Jim, here's a Y2K related article with a pretty positive twist. OK, let's hear from the fans of the "yeah, they spent all their budget for the foreseeable on their hardware and software upgrades this year, leaving nothing for next!" club. LOL at my own anticipatory quip. Courtesy San Jose Mercury News, 10/31 (reprint from the Hartford Courant):
mercurynews.com
============================================================
Posted at 8:32 p.m. PDT Saturday, October 30, 1999
Economy gets a Y2K
dividend from spending
boost
BY DON HAAR
Hartford Courant
ASK Jamison Scott how much his family's
sheet-metal business spent fixing its Y2K computer
problems and he'll say $80,000, a hefty sum for a
company with 15 employees.
But Air Handling Systems ended up with far more
than a quick fix for the calendar rollover. The
Woodbridge, Conn., company bought the latest
software for accounting, desktop publishing, e-mail
and Internet access, along with a database that ties
the front office to the guys in the shop.
Now, Scott says the maker of industrial ducts is using
computer muscle to grow faster. ``It was Y2K that
started this whole thing.'
The Air Handling Systems work is a snapshot of how
American business has tackled the Y2K problem.
Many experts now say the huge sum spent on Y2K
preparations -- $250 billion, by one industry group's
estimate -- is shaping up as a sound investment that
will make the nation even more prosperous.
Call it the Y2K dividend. It amounts to yet another
stunning surprise for a U.S. economy that just won't
let troubles stick.
Conventional wisdom until recently held that Y2K
spending has been a giant drag on the nation's
financial well-being. Companies have poured
uncountable sums into an enterprise that put an army
of computer technicians to work, but appeared to
create nothing of lasting value.
Sure, the Y2K spending made a technology disaster
less likely. Ignoring the problem was not an option.
But if companies did nothing except fix the Y2K bug,
the spending would do little to make them more
nimble and efficient.
And experts agree a nation can raise overall wealth
only when its businesses spend money to make
themselves more and more efficient -- although that
often brings pain to many people.
The payoff
Now, with days to go before the date change, a
long-term Y2K dividend is coming clear not only in
the form of better computer equipment, but also in
training and other hard-to-measure gains.
``The fear that business would simply just patch their
problems turned out to be wrong,' said Mark M.
Zandi, chief economist at RFA-Dismal Sciences Inc.
in West Chester, Pa. ``We're much better off for it.'
The Y2K threat resulted from computer systems using
two-digit codes to represent years. So, when 1999
turns into 2000, systems with the glitch may read
``00' and think it's 1900, and shut down. To fix it,
companies needed to sort through endless lines of
computer code -- or replace whole systems.
Early on, many pessimists foresaw doomsday-style
chaos resulting from failed computers on Jan. 1 and
beyond. The few still predicting a Y2K-induced
recession are distinctly in the minority.
But the fears they helped create -- coming at a time of
record profits -- jolted companies to spend heavily,
thus making the doomsday scenario less likely to
come true, Zandi and others said.
Air Handling Systems could have spent a modest
$10,000 upgrading its old computers back in 1996,
Scott said, but chose instead to risk a more
comprehensive approach.
Buying upgrades
The tiny company was not alone. Hartford,
Conn.-based United Technologies Corp., for
example, said its $250 million in Y2K spending was
part of its routine computer upgrades.
``When you're forced to go back and look at all your
systems, you do get unexpected benefits,' said UTC
spokesman Peter Dalpe.
Bell Atlantic expects to spend $477 million
preparing for Y2K, with much of that sum going for
equipment for routing calls that will handle more
traffic.
As companies file upbeat deadline reports, even
some pessimists are rethinking Y2K costs.
``I've moved to neutral,' said Bosworth M. Todd, a
Louisville, Ky., analyst and financial adviser who
has written about the high Y2K costs to the U.S.
economy. ``The drag part is probably being offset by
the investment part.'
To compare a non-productive economic drag with an
investment, consider a family budget. Suppose you
have to dish out, say, $20,000 to repair a
termite-eaten house frame. That would be a
necessary expense, but hardly as uplifting as
spending that same money on night classes to earn a
teaching degree that would boost your income.
Todd, chairman of of Todd Investment Advisors,
extended the house illustration: ``In the process of
clearing out the termites you also strengthen the
house, so that maybe you can add another floor.'
If the spending is only a drag on the economy with no
desirable returns, Y2K could amount to an economic
shock in the same way, if not as severe, as the oil
price increases of 1973, which caused a recession.
The spending on Y2K has been, by all accounts,
enough to cause a dent.
The Society for Information Management, which
represents 3,000 computer-related companies, said
last month that Y2K spending climbed to 48 percent
of all information systems outlays in 1999. That
could place worldwide costs above $1 trillion, and
U.S. costs in the ballpark of $250 billion.
Another estimate, by Standard & Poor's DRI in
Lexington, Mass., sets total U.S. business spending at
$160 billion.
By comparison, Americans spent a total of $255
billion in restaurants and cafeterias last year.
The Y2K effort has created a lot of jobs, of course,
and will enrich many overtime workers over New
Year's weekend. That's good for the workers, but not
necessarily good for the economy. The real question
is, what are all those people doing to create lasting
value?
``We've seen a lot more communication between the
information technology people and their customers.
We've seen some skill improvements,' said Leon A.
Kappelman, co-chairman of the Society for
Information Management's Y2K working group and a
professor at the University of North Texas.
Susan Coleman, a finance professor at the University
of Hartford, compared Y2K work to defense
spending -- it has built up an industry that can now
spin off all sorts of other products and services.
Ultimately, the value will depend on how well
companies use the Y2K bug repairs to learn better
ways of solving future technology problems, said
Kazim Isfahani, a Y2K analyst for the Cambridge,
Mass., technology consulting firm Giga Information
Group.
``We'll find out about how organizations are going to
respond to this knowledge after 2000,' Isfahani said.
``You'll begin to see the productivity gains at that
point.' |
