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Program like it's 1999.

The Millennium computer date problem will affect most major business operations and could cost millions to fix. What can companies do before time runs out?

Financial-services companies will lose millions in interest. Manufacturing companies will find their inventories "expiring" prematurely. Insurance companies will send inaccurate premium statements to policyholders. People will be charged for 99-year-long phone calls. And octogenarians will be notified of their eligibility for kindergarten.

Sounds amusing and pretty improbable, but in reality, with the dawning of New Year's Day 2000, corporate America will face a computer programming crisis that will affect most business operations: invoices, payrolls, bill payments, debt and interest calculations, credit-card transactions, inventory systems, and even beepers and security systems. Not only will your business be coping with data errors resulting from this problem, so will your vendors and suppliers, your customers, and your partners.

The possible scope of the so-called "Millennium bug" has no immediate parallel. There has been no other situation quite analogous to it in the 30 years or so since the world began using computers. In this respect, it is like an iceberg. Many see only the tip of a seemingly minor technical problem. However, it will cost companies worldwide some $300 billion to $600 billion to fix, according to the Gartner Group, a technology consulting firm. And if nothing is done now, some 90 percent of business software will fail by 1999, Gartner says. Time is running out.

THE DATING GAME

Contrary to popular belief, the Millennium problem is not a computer virus, which damages data and is caused by a malfunction of hardware or software or by sabotage.

Instead, the problem involves the coding of dates. In the 1960s and 1970s, computer memory and storage capacity were both expensive and scarce. To .save precious memory, computer programmers abbreviated dates in their programs, using two digits for the year instead of four. Remarkably, many of those early programs are still running - often forming the core of corporate information systems - and using the standard format MM/DD/YY to write the date.

Therein lies the rub. At the turn of the century, many computer operating systems and programs will write January 1, 2000, as 01/01/00 and "read" the new year incorrectly as January 1, 1900. Thus, any computer calculation involving a date will be wrong, rendering systems inoperable and data inaccurate.

For example, suppose you make a call at 12:02 a.m. on New Year's Day 2000 to an area of the country where it is still 1999. The computer may subtract 01/01/00 from 12/31/99 and charge you for a 99-year-long phone call. Or suppose your daughter, born in 1982, applies for a driver's license in 2000. The computer will be unable to determine whether she is 18 or 82.

And don't be fooled into thinking you won't have to deal with the problem for another four years. The Internet is rife with chat about Millennium date problems that already have affected products or services with four- or five-year expiration dates, with driver's licenses being the most common.

NO ONE IS IMMUNE

Analysts estimate the Millennium problem will affect more than 90 percent of Fortune 1000 companies, potentially disrupting more than 1 trillion lines of computer code across all platforms, from mainframes to desktop computers.

This may prevent your business from processing checks, handling orders, managing cash, and paying employees and bills. The Millennium problem even will affect peripheral electronic systems that are programmed with dates, such as air conditioning and security systems and vaults with timers.

Few industries will be able to avoid the Millennium problem entirely. However, because it is so reliant upon dates and information technology, the financial-services industry - particularly banking, mortgage banking, insurance, brokerage, and securities firms - will be among the hardest hit. Most affected will be financial transactions involving vast sums of money, such as mortgages, cash management, electronic funds transfer, the issuing and trading of equities and securities, and interest and dividend calculations.

For example, in one month, a credit card company with 1 million customers, each with an average card balance of $50, will lose $50 million in collections, plus the accompanying interest. Since the Millennium problem cannot be fixed in a month, lost collections will mount - $100 million in two months, $150 million in three. The company eventually will collect the principal from customers but may never recover all the interest, its primary revenue stream.

Some insurance firms will experience date problems affecting up to 90 percent of company software. For example, an insurance company that has 1 million customers and a Millennium problem affecting only 30 percent of its software will send inaccurate premium statements to 300,000 policyholders. Say these irate customers then swamp telephone service lines, costing the firm $20 per customer per month. The company will spend an additional $72 million annually on customer service, a figure that does not include the actual cost to repair the glitch or the incalculable price of offending customers who may take their business elsewhere.

Consumer-goods companies, manufacturers, and utilities have other problems: They may find their inventories "expired" 90 years ago. In a Detroit News article noted on the Internet, Consumers Power Co., an electric utility based in Michigan, admits that the problem is "quite serious" for its 350 computer systems. If not fixed, the Millennium problem could result in denial of service for its customers, the company says.

Of course, some companies have gotten ahead of the curve. As far back as 1969, mortgage bankers were instituting programming changes to cope with 30-year mortgages. At least one financial institution eliminated the sale of some bonds when computers began printing interest checks worth millions of dollars for instruments due in the year 2000. And San Antonio, TX-based insurer USAA told the Christian Science Monitor that programmers began tackling the Millennium problem in the 1980s, but they still have a huge reprogramming job left to complete.

NO QUICK FIX

Myths about the Millennium problem abound. "I can't believe a two-digit date is going to cause all this damage," is one. "It's just going to affect big mainframe computers," is another. "It won't be a problem for my business," is yet another.

However, chief executives cannot afford to ignore the Millennium date problem. Consumers Power estimates Millennium reprogramming will cost the company $20 million to $45 million. And according to the Detroit News article, insurer Blue Cross has budgeted $3 million for this year alone to begin converting its systems.

