OT..sort of but not reallyJanuary 4, 1999 YEAR 2000 Averting Disaster Is the Highest
Technology Priority
By BARNABY J. FEDER
or the information technology industry, 1999
will bring back memories of cramming for a
final exam.
Companies are spending heavily to avoid the chaos
that could be caused around the world by computers,
software programs and electronically controlled
machinery being confused by the transition to the
year 2000.
Most of the spending on Y2K, as the industry calls
it, will go toward heading off the problems that
could come after Jan. 1, 2000. Some companies and
government agencies may also be forced to lay out
millions of dollars toward recovering from
malfunctions this year.
Those
unplanned
outlays will pop
up, Year 2000
consultants
predict, because
many
forward-looking
scheduling,
purchase order
and budget
programs will
trip up this
month, or
around April 1,
July 1 and Sept.
1, dates when most companies and governments
open the books on the fiscal year 2000.
The potential for global trouble stems from the
once-common practice of using just two digits to
refer to the year in dates, like 99 for 1999. Many
computers read 00 as 1900 instead of 2000. Others
cannot process 00 in the date field at all and reset
their clocks to 1980, the dawn of the personal
computer age, or some other date. Some simply
freeze.
The year may also be marred by the rollover to 0
this summer of the calendars used in satellites that
pinpoint the location of mobile equipment, called
global positioning satellites. The satellite network's
longest time unit is a week, not a year, and the
highest number it recognizes as a valid week will be
reached in August. The transition to week 0 could
disrupt industries and military systems that use the
satellites.
Sept. 9, 1999, is another possible land mine because
many computer programs treat a data entry of 9999
as a shorthand for end of file or date unknown.
Thus, office clerks, sales representatives and other
workers innocently entering orders and other
information for Sept. 9 may end up deleting huge
amounts of data or causing programs to crash.
The bottom-line question
for anyone in the
information technology
business is how much of the
spending on Year 2000 and
other date problems will
come at the expense of
other information
technology projects.
"We're not expecting the
bottom to fall out, but it
will be a definite speed
bump for many I.T.
products," said Louis E.
Marcoccio, global director
for Year 2000 research at
the Gartner Group, an
information technology
consulting firm in
Stamford, Conn.
Estimates of information
technology spending tend to
vary widely because of
differences in sampling
techniques and in what is
included.
The International Data
Corp., a market research
firm based in Framingham,
Mass., projects that
centralized corporate
spending on information
technology will decline to just under 2 percent of
revenue but that strong growth in other areas,
including home offices, will lift total worldwide
spending nearly 9.4 percent, to $720.4 billion from
$658.6 billion in 1998.
Computer Economics Inc., a smaller research firm
based in Carlsbad, Calif., which does not count
home offices in its estimates, expects just 3 percent
growth, but puts the projected total this year at $987
billion.
Gartner's Dataquest subsidiary estimates that
information technology spending by governments
and businesses will climb more than 14 percent from
1998, to about $1.27 trillion.
There is general agreement, though, that the portion
of the corporate information technology budget
going to solve Year 2000 problems rose rapidly last
year and will peak somewhere between 20 percent
and 40 percent of information technology spending
this year.
A survey by Gartner of 65,000 companies around
the world suggests that many of them will meet Year
2000 needs by postponing purchases of new e-mail
packages, software that generates data supporting
sales programs and similar decision-support
applications, investments in new telephone service
centers and logistics applications.
Gartner expects large servers to continue to sell well
throughout 1999, along with information storage
devices, which could benefit from a rush to back up
data. Companies in the midst of deploying large
enterprise software packages to link and automate
many activities may accelerate some investments to
beat the year 2000 deadline. But the slowdown in
the growth of new orders for such software, which
began last year, should continue for at least several
quarters, Gartner said.
Gartner also expects orders for mainframe
computers and desktops to weaken, then rebound
next year.
Others foresee an even tougher spending climate.
"About the only thing we are not seeing postponed
for next year is E-commerce," said Kazim S.
Isfahani, an analyst at Giga Information Group in
Cambridge, Mass., referring to applications that
allow companies to do business with suppliers and
customers over the Internet. Rapid investment in
such software is widely seen as strategically
essential, Isfahani said.
Perhaps the most optimistic view for vendors
popped up in a Gallup poll for Computer Reseller
News, a trade publication, which concluded that
nearly four out of five large companies planned to
increase information technology spending to deal
with the Year 2000 problem rather than cut back on
new investments.
That was probably wishful thinking. Information
technology spending accounts for just 2.3 percent of
corporate revenue on average, and many companies
are budgeting for an increase in that figure. But that
does not mean they want to authorize a spending
spree just when recession in Asia and other
uncertainties threaten growth and profitability. And
it would take a huge jump in information technology
budgets to keep all new projects on track, given the
projections by Gartner and others of the huge share
that will go to fix Year 2000 problems.
Cost pressures aside, companies are also reining in
new information technology investment because
they do not have enough skilled managers and
technical workers to handle new projects on top of
the Year 2000 challenge and the usual load of
maintenance.
Others are worried that new projects could introduce
bugs that compromise the reliability of the Year
2000 work they have completed.
"The trick for vendors will be to single out
customers who are ahead of the curve and point out
which investments they can safely go ahead with,"
Isfahani said.
That could include the early stages of a wide variety
of enterprise and E-commerce projects that would
not be deployed until the year 2000 or later, agreed
Thomas D. Oleson, chief researcher for the
corporate advisory service at International Data.
Year 2000 distortions in spending patterns actually
began to show up in 1997 in the form of surging
orders for enterprise software -- packages that
coordinate major business functions. Many
customers decided to attack their Year 2000 problem
by replacing as many older programs as possible.
In 1998, though, it became too
late to get enterprise software up
and running before the year 2000.
Growth in new orders -- and stock
prices -- slumped for several
vendors, including Peoplesoft and
J.D. Edwards & Company.
On the other hand, Dell
Computer, Compaq Computer
and other makers of desktop
computers enjoyed
stronger-than-expected orders last
year from companies upgrading
their computer networks as part of
Year 2000 preparations. That
trend is expected to continue, at
least until the last few months of
this year.
The Year 2000 impact will be felt most directly, of
course, by companies that have made remediation
software and services a major part of their business.
Many, like Viasoft Inc. of Phoenix and the Alydaar
Software Corporation of Charlotte, N.C., saw their
stock prices tumble last fall as investors concluded
that the best growth prospects of the companies were
over.
The real issue, though, will be how successfully
these companies respond to the strategic challenge.
Some have reconfigured the software programs they
developed to look for Year 2000 bugs into packages
that can be used to verify that repairs have been
successful, a market that is likely to boom this year.
Similarly, companies that prospered on outsourced
Year 2000 repair work are leveraging those contacts
into other technical support deals. Outsourcing
mundane tasks like the maintenance of existing
programs may help pace-setting companies with the
majority of their Year 2000 investment behind them
to accelerate other projects.
"People see an opportunity to get a year or two
ahead of competitors they think will have trouble
with Y2K," said Michael Erbschloe, director of
research at Computer Economics. "After diverting
so much attention to Y2K, management is hungry
for applications that will add to revenue."
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