Is the world prepared for the millennium bug? Reports from the IDG News ServiceIn the middle of the century, Western diplomats feared that if one country fell to the Communists, its neighbours would topple too, in a falling-domino chain reaction. Now, at the end of the century, fears have shifted from communism to computers. What kind of domino effect will the millennium bug have?
CIO asked its sibling division, the IDG News Service (with 20 reporters in 12 bureaux), to check the pulse of IT managers in Europe, Asia and South America. The news was not encouraging. Not surprisingly, those IT professionals willing to go on the record were happy to report that they are well along in their remediation. Typically, though, they professed pessimism regarding the progress of other companies in their countries as well as of their governments.
Asian Tigers by the Tail
Let's be honest. In recent months, Asia's been buffeted by its worst financial crisis since World War II. Nonetheless, as a U.S. trading partner, it's a crucial manufacturing arena. (How much of the PC on your desk do you suppose was really made in America?) Even before its financial difficulties, Hong Kong was distracted by its handoff from Britain to the People's Republic of China in the summer of 1997. There, IT professionals express vast disagreements about the country's ability to handle Y2K. "There is no evidence that Y2K [will] affect the economy of Hong Kong. The awareness in the business and IT community of the problem is very high," says Y. B. Yeung, head of technical services at Hongkong Bank, part of Hongkong and Shanghai Banking Corp. But Jagdish Bajaj, MIS manager at KPS Retail Stores Ltd., a video rental chain of 133 stores, disagrees: "The impact will be disastrous. There are indications that large IT users like the immigration department and hospital authority are only now waking up to the Y2K issue."
Bajaj is no less encouraged about the private sector. "People seem to shrug [Y2K] off and do not realise that it goes far beyond computers and software alone. I expect we will see chaos, confusion, finger-pointing and litigation-all of which will obviously have a huge economic impact," Bajaj says.
In other Asian countries, governments are leading the charge toward remediation but not with velvet gloves. Singapore's national IT authority, the National Computer Board, has been leading the drive toward Y2K compliance since 1995 with grants for conversion work, seminars, a Web site and help from government experts under a scheme known as the Y2K National Awareness Campaign. At the same time though, the government has warned large companies and banks, in particular, that they will be heavily fined if their systems fail the millennium changeover. Under these conditions, local CIOs proved reluctant to discuss their conversion plans. And who can blame them? If they cane people for littering, who knows what punishment they'll mete out for computer failure.
In the Philippines, President Joseph Estrada recently organised a presidential commission to oversee the $6 billion remediation effort. In addition to its remediation work, the commission is charged with making sure noncompliant computer products aren't dumped in the country. As for the remediation project, Science and Technology Secretary William Padolina reportedly told the Philippine Senate in August, "If we start today, it's going to be a photo finish."
Malaysia and Thailand are expected to have more difficulty implementing nation-wide Y2K compliance projects at smaller companies, although banks and government agencies have said they are well advanced with conversion projects. In other arenas, progress is slow. A member of Malaysia's parliament said in late July that it was clear that Malaysia was lagging behind the Philippines and Singapore in its Y2K conversion effort, while government efforts in Thailand have been delayed by a disagreement between the budget bureau and the science and technology ministry over proposed funding for Y2K problem solving.
South of the Border
Those global companies proclaiming that they're on top of the problem below the equator credit the support of top management for their progress. At Petróleos de Venezuela SA (PDVSA), Venezuela's state oil company, a sharp decrease in oil prices is forcing the company to make deep cuts almost everywhere-but not in approximately US$200 million the company has set aside for its Y2K conversion. "Top management understands this to be a matter of survival," says Nelson Nava, the company's IT director, adding that the company has created a high-level Y2K steering committee, made up of high-ranking PDVSA vice presidents and subsidiary presidents, to oversee the project's progress.
Mauricio Arias Toro, IT director for Empresas Públicas de Medellín (EPM) in Colombia, says the public utility began fixing its year 2000 problems last year. With over US$800 million in annual revenues, the agency provides services such as water and sewer, electricity and telecommunications to Medellín and about eight other neighbouring municipalities. "The company's general manager declared [Y2K] the company's overall top priority, not just IT's top priority," Arias Toro says. He expects EPM to have fixed about 70 percent of its systems by the end of this year and the remaining 30 percent by next summer.
Similarly, at Mercantil Servicios Financieros, a holding firm that owns several financial institutions, including one of Venezuela's largest banks, Banco Mercantil, the year 2000 conversion has been designated by its president as the Caracas- based institution's top corporate priority, according to Zoila Cabrera, year 2000 project manager.
Mercantil, which began its conversion in 1995, plans to be 100 percent year 2000 compliant by the end of this year, says Cabrera. A 32-person team, made up of members from a variety of departments- including IT, legal and accounting as well as outside consultants- gives progress reports every month to the company's top brass.
But as in Asia, Latin American IT professionals are concerned about other sectors of their economy. In particular, Toro notes, the government sector is lagging in its year 2000 efforts even though the president has emphasised the importance for both the public and private sectors to address it. Nava warns that if its partners-whether banks or vendors-haven't shown significant progress in their Y2K remediation by the first quarter of 1999, PDVSA will stop doing business with them.
