Feature: Life after Y2K
- 01 May, 1999 12:01
There's no doubt that the Y2K frenzy has forced an immense backlog of IT projects to be pushed aside. And according to some doomsayers, this points to an industry lapse in the aftermath of Y2K. However, as Peter Young reveals this month -- it's not all bad news. In fact, optimists are predicting a number of positive spinoffs set to blow away any post-Y2K doldrums!
Let's drag one plain truth out of the shadows into the sunlight. The fact is the year 2000 date disaster has poured a waterfall of pure gold into the collective pocket of the IT community.
Australia alone will end up spending somewhere above $20 billion to correct the situation, according to Australian Bureau of Statistics guesstimates.
Right now, all attention is focused on defusing the time bomb -- or at least muffling its shockwave -- before it explodes on January 1.
But a new issue is rapidly taking shape for IT consultants, contractors, programmers, testers and managers who have been sharing the Y2K largesse.
When the rich bounty starts to taper off in the next few months, how will they support the standard of living to which it has accustomed them?
Just as mountain ranges create rain shadows, there are fears the great Y2K divide will cast an IT jobs shadow over the first years of the new millennium.
This scenario assumes a slowdown in public and private sector IT spending while finance directors recuperate from the ravages wrought by the millennium bug as it chewed its way through their budgets.
It also supposes that vendors and consultancies in the Y2K mini-industry will adjust to softening demand post-2000 by jettisoning staff.
Finally, it presumes a severe case of corporate techno-exhaustion. The cost of managing complexity continues to exceed predictions, which at boardroom level translates into rising dissatisfaction with the bill that IT is running up on its promise to deliver increased productivity via technology.
According to the doomsayers, all this points to an industry hiatus in the aftermath of Y2K that will choke off the river of gold.
There is a strong case for believing the pessimists are wrong. But a survey of industry players and participants shows six signs that point to a soft landing on the far side of January 1:
* Applications backlog
* Electronic commerce
* New friends in high places
* Long Y2K tail
* Industry chutzpah
Individually, none may be substantial enough to take up the entire Y2K slack. As a group they should prove a potent painkiller for industry headaches in the next few years.
Far from a post-Y2K job hiatus, Andersen Contracting's most recent trend analysis shows little or no slackening of demand for people in the next two years. The analysis identified changes forced by the arrival of the GST as a key driver in the job market next year, said Andersen Contracting managing partner Australia/New Zealand Sheryle Moon.
The impact of a GST won't be felt in as many areas of an organisation as the millennium bug, Moon conceded. Yet specific systems affected by the introduction of a GST will require far more remedial work than they underwent because of the Y2K problem, she said.
"A number of our clients are already saying the implications of tax reform for their systems are greater than Y2K was.
"Two of our largest clients are predicting they will have to institute more changes because of GST than they did because of Y2K."
Even companies whose accounting software is already designed for GST will need at least six man-months of work to massage their business processes into line with GST requirements, according to Ron Read, northern region sales manager for financial software vendor Systems Union. More cautious about the volume of work GST will generate was Hitachi Data Systems CEO Tim Ward. "The jury is still out on just how much work the GST represents," Ward said. "In theory, it should be a fair bit but we will have to wait and see what the real numbers are."
More fundamentally, it is by no means certain the Federal Government can successfully steer the GST through Parliament and into the law books in time for the new tax system to go into effect by next July as planned.
The first slowdown in Y2K spending should show up in July this year, according to Graeme Inchley, chief executive of the Federal Government's Y2K industry taskforce.
"It will peak around mid-year and then start to ease as more and more organisations complete their remediation work and move on."
However Y2K work will continue to wag its tail well beyond Jan 1, 2000, Inchley predicted.
"I see the whole effort going on over at least the year 2000 and possibly into 2001."
It could take months after the official conversion date to pinpoint and repair faulty remediation processes. Inchley cited anecdotal evidence of companies who don't expect all the potential Y2K flaws to emerge until they lodge their tax returns for the year 2000.
Extending the Y2K envelope out even further will be the process of bringing non-core systems into the fold.
"There is one heck of a lot of conversion work on non-critical systems still waiting to be done," said Ross McLean, managing director of compliance solution vendor MS400 Asia Pacific and former Asia/Pacific director of Hitachi Data Service's Y2K division.
"Most companies took the triage approach and concentrated on the top 30 per cent of their application suite. The rest still need to be replaced or converted, so there will be very viable conversion and consulting work up until 2002."
However pay scales will come off historic highs and "there will be a bit of cold turkey going on among $1000 a day Cobol programmers", McLean predicted.
The most obvious reason for industry optimism is the immense backlog of IT projects pushed to one side by the multi-year effort to stamp on the millennium bug.
Many organisations put all systems development on hold over the past year or two, creating a bottleneck behind which user demand is pent up. In addition, some organisations dropped various functions from applications in order to facilitate Y2K compliance. They must now bring back that functionality plus implement change requests.
A straw poll of government and private sector IT managers confirmed the backlog is real and that organisational budgets are available to accommodate it.
"We have identified a number of projects that will proceed," said Lyle Batley, director of business systems support director for the finance division of Queensland's Main Roads Department.
Besides addressing GST and electronic commerce in the post-Y2K period, Main Roads will usher in a major archiving project and must complete a major upgrade of its SAP enterprise application suite.
