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To: tech who wrote (2093)	1/8/1998 2:29:00 PM
From: tech	Respond to of 3391

Year-2000 budget crunch *Cascading conversion costs are forcing IT managers to make some tough trade-offs* Link: infoworld.com The warnings continue. The average cost of a large repair is estimated at $25 million if they start now; double this if they wait. None of this has phased the vast majority of managers. They are warned trhat outside programmers will not be available at the end of the third quarter of 1998? This is another way of saying that most businesses are not expected to get rolling on their y2k projects until late in the second half of 1998 -- way, way late for a project that costs $25 milion today. * * * * * * * * The average large company is expected to spend a big chunk of its 1998 information technology budgets on year-2000 compliance.. . . "What we're seeing is that as people have gotten serious about year 2000, they are scrounging for cash, and essentially all projects except the one or two that make a strategic difference are stopped," said Bruce Stewart, an analyst at the Gartner Group, in Stamford, Conn. . . . The major issue surrounding IT investment decisions is money. In the Cutter Consortium's survey of 150 IT professionals, the average cost of respondents' companies' year-2000 budgets in 1997 was $25 million. The number is expected to double in 1998, Yourdon said. . . . One ramification of this shift of resources to year-2000 compliance projects is likely to be a slowdown in the desktop and networking markets dominated by Microsoft, Lotus, Novell, and Netscape. The markets will not evaporate, but as funding for discretionary projects dries up, it will become increasingly hard for vendors to sell, Gartner Group's Stewart said. . . . Investments IT managers said they will be making this year include installations of year-2000-compliant packaged applications from the likes of SAP, Baan, Oracle, PeopleSoft, and J.D. Edwards, and anything else that absolutely makes or breaks a company's business. . . . "By the end of third quarter this year, there will be no third-party resources available to take on the year-2000 problem for you," Colony said. "So make sure you lock in third-party help now, or the resources in new development will have to be pulled in to fix the year-2000 problem."

To: tech who wrote (2093)	1/8/1998 2:38:00 PM
From: tech	Respond to of 3391

Can the IRS Make It? The Challenge Link: tax.org TAXPRACTICE (Dec. 2) ran a feature on the IRS and y2k: "Is the IRS Ready for the 21st Century? We'll Have to Wait." Is short, the author doesn't know. But what the article describes sounds as though the IRS will not be ready. The question is: Will it survive at all? Here is a key statement: "The IRS has no fallback plan for failure. If its computer systems are unable to deal with the year 2000, it is not clear exactly what the consequences will be. Will the computers freeze up or just post some data incorrectly? Or is the whole Y2K problem overblown?" * * * * * * * The law of unintended consequences makes it more likely that the IRS computer systems will not be able to perform adequately during the 2000 filing season. . . . What if the IRS computers have problems with the 2000 date change? At best, taxpayer service will slip. At worst, systems may crash because computers were not reprogrammed in time to recognize the century date change. . . . After joining the IRS in April of 1996, Arthur A. Gross, the agency's chief information officer (CIO), put together an ambitious plan to survey and fix the various computer systems. It includes a three-tier priority approach. As part of this plan, the IRS recently completed an inventory of its various computer systems. This was an important first step because the IRS did not readily know how many computer systems it had with Y2K problems, and documentation for the computer programs was often missing or incomplete. The three tiers are as follows: Tier 1, which gets top priority, includes all mainframe-resident application programs, such as the business and individual master files and the national account profile. These systems, created specifically for the IRS, are located at the two IRS computer centers (Martinsburg, W.Va., and Detroit) and at a number of the 10 service centers around the country. Though he is CIO, Gross does not control all computer resources at the service centers. Many are controlled by the service center directors, who report to the deputy commissioner through the service center executive. These are not directly covered by Gross's plan. . . . Similarly, it is unclear what impact the century date change will have on the computer systems Gross doesn't oversee. They include the district offices and the individually created computer systems at the local offices. Approximately 23 application systems are operated by the field and the service centers outside the control of the CIO. Nine of these systems are considered "mission critical" and must also be made Y2K compliant. . . . It is unclear who has specific responsibility to assure that these systems become Y2K compliant and what progress has been made on getting them ready for 2000. Presumably, this is also being handled by the IRS Y2K staff. Another concern is that some tax-related systems that are vulnerable to the century date change problem will not be subject to any Y2K scrutiny. This includes the data exchange program that the IRS uses to receive taxpayer information, such as Form 1099 data, from third parties. For these there is simply no time or resources. Also, the IRS receives data from a number of foreign countries, such as Canada. It is unclear what impact foreign Y2K problems could have on international programs. . . . If the agency does not process the yearly tax returns and send out the 70 million or so refund checks, any additional failings are incidental. Congress and the taxpayers have made the agency pay for troubled filing seasons in the past. So although preparing for the 2000 filing season is a far larger effort than preparing for 1998 or 1999, the latter two must get first priority. Also, getting ready for a typical filing season requires the review of discrete sections of the IRS computer programs; Y2K requires a review of all 63 million lines of computer code. If the IRS's systems are not fixed in time to deal with the change of date, a number of problems are expected. Refunds may be slowed, taxpayer correspondence will be delayed or lost, there will be delays in compiling various management data, and nobody knows for sure what else will happen. . . . The IRS has no fallback plan for failure. If its computer systems are unable to deal with the year 2000, it is not clear exactly what the consequences will be. Will the computers freeze up or just post some data incorrectly? Or is the whole Y2K problem overblown? The problem is the answers may not be known until late in January 2000, when the first filing season of the next century is under way. The century date problem will be an event or nonevent, but it very well may determine the success of the new IRS.

