Here is some food for thought...EDS getting lots of Y2K business..
Y2K Contracts Reach a Record Pace As Companies Fail To Make Deadlines
By: Stacy Collett
Tim Morton
vp of operations for EDS' CIO Services 2000
In opening talks with prospective Year 2000 clients, Electronic Data Systems Corp.'s Tim Morton doesn't mince words when breaking the harsh news: "Don't plan on resolving all of your Year 2000 issues in time." At this late date, time definitely is working against them.
"It's the 80/20 rule," says Morton, vice president of operations for EDS' CIO Services 2000. "What are 20 percent of the applications that run 80 percent of the business? Let's go after them first, and as time and resources permit, we'll address the others."
Despite the dim prognosis, companies are enlisting EDS and other integrators for Year 2000 help at a record-setting pace. EDS' CIO Services 2000 business unit tallied seven new clients in the first quarter of 1998 totaling $26 million in contracts. And EDS officials expect that figure to increase in the second quarter as companies, realizing the increasing scope of Year 2000 problems, turn from their internal staff to outside vendors. Ernst & Young counts three new contracts for the same quarter, and $200 million in Y2K-related sales from October '97-March '98.
At IBM Global Services Year 2000 contracts have nearly tripled in the last six months, from 700 in September 1997 to about 2,000 in March 1998,
although not all of them are full-scope engagements.
In a quarterly report querying 128 companies on Y2K readiness from January through March '98, 78 percent say their rate of missed Year 2000 milestones increased.
"What happens when they get into this crunch mode, they start looking to outside help. That's one of the things that's contributing to this spike," explains Malcolm Slovin, vice president and services director of performance engineering and measurement strategies at The META Group, the Stamford, Conn.-based research firm that conducted the study. Some 85 percent realize they've underestimated Year 2000 costs, according to the report.
The nation's 250 largest companies are expected to spend $33 billion on Year 2000 conversions, says Slovin. But to date, only 20 percent of that money has been spent.
These enterprises are increasingly forthcoming with their Year 2000 compliance pursuits, due in part to the Securities and Exchange Commission's "strong recommendation" that companies include their Year 2000 exposure in their 10K filings.
Ralph Szygenda, CIO of General Motors Corp., recently revealed that while GM had a budget of over $500 million for Year 2000 compliance through December 1997, the company has spent only $40 million to date, according to Morton.
Some of EDS' new clients, which include Adidas US, Banc One Corp., Moore U.S.A. and Norwegian Cruise Lines, assumed they had a year and a half to complete their Y2K work. But as client and vendor discovered, software expiration dates can catch them by surprise.
Some 30 days into a Y2K project for one of its new clients, EDS consultants found a purchasing system that was going to expire in July 1998. "They were completely unaware of it, and it sent the CIO into a panicked state," recalls Morton.
Fire extinguished, but a close and all-too-common call: Some 37 percent of companies in the META Group's quarterly study have suffered a Year 2000 failure since Dec. 31, 1997.
Indeed, today's opportune words are "triage" and "contingency planning," according to EDS' Morton. Integrators need to be confident that the time they have available is focused on mission-critical applications. For the remaining compliance issues, they'll rely on manual workarounds or consolidating systems from seven payroll systems, for example, down to one or two.
But if a company finds itself looking for Y2K help after discovering it's in critical condition, integrators won't be shy about turning business away.
"They want to be with the winners, not the losers," says META Group's Slovin. "They're making sure they can complete what they say they're going to complete. If EDS came across a company with a lot of embedded systems that had not started doing work in Year 2000, they would probably pass it up simply because there would just be too much to do at this particular point."
EDS says it's being "somewhat selective" with its business, but only because it wants to establish relationships with new clients, with the hope of future business.
IBM Global Services, while not keeping figures on the number of projects turned away, also picks and chooses its Y2K clients. "We go after those [contracts] that are within our expertise," says Colleen Arnold, IBM Global Services' general manager of worldwide Year 2000 distribution industries and business services, adding IBM prefers mixed and distributed environments, mainframe, midrange and desktop projects.
When an integrator does take on a project, there are limited guarantees of Y2K compliance. In this second quarter of 1998, market research firm GartnerGroup says enterprises just signing deals for Year 2000 work will face contract language offering little to no warranties for work provided.
"I've seen very few organizations provide that warranty for Year 2000 compliance," says EDS' Morton. Instead, EDS will go through a discovery of the noncompliant dates within an application and develop specifications. Then it'll warrant that its work matches those specifications.
The selection process continues to narrow as the Year 2000 pipeline fills. Until now, vendors were getting only one-third of the engagements they anticipated, largely because of sticker shock, according to Shawn Bohner, program director for META Group's PEMS unit.
Now, despite a target-rich environment of Year 2000 vendors, optimism for Y2K work over the next two years leaves opportunity for cherry picking.
Numbers back up integrators' positive outlook. The 10K reports reveal that companies have completed only 25 percent of the work on compliance, leaving a tremendous amount yet to be done, Bohner says.
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c 1998 Post-Newsweek Business Information, Inc. All rights reserved.
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