"We don't see our development environment subsiding for at least two years," said Batley.
The funds to drive the backlog also appear to be in place.
"I haven't heard of any spending slowdown," said Peter Kalkman, the Australian Computer Society's Canberra branch chairman.
Added Andersen's Moon: "I don't hear any of our big clients talking about lower IT budgets going into the next year or the year after."
Many of the contractors hired for Y2K work will be kept on to help dig into the waiting mountain of deferred and new projects.
Kalkman, who is also IT manager of a large federal government department, said it will be retaining about 10 per cent of its Y2K contractors.
They are ideal because their remediation work has given them an intimate knowledge of the department's core systems, its business and its people, Kalkman said.
A poll of ACS councillors in other states showed many expect a delayed reaction to the introduction of Europe's new euro currency will create yet another significant layer of post-Y2K work, Kalkman said.
"The issue of the euro has been largely overlooked so far in Australia," he noted. "But as the euro becomes more entrenched our trading patterns with Europe will force many companies to change a lot of their systems to cope with it."
One of the positive spinoffs of the Y2K crisis in Kalkman's view is that organisations are not only spending more on IT than previously but their management has a better understanding of IT and its business impacts.
The large management consultancy groups, so richly rewarded by the Y2K crisis, are not viewing its imminent disappearance with dismay.
They are confident of their ability to align their mix of skills with whatever replaces Y2K as the market hot spot.
"When Y2K started, there were no Y2K experts, so we identified the needed skills and created Y2K teams composed of people who were already experts in certain areas," said Dinsha Palkhiwala, consulting principal with DMR Consulting.
He's certain the same process will repeat itself in the post-Y2K period. If anything, the Y2K experience has given consultants a deeper armoury of skills, he suggested.
"For example, in the testing area Y2K led people to come up with innovative strategies that will be useful in other situations."
The immovable Y2K deadline also compelled risk management consultants to learn new "no-slippage" methods for handling large projects, Palkhiwala noted.
"It means we now have a much richer mix of skills to address large projects."
The Y2K era is leaving IT shops with a legacy of entrenched benefits as well. They have had to get serious about code testing and code management, regular maintenance and library management. It is a cultural change which should prove of immediate value as they tackle the next round of major application developments.
Many organisations didn't have those disciplines pre-Y2K but the millennium bug has shown them the light and they won't want to be caught again in future.
The Y2K scare has also raised the profile of IT in corporate boardrooms. "It has brought home to many organisations the importance of business and IT working together," said Palkhiwala.
"Business has realised that if it just blindly delegates things to IT instead of waking up and taking control of the situation, the consequences may be difficult to manage."
Introducing technology to cope with GST changes is a localised action that will do nothing to improve the competitiveness of Australian companies on the global scene.
Just the opposite effect will flow from electronic commerce which is emerging as the other strong candidate for blowing away any post-Y2K doldrums in the IT industry.
Activity on the e-commerce front is taking off in the US and Europe, confronting Australia "with a real risk of being left behind", said Y2K industry taskforce chief Inchley.
"I honestly believe we are ready for a huge influx of resources into e-commerce. It is already cast as a growth area. Either you are in it or you are going to be dead."
Vendors are honing their e-commerce strategies but the support infrastructure of regulations and standards is not yet in place.
That is putting pressure on government, according to Inchley.
"Post-Y2K if not earlier, the Australian Government needs solid policies on the development of e-commerce for Australia in a global economy," he said.
However ecommerce is unlikely to be a short-term saviour.
"E-commerce is certainly an area everybody is talking about and we have put together some skills databases, especially in the Internet development area," said Sheryle Moon.
"But we have seen very few requirements for things like encryption skills or any of the other security skills needed for e-commerce. There is no evidence right now of how big that requirement will be or when it will hit."
Perhaps because the IT industry is peopled by individuals who love a challenge, there seems little fear among Y2K specialist vendors that customers will sit on their chequebooks in the post-Y2K era.
Two years ago, efforts to repair Y2K date codes were justified largely by what might be called the Bermuda Triangle argument.
Any company whose code wasn't fixed before the millennium rolled over was assured it would disappear as a business shortly thereafter.
Since then, vendors have become more sophisticated at pointing out silver linings in the dark Y2K cloud for customers.
"One of the biggest value propositions to come out of Y2K is that customers now know more about the quality of their applications portfolio," said Martyn Bartlett, MD of Y2K conversion specialist Viasoft Australia.
"It has taught them how to do testing and impact analysis more effectively and showed them the finer principles of risk management.
Significantly, it has also increased their readiness to acquire needed short and long-term skills by turning to contractors and consultants.
For Y2K vendors like Viasoft who intend to re-position themselves more in the consulting services business, that is a key shift.
It will create some tensions as annual revenue growth slides toward the more normal 30 per cent to 50 per cent instead of the 100 per cent jumps Viasoft experienced in the past few years.
However Bartlett doesn't see Viasoft shedding any staff as it moves through the Y2K decompression period.
"There is a school of thought which says the whole consulting marketplace is taking off because it is easer to get things done if consultants are brought in to do it," he said.
For one thing, using consultants can be a more budget-friendly exercise. It is often simpler to pay for consulting services as budget items than to seek steering committee approval for a project's capital cost.
Reinforcing that is what Andersen's Moon called "the entrenched trend toward the casualisation of the workforce".