For a midsize company with 8,000 programs, the Gartner Group estimates the price tag could be as high as $13.2 million. The typical Fortune 500 company will need to invest $100 million or more, Gartner says.

Given the high cost to fix date coding, some chief information officers are reluctant to inform their CEOs of the bad news. That's a mistake. Chief executives must be made aware of the situation, must get involved, must discover the extent of their companies' Millennium problem.

CEO AS CATALYST

Repairing the Millennium problem is much more complicated than simply adding two more digits to the date field. Often, date fields cannot incorporate more than two numbers. Nor can computers be instructed to globally insert the digits "one" and "nine" into years, because some dates may refer to a different century. All systems and software must be changed in a coordinated fashion and then be tested to ensure they can handle dates in both centuries. As a first step, companies will have to examine and test their entire portfolio of software to locate and identify the problem code in different programs and multiple versions of the same program.

In addition, the longer you wait, the harder it will be to hire skilled people who can fix your company's systems. Thanks to down-sizing, companies may no longer employ technicians who are familiar with old software applications. In general, there is a finite supply of experts who are still knowledgeable about the older applications. By 1997, you may have to pay a premium for the help your company needs - or you may not be able to find it at all.

Also, the remaining time window may be too narrow for your company to complete the necessary reprogramming by January 1, 2000. Consumers Power, for example, says it began the conversion process two years ago. Depending on the scope of their information systems, companies will require from three to five years to locate the problem code, repair it, and then test their entire software portfolio to ensure that it works properly. The analysis alone may take six months. Moreover, companies should plan to finish the work with a comfortable cushion of one glitch-free year before the turn of the century.

Because the problem may concern all company operations and cost a lot to repair, the CEO must be the catalyst for a solution. Only the chief executive can fully understand the business risks, weigh all the alternatives, allocate the resources, and marshal the troops to get the job done. With all the unknowns facing most companies about the scope of the problem, high-level input in the analysis and planning stages is crucial. The form of that input includes the following:

* Don't shoot the messenger. According to the trade publication, Computerworld, only about 20 percent of companies currently are working on Millennium date repair. Yet, proactive companies that take the initiative and act quickly in the short term will be able to implement solutions more easily and potentially save money in the long run. Northern Telecom told the publication that planning and control will reduce the cost of converting the company's 15 systems by some 75 percent.

* Think strategically. Repairing the Millennium problem presents an opportunity to enhance your company's information technology. Since you already are investing in reprogramming, this is a good time for an overall assessment of your company's current systems. You may want to link Millennium solutions with other modifications to leverage technology better for your company's competitive advantage.

* Put your repair infrastructure in place now. You should budget for and assemble the necessary resources to repair the Millennium problem before the analysis phase has been completed. Examine whether you have sufficient staff in house or whether you will require help from an outside vendor. If you do need to hire outside experts, start the research and bidding process immediately.

* Choose the best solution for your organization, In evaluating vendors, keep in mind that the lowest estimate may not offer the most effective Millennium solution. Your choice should be based on your confidence in the technology firm's ability to implement the precise repair your company needs.

* Help acquaint your industry with the problem. CEOs should take the lead in familiarizing their industries with the Millennium problem. The more companies that get a head start on Millennium repair, the less disruption there will be across the corporate spectrum.

Time and preparation are of the essence. Remember that the year 2000 is fewer than 1,000 working days away - and the clock keeps ticking.

RELATED ARTICLE: CENTURY 21 SOLUTIONS

Solutions to the Millennium problem depend on the size of your organization; the technology, computer platforms, and different software applications that comprise its information systems; and whether the repair will involve multiple offices or sites across the country or around the world. Repair options include:

* Doing it yourself: This solution is more viable for smaller companies with less complex systems.

* Purchasing vendor-based solutions: Be sure that "standard" repair packages bought from an outside vendor meet the unique needs of your organization in terms of data integration and customization.

* Insourcing/outsourcing: Large organizations, particularly multi-nationals with offshore operations, may find the combination approach the most effective. An outside vendor can assist internal IS staff with the development of repair solutions, and with the necessary analysis, production, change, and testing.

* Project management: Some companies may have the technicians to fix the Millennium problem, but lack the higher-level expertise to manage the job. In this case, outside project managers are brought in to oversee internal efforts.

* Total outsourcing: Some organizations may require customized assistance encompassing every aspect of Millennium repair and maintenance, from analysis to reprogramming to testing.

Once you have determined strategy, you will need the technology tools - the software programs - that are the "enablers" of your company's Millennium implementation. These tools handle functions such as inventory and analysis of your company's entire software portfolio across multiple computer platforms; "partitioning" analysis that "breaks out" the problem in logical components that can be changed and moved; data and source code changes that automate the date conversion; and testing.

You may require a complete set of repair software, or a different combination of software tools, for each different computer platform. However, as in any repair job, first you must decide how to do it. Only then do you choose the right tools to get the job done.

Samuel J. Palmisano is president and chief executive of Integrated Systems Solutions Corp., an IBM subsidiary that is part of IBM's $12. 7 billion services business and specializes in information technology consulting, systems integration, and managed operations.
COPYRIGHT 1996 Chief Executive Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Information Technology; includes related article on solutions to the problem; solving the Millennium computer date problem
Author:Palmisano, Samuel J.
Publication:Chief Executive (U.S.)
Article Type:Calendar
Date:Apr 1, 1996
Words:2186
Previous Article:Mr. Network.
Next Article:Are your ready for convergence?
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