Year-2000 Companies Ponder
What to Do Once It's 2001
By LISA BRANSTEN
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- People stocking up on bottled water and canned food in anticipation of the year-2000 problem are, for the most part, considered overanxious. But the perils are all too real for one group: companies that have built businesses around getting corporate computer systems ready for the date change. After all, if all goes well, in about nine months their customers will go away.
It is a scary situation for a company like Infoliant Corp., which sprung up to help companies over the Y2K hurdle and now faces the question of what to do next.
Its customers' legal worries are giving Infoliant some additional time. The closely held Pittsburgh, Pa., company's main product is a database of more than 30,000 computer hardware and software items; companies use the database to check if their systems are Y2K-compliant and determine how to fix them if they aren't.
Kevin Weaver, Infoliant's founder and executive vice president, says the majority of his customers have signed on through the end of 2000 -- with some extending contracts even farther -- because they want Infoliant's help in case systems fail and they find themselves in litigation or have to file insurance claims. Infoliant's database will act as a "paper trail" allowing companies to show that they took the right steps.
Mr. Weaver says he isn't sure what he's going to do with the database once companies make it safely into the new millennium, but he's sure it will be prove useful to companies that want to keep closer track of their systems. Still, he's hired Andy Bochman, director of year-2000 service at the Aberdeen Group, the Boston consulting firm, to help Infoliant figure out how to turn the database into something that will be valuable past next year.
Facing the Future
While Infoliant is trying to map out what it will do once the Y2K problem is in the rearview mirror, Mr. Bochman says that only about half of its year-2000 brethren are making such preparations.
Some of the companies in the worst trouble are those that sprang up only to deal with the Y2K problem -- which stems from the inability of some older hardware and software to read the date "00" as "2000" and not "1900" -- and have not yet begun to think about how to deal with life after Y2K.
Also in trouble are those companies that never really got the business they expected and have not yet begun to look at the future. "There are some companies that haven't really made what they expected to from Y2K ... and they are paralyzed and in trouble," Mr. Bochman says. "At least half of the companies have met their expectations in terms of Y2K revenues and they've ... dedicated a fair percentage of internal people to building new products and services that are not Y2K related."
This isn't to say that the Y2K problem hasn't been a boon for companies specializing in remediation of the millennium bug: Besides booming business, the problem has given those firms the opportunity to build relationships with customers that might be interested, now or down the road, in other services.
John Jenkins, chief executive of Tava Technologies Inc., says the Denver company has picked up hundreds of new clients because of its Y2K offerings and is now working to convert them to other products and services. Tava makes 50% to 60% of its revenues solving Y2K problems, but the company sees its primary mission as selling services to help companies integrate and manage computer systems.
Tava, built up through the mergers of five privately held service companies between 1995 and 1997, specializes in helping companies integrate their computer systems, particularly in the manufacturing area. The company added a Y2K practice as another way to help its clients and get new customers; so far, Mr. Jenkins says, it seems to be working, Mr. Jenkins says.
Luring New Customers
"This has been the best thing that's ever happened to us in terms of building the core business," he says. "You tell me how I could capture 400 new clients in 24 months -- no marketing event in the world could have done that for us."
Still, that good news isn't reflected in the company's stock price of $5.065, not far off the 52-week low of $2.75 it hit last October and well below the $14 it traded at last spring.
Mr. Jenkins attributes the share-price fluctuation to excess enthusiasm about Y2K companies last year; after that, he says, "the herd mentality turned the other way and people said Y2K companies don't have any future past the year 2000."
"For some that may be true, but that's not our story," he says, adding that going forward, he hopes to use the skills Tava has developed solving Y2K problems to help companies better manage their technology and help them integrate new and old systems.
Tava is far from alone in seeing technology management as a profitable sequel to year-2000 remediation.
Fortress Technologies Inc., a closely held Hinsdale, Ill., company, helps firms catalog their technology infrastructure, which often grows disorganized as new hardware and software are added piecemeal. As much as 18% of the company's revenues came from Y2K-related services in the most recent fiscal year, says John Siniawski, Fortress' president. Mr. Siniawski expects Y2K-related revenues to increase this year as companies rush to document their Y2K changes. But he also expects that Fortress will gain technology-management business from companies that realize they need to keep better track of their computing resources.
A Bump After the Y2K Headache?
The headache of fixing vast disorganized computer systems should force corporate America to focus on better managing their operations once the Y2K problem is solved, Mr. Siniawski says, adding that "I think our business is going to get a nice bump once Y2K goes away because people are going to need more information about their systems."
In fact, Craig Rozelle, director of the infrastructure-management solutions group at Fortress, believes that the company's revenues may actually increase once year-2000 problems are solved because systems people will want more computer services once they've solved those problems.
But Dick Heiman, an analyst at Framingham, Mass., market-research firm International Data Corp., isn't convinced that companies' year-2000 preparations will really pave the way for technology management.
"I think it's a mixed bag," he says. "Some will use to their advantage the fact that they've had to go through all that pain -- on the other end of the equation, there will be people who say, 'Well, we're through that. We don't have to do that anymore.' "
Mr. Heiman thinks Y2K companies will have to sell customers on new reasons to keep their systems organized, such as the conversion to the euro or the work needed to hook older systems into the Web with an eye toward e-commerce revenues.
But he emphasizes that those are opportunities, too. Just because problems associated with Y2K will have to be solved by year's end, he says, doesn't mean there won't be plenty of ways for firms to help companies manage the effect of change on their systems.
Whatever their specific strategies, Y2K companies are counting on firms changing their thinking.
"I think our business is going to get a nice bump once Y2K goes away because people are going to need more information about their systems," says Craig Rozelle, director of the infrastructure-management solutions group at Fortress.
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