Will All High-Tech Companies Survive Y2K Bug?
By Neil Winton, Science and Technology Correspondent
HANOVER (Reuters) - Few experts will be surprised if some information technology companies displaying their products at the annual CeBIT technology trade fair this week fall victim to the millennium computer bug and do not return next year.
''I wouldn't be at all surprised if a very major IT (information technology) company is in serious trouble by CeBIT next year,'' said Margaret Joachim, Year 2000 expert for U.S. computer services company Electronic Data Systems Corp (NYSE:EDS - news) .
''I won't say which one, but it is entirely likely that somebody will come unstuck,'' Joachim said.
Joachim also says there will be turmoil amongst smaller technology companies which may go bankrupt as the scale of the millennium bug becomes apparent in terms of costs and lawsuits.
Troubled smaller companies might also be taken over by bigger ones which can see damaging supply chain interruptions looming.
The millennium computer problem stems from the once-common practice of computer programmers of using only two digits for the year in dates, like ''97'' for ''1997.''
This has the potential, when dates change in 2000, to confuse computers and microchips embedded in machines, causing them to produce flawed data or crash.
INFORMATION TECHNOLOGY INDUSTRY VULNERABLE TO BUG
Experts are divided on how successful companies, institutions and governments will be in protecting themselves from the bug. The information technology industry in particular, even though it has great insight into the problem is still considered vulnerable.
''It'll be interesting to see if the technology industry manages to scrape itself together to hold a CeBIT 00 (2000), given the rash of lawsuits they can expect when their products begin failing on January 1st,'' said author Simon Reeve.
Reeve co-authored ''The Millennium Bomb'' in 1996, which he says was the first book to warn of the potential technological chaos in 2000.
''It is astonishing that the technology/computer industry is so eager to get together and pat itself collectively on the back at CeBIT when it remains reluctant to get together and address the millennium bomb issue. It's known about it for years, problems are already emerging, and customers are now starting to really panic,'' said Reeve.
SUPPLY CHAIN PROBLEMS COULD HIT EVEN RESPONSIBLE COMPANIES
Nick Fitzhugh, Year 2000 expert at management consultants Ernst & Young, is a little less apocalyptic but still sees the possibility of major problems.
Fitzhugh said many technology companies have put themselves into reasonable shape, but doubts remain.
''No one is saying they are 100 percent confident everything's OK for two reasons. There's the pervasive nature of the problem, there's always the residual risk even after testing.''
''But I think the greater risk is the supply chain. It's all very well having all systems tested 100 percent and OK, but problems along the supply chain could impact business,'' said Fitzhugh.
JUST-IN-TIME SUPPLY CHAINS MOST VULNERABLE
So-called Just-In-Time (JIT) supply systems are in jeopardy, said Fitzhugh. JIT supply chains are designed to eliminate stocks, or push them back onto suppliers. JIT depends on meticulous, computer controlled timing of parts deliveries. When the production line needs the next delivery of parts the truck supplying it arrives five minutes earlier.
''But if the supply chain fails, everything fails. And the customer chain. If you are producing products and customers are not able to receive and pay for the products, these are significant issues,'' Fitzhugh said.
Fitzhugh said industry in general and technology in particular will need strong continuity planning.
SMALLER COMPANIES FACE BANKRUPTCY, TAKEOVER
EDS's Joachim suggested smaller companies probably can't afford such lifelines and that those that look vulnerable may be taken over by customers in order to protect themselves.
''During the rest of this year, a lot of smaller companies are going to disappear in voluntary, or involuntary, liquidation as the problems become all too much for them. They will suddenly find themselves taken over by somebody who is extremely concerned about them as suppliers,'' Joachim said.
''If key suppliers to large organizations look rocky, taking them over and making sure they perform is quite a good contingency plan. It could be cheaper than letting them go off the rails.
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