Forecross in San Fransisco Examiner...Dec 27, 1998
A millennium bug is fostering a multibillion-dollar business
The looming new millennium has spawned a slew of software manufacturers and consulting firms that hope to get a piece of the estimated multibillion market for fixing computers' possible Y2K problems.
These companies are offering businesses every possible protection against computer failures resulting from programs that can't process year 2000 dates, mainly software programs that find and fix all the computer dates; programs that check the fixes to make sure they actually work; and consultations on which computer programs are the most critical to operations and should be fixed first.
"This whole year-2000 thing is a big unknown, and there's a tremendous amount of activity right now," said Kim O. Jones, president and CEO of San Francisco-based Forecross Corp. He co-founded the company in 1982 to help businesses convert their computer systems. Today, the majority of Forecross' sales are derived from Y2K business.
Despite the deadline, preparing for the next millennium doesn't appear to be the top priority in corporate America.
Industry statistics show that most businesses are nowhere near done programming all their computer systems to recognize dates beginning Jan. 1, 2000.
For example, a recent Deutsche Bank Research report says 36 percent of finance firms surveyed have spent less than half their Y2K budgets so far.
Although analysts say the number of businesses providing Y2K services has mushroomed, they couldn't estimate a count because so many tiny, one- or two-person firms have sprung up in recent years.
A number of Bay Area firms hope to cash in on the expected rush of last minute Y2K fixes, including Ascent Logic Corp. and MatriDigm Corp., both headquartered in San Jose, Reasoning Systems Inc. in Mountain View and Tactical Strategy Group Inc. in Soquel.
Stamford, Conn.-based Gartner Group Inc. has estimated that companies will spend between $300 and $600 billion on upgrading their computer systems for Y2K.
Forecross began doing Y2K-specific work in 1995, programming the computer systems of companies such as investment bank Brown Bros. Harriman & Co. and IBM France.
This is how Forecross' service works: Companies send their computer codes electronically to Forecross' factory, which re-programs them to read dates in the next millennium. Then Forecross ships the codes back to the customer.
"Our software is focused on finding and correcting" programming problems, Jones said. "We find out where (companies are) misprocessing dates and correct them automatically."
He added that, "Computer programmers (at companies) are probably the worst people to fix this problem because they like to be creative and think of new ways to fix things. But the nature of Y2K is that it's very humdrum and repetitive."
Jones said about 60 percent of the $5.8 million in sales Forecross posted last year came from Y2K business.
He anticipates business from Y2K work to be robust for the next several years as companies continue to re-program their systems and find additional computer bugs.
"In January, we're going to start seeing systems breaking because a lot of them do renewal (work) and have expiration dates with 2000," Jones said.
Jones wouldn't disclose what Forecross charges for its software services. But he said a rule of thumb in the industry is about $1 to re-program each line of computer code. He noted that major corporations can have hundreds, or even thousands of lines of code, which means a company can spend hundreds of millions on upgrades for Y2K.
San Jose's Ascent Logic is on the consulting side of the Y2K business.
"Our methodology is, "Let's take a look at what you do and break it down,' " said Dick Crisman, vice president of sales and services at Ascent Logic, which specializes in risk assessment consulting for heavily computerized industries, such as aerospace and finance.
"The problem with Y2K is two-fold," Crisman continued. "A company might say, "I have a date in all kinds of places, and I don't even know where they all are. And even if I got it all fixed, what about people I do business with? What about my customers? If they're broken and can't accept my goods, they're not going to pay me.' " said Crisman. Ascent charges anywhere from $50,000 to $500,000 for its consulting services.
But not all Y2K "fix it" firms are riding the gravy train.
MatriDigm said it has not had robust sales from Y2K business, in part because many companies try to fix problems themselves.
"We have not had the success we would have expected," said Jill Goldberg, MatriDigm's director of business development. "A lot of it is companies feeling they can fix it (themselves)."
The software company was founded in 1995 to help businesses switch over from old programs to newer ones. The following year MatriDigm began positioning its software to address Y2K issues. Today, all of privately-held MatriDigm's business is related to Y2K problems.
Goldberg noted that most companies are too busy with day-to-day operations to think ahead about potential Y2K problems.
"I'm not confident this is being addressed at the level of thoroughness it should be," she said.
To increase sales, both MatriDigm and Forecross have developed auditing software, which makes sure all programming changes actually work.
Kazim Isfahani, an analyst at Giga Information Group Inc. in Norwell, Mass., was skeptical about software vendors that push auditing programs.
"Virtually every Y2K remediation vendor has an auditing tool," he said. "That's a direct result of vendors not being able to meet remediation sales targets. It's a pure marketing play."
Even if sales from Y2K fix-it work hasn't skyrocketed yet, companies such as Forecross are certain their businesses can endure after the millennium dust settles.
Perry Harris, an analyst at Yankee Group Inc., a Boston-based technology research firm, was bullish on the future of fix-it companies.
"After 2000, there will be delayed projects" in corporate America, Harris said. "If you're spending $600 million on Y2K, you've probably delayed other projects."
Other analysts said many companies in this crowded field probably won't make it.
Isfahani of Giga Information said it's clear many of the mom-and-pop operations that cropped up to cash in on what they thought would become a boom industry will likely fade away.
For the others, it's wait and see, Isfahani said.
"Whether they've done a good job will tell when the rollover occurs," he said.
Then there are those who scoff at all the Y2K girding.
"I don't think this will be the economic catastrophe of the world," said Professor Michael Dertouzos, director of the Laboratory for Computer Science at the Massachusetts Institute of Technology.
"Imagine tomorrow morning one piece of paper in every desk drawer in the world gets destroyed," he posited. "What is the consequence of that to the world?"
©1998 San Francisco Examiner <http://www.examiner.com> Page C 1
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