If this turns out to be true! Well need I say more?
Study Finds Y2K Problems May Cost Trillions
By Joseph McKendrick
August 15, 1997
With the likelihood of a storm of litigation over the Year 2000 crisis, some analysts are ratcheting
up their estimates of the cost of the Year 2000 "bug" on businesses. While much of the industry
has ascribed to the worldwide cost estimate of $400 billion to $600 billion calculated by Gartner
Group (Stamford, Conn.), another firm now says this is too low. Technology Management
Reports, a San Diego-based research firm, projects that the overall worldwide economic impact
of dealing with computer-related year 2000 problems will exceed $2 trillion.
About 25 percent of this estimate consists of the costs of litigation, says Michael Erbschloe,
research director for Technology Management Reports. "By the second half of 1999, the lawsuits
are going to start flying," he predicts. This projection also includes the cost of rewriting existing
programs, the acquisition and installation of replacement systems, and productivity lost due to
system downtime and business interruption caused by failing systems not in Year 2000
compliance.
Litigation is expected between year 2000 consulting firms and their clients, and between
stockholders and the management of firms that experience disruptions as a result of Year 2000
problems. "Lloyds of London was told that they should anticipate paying out upwards of $800
million to $1 trillion in litigation expenses, or else start putting riders and exclusionary clauses on
their business continuation insurance," Erbschloe reports. Already, some insurance companies are
adding exclusionary clauses in their business continuation coverage for Year 2000 problems, he
says. "However, we expect it to be a fairly hefty time in litigation -- the courts are going to be
clogged."
Another factor driving worldwide costs up is a sharp rise in programmers' rates as the year 2000
draws closer. Technology Management Reports estimates that it is now costing about $1.30 per
line of code to bring programs into compliance. Year 2000 consulting fees are climbing to about
$1,500 per day. By the second half of 1998, top-notch consultants will be drawing over $2,000
per day and during 1999, consulting fees will reach about $2,500 per day, Technology
Management Reports predicts.
"I'm seeing costs accelerate, and consulting prices are going through the roof," says Erbschloe.
"Especially in big urban areas like New York, San Francisco and Los Angeles, where they're
running almost twice the national average."
The AS/400 will come shining through this crisis, and may see "a boom time" for sales by 1999,
Erbschloe points out. The AS/400 is operationally ready for year 2000, and many companies
may move their legacy systems to this environment. |
