Despite warnings, Y2K problem looms large
20:04:11, 27 May 1998
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Puget Sound Business Journal - Seattle/Tacoma, 05/22/98
Washington, D.C. - Experts on the Year 2000 (Y2K) problem predict a wide range of scenarios resulting from massive computer system failures and malfunctions as we begin the new century.
From nationwide chaos and famine, to short-term disruptions and mild recession, to a mere technical blip that some say has been overblown by the media, the Y2K issue is gaining more attention and action from political and business leaders.
What is the Y2K problem? Currently, most computer operating systems and applications software only store the last two digits of the year (98), with the century (19) generally implied. Thirty years ago, hardware was expensive and storage capacity limited, thus the two-digit practice became the norm.
What was a best practice for the industry back then now will make the year 2000 (00) indistinguishable from the current century. As a result, widespread system failures, malfunctions and other serious impacts have been forecast by those most closely following the Y2K issue.
Y2K experts are in wide agreement that small and medium-sized firms are the least aware of their potential exposure to the "millennium bug" but have the most to lose if they remain apathetic in their preparation. At the request of Senator Kit Bond (R-Mo.), chairman of the Senate Small Business Committee, a forum was held last month to highlight the seriousness of the issue and its impact upon the small-business sector.
"Many small businesses are unaware of the Y2K issue," said Sen. Bond. "Consequently, most have not begun compliance work or are just beginning to upgrade their computers and systems."
A survey of the estimated impact of Y2K was released by The Washington D.C. Year 2000 Group at the forum hosted by Bond. The working group is sponsored by the Fannie Mae Corp., with membership comprised of individuals dealing with Y2K issues in the private sector, government and other organizations.
The survey reveals two-thirds of respondents believe there will be at least an economic slowdown directly attributed to the Y2K problem. At least one-half believe there will be a mild recession, and more than one-third think there will be a strong recession and local social disruptions. About a tenth foresee an economic depression, widespread failures in infrastructure and the supply chain and a breakdown of social cohesion.
The results of this internal Y2K Group survey closely resemble what some lawmakers and outside experts have been tracking.
"After communications with small businesses and many computer manufacturers, consultants and groups, we have found there is significant likelihood that the Y2K issue will affect many small businesses and will most likely cause many small businesses to close, playing a larger role in Federal Reserve Chairman Greenspan's prediction of a 40 percent chance for recession," stated Bond.
At recent hearings before the House Ways and Means Committee - Subcommittee on Government Oversight, witnesses also testified to the seriousness of the issue. John Bace, research director for the Gartner Group - the world's largest information technology research and advisory firm - reports their decade-long warnings have largely been ignored.
"We are afraid that there just will not be enough talent and resources available, given the amount of time left, to handle all of the potential failures in a timely fashion," stated Bace in his testimony.
A study by the Gartner Group reported only 50 percent of enterprises worldwide would reach "operational sustainability" in 2000, meaning these businesses and their trading partners or vendors, their electronic commerce links and their supply-chain systems, will be fully Y2K tested and functional.
This is not to suggest all other firms will "go under." But, as Bace suggest in his testimony, playing catch-up or dealing with the issue in an ad hoc mode could, in itself, create havoc and expense that could close a business.
"The result is that no one single year 2000 problem hits a major artery that could kill a company. However, the combination of failures within the enterprise and from the outside might have the effect of disrupting business in such a way that the company bleeds to death," said Bace.
President Clinton has established a Y2K Commission, while the Senate has formed the Select Committee on Y2K. In addition, each government agency has its own Y2K office. Because many predict the government will be the last to get Y2K compliant, experts do have some advice for the private sector and small businesses:
Act now.
It made be hard to think ahead, but this is not a project you can put off any longer. Put all other projects aside, inventory all computer systems and begin to determine costs for upgrading, renovating, or replacing noncompliant systems.
For all new purchases of hardware, software and services, receive a written Y2K readiness statement. Don't get caught in the "litigation web" caused by the new millennium crossover. Lloyd's of London estimates U.S. litigation costs will conservatively reach $1 trillion.
Are vendors and service suppliers compliant? If not, will their noncompliance feed back into your system after you've become Y2K compliant? What have they done to test their systems if they say they are Y2K ready?
Test yourself. It's the only way you know you are really Y2K ready.
Develop a business contingency plan for a worst-case scenario. Y2K issues will vary from small business to small business - depending upon your dependency on technology, what type of internal systems you have and what your external dependencies are - including elevators and phone providers. For most businesses that won't be Y2K-ready, building a manual process is seen as a must.
Because the government has not taken leadership to build Y2K awareness in the private sector, you may want to check out the following Web site to get informed: www.year2000.com.
KAREN KERRIGAN is president of the Small Business Survival Committee in Washington, D.C.
(Copyright 1998)
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