Analyst Looks to Debunk Fears Of a Software 'Nuclear Winter'
By MARK BOSLET
Dow Jones Newswires April 9, 1999
(general article that has implications for Rational as well - PQ).
PALO ALTO, Calif. -- Enterprise-software companies
have been quick to blame the year-2000 snafu for first
-quarter business deals that failed to close and earnings
that missed Wall Street's targets.
But Chuck Phillips, an influential analyst at Morgan
Stanley Dean Witter, isn't so sure that the Y2K bug
is the real culprit -- or that fears of a Y2K-induced
catastrophe in the market will be justified.
Yes, the year-2000 problem does exist: Old (and not-
so-old) software and hardware often keep track of dates
only by the last two digits, raising fears that such
systems won't be able to distinguish between 1900 and
2000. Corporations fear this difficulty will prevent billing
systems from billing, insurance systems from insuring and
other business software from doing what it was intended
to do once the millennium changes.
The result is that software customers have reined
back purchases to devote resources to fixing the bug.
Some industry experts theorize that a "nuclear winter"
brought on by an industry-wide buying freeze has only
just begun to grip software companies.
But much more than the year-2000 problem is plaguing
a sector where stock prices have tumbled since the
start of the year, Mr. Phillips maintains.
On a conference call Thursday afternoon, Mr. Phillips
said he saw several other factors that are greater
contributors to the soft business environment. He noted
that in some core markets -- particularly markets for
enterprise software designed to automate back-office
functions -- saturation has occurred.
In addition, a broad technology shift is taking place.
"The Internet frenzy is hitting the enterprise" and
managers no longer want to put in the old generation of
client/server systems, Mr. Phillips said. Instead, he
said, they want Internet-style systems made up of large
backroom servers that users can tap into through browsers
on their desktop PCs.
"It's not the lack of a budget," Mr. Phillips said.
"People want to spend their money on new, exciting things."
Mr. Phillips also sought to debunk the "nuclear winter"
scenario. Top industry officials -- such as Oracle's Chief
Operating Officer Raymond Lane, BMC Software's CEO Max
Watson Jr. and Novell's CFO Dennis Raney -- say their
customers don't plan system "lockdowns" later this year
in which no new software is introduced until existing
software is shown to be year-2000 compliant, Mr. Phillips
said.
More significantly, a recent survey of chief information
officers at larger corporations found the executives are
afraid of being placed at a disadvantage by the Web.
"They can't let a new channel develop and not be there,"
Mr. Phillips said.
"There's a shift taking place here and people want the
new stuff," he said, adding that the year-2000 explanation
has been "overblown" and is "not the main culprit." |