To: tech who wrote (2093)	1/8/1998 7:36:00 PM
From: tech	Respond to of 3391

Year 2000 bug draining revenues Link: news.com By Mike Ricciuti January 8, 1998, 12:00 p.m. PT Where have I heard this before ? It is clear that if companies have no test aside enough funds (MOST HAVE NOT),and if they have also not addressed the problem yet (MOST HAVE NOT), they are in big trouble when it comes to reporting their earnings. I am expecting may companies to report lower than expected revenues as a direct result of the year 2000 problem. The problems in Asia just add to the mix. * * * * * * * * * * * * * * What was supposed to be a profit bonanza for technology companies is instead turning into a major revenue drain. The Year 2000 problem, also known as the millennium bug, threatens to derail the revenues of technology providers in the coming year, company executives and Wall Street analysts warn. Big corporations are diverting crucial budget resources to hire additional personnel needed to fix the problem, leaving fewer dollars available for new technology purchases. Wall Street analysts say the first effects of a Year 2000-related revenue slowdown are just now being felt--and it will get only worse throughout 1998. "Of all the factors in the marketplace, Year 2000 issues are much more real than investors realize. They are treating this as a non-issue, and it really is an issue," said Bob Austrian, an analyst with NationsBanc Montgomery Securities. Just last week, database software maker Sybase (SYBS), in announcing an expected fourth-quarter loss, attributed at least part of the shortfall to increased spending by information systems managers to eradicate the millennium bug. The company said in a statement that results could range from a loss of as much as 7 cents per share to a profit of as much as 2 cents a share. Analysts were expecting the database maker to post profits of 12 cents a share, according to First Call. "The Year 2000 issue has caused enterprise customers to spend a significant amount of time and money on fixing the problem," said Mitchell Kertzman, CEO of Sybase. "Sybase, Oracle, Netscape.a lot of companies are being hit by this." That means fewer dollars for new development. And that, in turn, means bad news for Sybase and other makers of infrastructure software, which includes database servers, middleware, and some development tools. Indeed, Oracle (ORCL), the database market leader and the world's second-largest software maker, pointed out in a recent Securities and Exchange Commission filing that Year 2000 spending could interrupt future revenue growth. Oracle reported earnings per share of 19 cents for its second quarter, ended last November. That's a far cry from Wall Street estimates of 23 cents per share. Database server sales grew a lackluster 3 percent. More alarmingly, application software sales were up only 7 percent, compared to 96 percent growth in the same quarter one year ago. The same is true for networking equipment giant Cisco Systems (CSCO), which, in an SEC filing last month, stated that management "is concerned that many enterprises will be devoting a substantial portion of their information systems spending to resolving this upcoming Year 2000 problem. This may result in spending being diverted from networking solutions over the next three years." Cisco said it also has to provide Year 2000 fixes for its own products, potentially increasing Cisco's operating costs. Even profit machine Microsoft (MSFT) is unsure what effect Year 2000 spending will have on its bottom line, and the software giant is keeping earning estimates on the conservative side, just in case. "People will marginally buy less software in the run-up to the year 2000 because they want to make sure what they have works, and works well," said Craig Fiebig, product manager for Microsoft's BackOffice server software. "Microsoft is thinking [about the problem], but I don't know that we have a formal model. However, as we do three-year outlooks, we don't know what will happen, so we have kept earnings estimates conservative." But wait a minute. Wasn't fixing Year 2000 bugs supposed to be a revenue bonanza for software and networking companies? As it turns out, the answer is both yes and no. Austrian explains that the Year 2000 problem, which stems from the inability of computer software to recognize the year 2000 in date fields, is a double-edged sword for technology companies. The panic to make business applications able to recognize 21st century dates has driven sales of new business software, as large corporations opt to replace aging mainframe systems instead of fixing them. "In the mid-1990s, a lot of the large applications vendors have enjoyed extra demand for their software due to Y2K replacements," Austrian said. Those companies include SAP, PeopleSoft, and Baan. Just yesterday, SAP said it will report a 60 percent revenue gain for 1997. But the Year 2000 profit balloon is ready to burst, Austrian said, as most installations of new systems to fix Year 2000 problems are already under way. "We see a slowing in demand for enterprise applications no later than the first part of 1998, with the greatest slowdown toward the middle of the year," he said. "It's like people replacing tires. If they know that winter 1998 will be bad, they'll replace their tires now. But they won't come back for tires next year," Austrian said. And for companies like Sybase and Oracle, Year 2000 spending diversions only spell trouble. "The Year 2000 has been great for SAP and PeopleSoft. But it's been a negative for us," Sybase's Kertzman said. The Y2K problem is contributing to an overall revenue slowdown for database software vendors, said Melissa Eisenstat, an analyst with CIBC Oppenheimer. "Y2K is definitely one reason. And increasing attention is being turned to the application area. So companies are keep their existing database software and are buying new applications." Results of a corporate buying spending study released this week by Merrill Lynch indicate that Year 2000 spending is on the rise, with additional investment in personnel at the top of many lists. The survey of 50 chief information officers indicates that Year 2000 spending, as a percentage of overall budgets, will rise from 7 percent last year to 12 percent in 1998. CIOs also mention Year 2000 compliance as their most important issue by a wide margin, according to the survey. But the Merrill Lynch report goes on to mention that chief information officers frequently complain that it is difficult to find good people to address Year 2000 problems. Consequently, a good part of the planned budget increases cited by CIOs will go toward staffing, where in previous years the dollars went toward new hardware and software, according to the report.