Y2K effects to last throughout 2000

A widespread misconception that most year 2000 problems will occur between late December 1999 and early January 2000 could leave companies worldwide unprepared to deal with outages that occur outside that time frame, an analyst has warned.

"The real period of risk has not been well understood," said Lou Marcoccio, a Gartner Group analyst that specialises in year 2000 issues, during a presentation titled "Year 2000 World Status" here at the company's ITxpo '99.

Many companies are making arrangements to have additional IT staff on duty and extra inventory stocked up in late December 1999 and early January 2000, but do not seem to be extending those precautions much beyond those dates, Marcoccio said.

"Most companies believe they only need to worry about supplier interruptions and failures occurring on January 1, 2000," he said.

Yet, Gartner predicts that about 25 per cent of year 2000 related problems will arise during the fourth quarter of 1999 and 55 per cent throughout 2000, with some more cropping up during 2001, Marcoccio said.

"Most failures will occur when date-forward transactions are run, and they are not all run in early 2000," he said.

For example, the number of transactions that take into account the year 2000 will increase 800 per cent in the fourth quarter of 1999, compared with the fourth quarter of last year, he said.

Meanwhile, companies are spending between 20 per cent to 40 per cent of their IT budgets on year 2000 issues in 1999, but they will get no respite in 2000, when Gartner expects companies will have to devote up to 40 per cent of their IT budgets to fixing year 2000 problems. Year 2000 spending will begin to wane in the second half of 2000 and is expected to take up no more than 8 per cent of companies' IT budgets in 2001, Marcoccio said.

In terms of regional progress, Gartner expects that 60 per cent of companies around the world will reach the highest level of year 2000 readiness by January 1 of next year, up 10 per cent from Gartner's expectations two years ago, Marcoccio said. This level of preparedness, which the consultancy calls "Level 5," implies that a company has fixed and tested 100 per cent of its so called "mission-critical" systems and has drawn up and tested the necessary contingency plans.

"There has been tremendous progress in 1999," he said.

Countries that have shown the most progress lately are Chile, Costa Rica, Bahrain, Kenya, Germany, Sweden and China, Marcoccio said. Countries with the highest levels of compliance as of this month are Australia, Belgium, Bermuda, Canada, Chile, Costa Rica, Denmark, Finland, Iceland, Ireland, Israel, the Netherlands, Norway, Singapore, Switzerland, Sweden, the UK and the US, he added.

However, Marcoccio cautioned that a high level of compliance on the part of a country does not necessarily mean that business is at a lower risk of being affected by year 2000 problems related to the country's basic-services infrastructure.

If a country relies heavily on telecommunications, trade, computers and electricity, as is the case of the US and the UK, even a few outages can be very disruptive of business, Marcoccio said.

The same principle holds true for specific industries. Investment services, banking, government and telecommunications stand to lose much more from a year 2000 outage than sectors such as oil, chemicals, retail and food, Marcoccio said.

Overall, in most regions, the year 2000 problem will cause isolated technical failures, most of which will be solved promptly, Marcoccio said.

However, the analyst warned that widespread panic could cause considerable problems. A Gartner survey done in September of 14,000 "general public" individuals in 21 countries found that a large percentage of respondents plan to stock up on cash and food, which could cause shortages, he said.

For example, 55 per cent of respondents said they plan to withdraw cash to last between two and six weeks, when normal behavior is to get cash for four or five days. Meanwhile, 67 per cent plan to stock up on food to last between seven and 18 days, as opposed to the regular food reserve of four to five days, Marcoccio said.

Finally, Gartner recommends that companies implement an "event management center," which would be a central command post for year 2000 issues to coordinate internal and external communications, schedule resources and maintain operations during failure or outages, he said.

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