In Venezuela, Cabrera worries about the lack of compliance of its big clients, partners and suppliers in the public and private sectors. "We're monitoring their progress, because if they don't fix their year 2000 problems, they're not going to be able to fulfil [their commitments] with us," she says. "Most [companies and public agencies] should be at the stage we're at; that is, almost fully compliant and getting ready to begin testing, but many haven't even begun."
In some cases, CIOs expect to have to step in and assist their suppliers. Carlos Roberto Boschetti, Sao Paolo-based IT director of Volkswagen South America, which includes Brazil and Argentina, expects remediation to be completed by the year's end. "We are very comfortable in terms of our inside project, but I have a concern in terms of our process chain," which involves suppliers through EDI and online activities. In terms of production, VW has almost 3,000 general suppliers in Brazil and 1,000 in Argentina. Its cars, trucks and buses are sold at 820 dealers in Brazil and 120 dealers in Argentina. "I have no visibility directly into this [extended] process chain. That is my trouble," laments Boschetti, noting that 80 percent of the vehicles' parts come from external suppliers.
To that end, he promises that once VW's conversion is completed, the company will focus on helping its partners, suppliers and other links in its process chain become compliant and "make sure there is no big risk for us in terms of our 'job-stopper' suppliers. If our suppliers stop, we also stop due to lack of parts."
In the Land of the Euro
CIOs in Europe have already been dealing with the pressures of so- called "mass change" projects, trying to balance the conversion of their currencies to the European Monetary Unit (EMU) at the same time as they're dealing with Y2K. Like Y2K, EMU conversion comes with a calendar-based mandate: Convert between 1999 and 2002. But the prospect of doing both at once is both daunting and distracting. IT managers in Switzerland, with its high number of banks, are taking both challenges equally seriously. IT managers in other countries, however, distracted by the euro, may not have realised the impact of Y2K as quickly.
IT staffers and analysts in Europe are sharply divided in their predictions of success versus failure. According to Magnus Herrikson, Y2K project manager for the Skandia AB insurance company, the government in Sweden "realises that the problem has been underestimated and is putting a great focus on the public sector." He thinks the public sector will fix its year 2000 problems in time, bar a few glitches that the Swedish economy can sustain. theless, Thomas Hahn, a Y2K consultant working for Mijada Sverige AB, an IT consulting and systems development company, is not convinced that the government's actions to clean up its own systems will pay off. For all the government's attempts to take a firm hand, Hahn believes a number of authorities will still not be ready in time. Where he works outside Stockholm, for example, there are hospitals that have not even started fixing the bug. The public sector is further hindered by elections slated for this year. Changes in the law following elections normally double the amount of updates needed in the tax and social security systems, Hahn adds.
The year 2000's ultimate impact on European economies may result more from reaction to the Y2K problem than from actual Y2K failures, says Martha Bennett, a vice president and senior analyst at Giga Information Group Inc. in Windsor, England. "A lot of it will be influenced by people in whose hands there is panic mongering," Bennett says. "Panic could have a greater impact than the actual problem."
Exaggerating the problem won't help, but countries such as France and Germany need to boost their ongoing efforts and realise that fixing Y2K issues is more important than preparing for Europe's common currency, Bennett says, as it makes no difference if you're ready for the euro when your information systems come to a halt.
When outlining his euro strategy last year, a senior IT executive at a large French company told Bennett that his company hadn't yet begun to prepare for the year 2000. His reasoning was that the euro's first phase-in deadline of Jan. 1, 1999 comes before Jan. 1, 2000. "And this was not a company in the financial services sector" that would necessarily need to be preoccupied by the euro, Bennett notes. While there are such extreme cases, Bennett thinks that overall France is moving forward smoothly with Y2K preparation. She bases this opinion on conversations with an executive from CIGREF (an IT group representing some 84 large companies), who said there is a lot of remediation going on.
In Germany, Y2K preparation has suffered from the country's attention to the euro conversion. Even late in 1997, Bennett says, Germany "was terribly behind on year 2000 preparation, and the situation is still a cause for concern" because of the priority given the euro.
If global commerce is the single biggest contributor to peace, the year 2000 issue might not be far behind. Everyone's dealing with the same shortfalls-not enough money, not enough staff, not enough time. Then there are unique cultural and language issues exacerbating the situation.
Take France, the best example. Most of the basic information about the year 2000 is disseminated in English. Even though French IS departments are accustomed to working in English, they always work faster in their mother tongue, as one French IT expert points out. French businesses are not in the habit of sharing information among employees or companies as openly as businesses in the United States and the United Kingdom.
Technology has already done an amazing job of shrinking the world. We're interconnected beyond our wildest dreams. Although it's clear that we'll witness some falling dominoes come the turn of the century, there are also stalwarts who, to our relief, will remain standing.
Compiled from reports by Jeannette Borzo (Paris), Elizabeth de Bony (Brussels), Kristi Essick (London), Rob Guth (Tokyo), Clare Haney (Hong Kong), Ana Garcia Huerta (Paris), David Legard (Singapore), Juan Carlos Pérez (Caracas), Joy Dietrich (formerly of IDG News Service in Geneva), Philip Willan (Rome) and Terho Uimonen (Taipei).