answers
Most importantly what are the industries most impacted by the
change -- the military and other government agencies, the finance
and banking industries, utilities and telecommunications -- doing
about it? What's the best route -- to fix or replace? How does the
new and/or altered program interact with other existing programs.
It is an IT nightmare.
Furthermore, is anyone doing it right? Chase Manhattan Bank
began addressing the problem in 1995 and estimates it will spend
$200-250 million on Y2K over the next three years. The Federal
Government's estimate to fix the problem is $2.3 billion, yet the
widely held belief is that the price tag will be closer to
$30 billion.
And what about timelines? Twelve of the fourteen federal
departments plan to implement their Y2K compliance programs in the
last three months of 1999. Isn't that cutting it a little bit close
considering the trials and mistrials of most new technology projects?
Is it already too late for most impacted operations to realistically
implement new programs by the Year 2000? Will those that do have a
far more competitive edge in the marketplace?
Dravis, a software analyst focusing on enterprise systems and
application software, has more than 15 years of information
technology industry experience and is addressing these issues as an
analyst, and with his background managing both application
development and technology assessment efforts.
For a complete copy of this new report, or to schedule an
interview with Dravis, please contact Cheryl Popp at 415/693-3506
or at cheryl-popp@rsco.com.
Robertson, Stephens & Company is a leading international
investment banking firm focused on emerging growth companies. The
firm's 35 senior research analysts cover over 460 companies.
The information contained herein is not a complete analysis of
every material fact respecting any company, industry or security.
Although opinions and estimates expressed herein reflect the
current judgment of the Firm, the information upon which such
opinions and estimates are based is not necessarily updated on a
regular basis; when they are, the date of the change in estimate will
be noted. In addition, opinions and estimates are subject to change
without notice.
This news release contains forward-looking statements, which
involve risks and uncertainties. The Company's actual results may
differ significantly from the results described in the
forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in the
"Investment Risks."
Robertson, Stephens & Company LLC from time to time performs
corporate finance services for some companies described herein and
may occasionally possess material, nonpublic information regarding
such companies. This information is not used in the preparation of
the opinions and estimates herein.
Facts and other information discussed have been obtained from
sources considered reliable but are not guaranteed. Robertson,
Stephens & Company LLC, its managing directors, its affiliates and/or
its employees may have an interest in the securities of the issue(s)
described and may make purchases or sales while this press release is
in circulation.
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CONTACT:
Robertson, Stephens & Company
Cheryl Popp, 415/693-3506
Paul Dravis, 415/693-3318 |
