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by The Year 2000 Research Group Inc.

This Is Not A Test

If your doctor knew you had a virus that had an 80 percent chance of causing long-term health problems and a 20 percent chance of killing you at a specified date in the near future, would you listen to your doctor's suggestions? If your entire town was infected and there were not enough doctors, just how long would you wait to take remedial action? Well, right now your business -- no matter what size or in what sector is just as vulnerable. Why? Because of a doomsday scenario variously referred to as the "Year 2000 date code problem", "Year 2000", or the "millennium bug". The crisis has been perpetuated by a very simple fact. Until recently, date fields in most computer hardware and software applications used a two-digit year. The problem? When 99 flips to 00 at beginning of the year 2000, it will be interpreted by the computer as the year 1900 or another random date. The result will be chaos.

No One To Blame

Think back to the 1960s when punch cards were used to store computer information. By using two digits instead of four to represent the year, especially in applications such as financial records where dates were frequently used, millions of dollars could be saved. Indeed, this two-digit practice became the de facto standard for future programming. At the time, however, programmers never dreamt their code would still be used well into the 1990s. So here we are, less than three years and counting until these two digit date-codes can cause us all enormous problems. Already, many date-related applications are producing incorrect results. According to a study by the Gartner Group, 90 percent of computer applications that are not yet Year 2000 compliant will either crash or malfunction.

When it's Gone It's Gone

Unlike other deadlines, this one can't be extended. Unfortunately, many executives and business owners who do not yet realize the scope and complexity of Year 2000 compliance are in for an unpleasant

Surprise. A recent study by RHI Consulting of 200 companies found that only 47 percent had begun to work on Year 2000 compliance, and, of those who hadn't started, only 58 percent planned to do so within the next 12 months. (By the way, starting is not the same as completing on time). Small-to medium-sized business enterprises (SME) are even further behind. These businesses are particularly vulnerable, because many think that Year 2000 is a technology problem only, and that by applying simple upgrades the entire problem will be solved. In the majority of cases this is not true. Consider these examples: What if some of your major suppliers can only achieve Year 2000 compliance on critical systems? What about the rest of their systems -- systems such as shipping? What happens if suppliers can't guarantee delivery deadlines for an indefinite time, because their shipping system is still not Year 2000 compliant, or suddenly lacks interoperability with their other systems? Think about it. You may have kept your stock deliberately low. Perhaps one of your big customers may have to close their doors still owing you money, because they won't be able to cope with the financial burden of Year 2000 compliance. Or you may get tied up with litigation because of business interruption caused by that same supplier. In fact, the Gartner Group predicts that 45 percent of businesses will have severe cash flow problems owing to this crisis. And you can forget getting help from the banks. They will really tighten up when there is a run for loans for operating funds. No doubt banks will soon start demanding Year 2000 compliance status before approving business loans.

Appreciating The Risk

Here are a few more business risks that you may be courting. Personal liability from business interruption suits, for starters. If you can't deliver on a contracted obligation you won't be able to argue those Year 2000 problems were unforeseen events. You must be able to prove that you exercised "due diligence" or you will be accountable. As far as cost, the longer you wait, the less available and more expensive computer consultants will become. Already, U.S. information technology companies are raiding Canada for personnel in short supply for future conversion projects. If you have resident programmers, think about this. Will they be able to resist these larger salaries south of the border?

I'm Safe Because I'm Small

You're safe, because you're small? You think you can handle your own Year 2000 conversion project? Fine and good, but you should seriously consider having your conversion checked out by an experienced professional. After all, the high degree of interconnectedness in most applications amplifies the fragility of the overall system. For example, the next time you go to your bank, ask their representative if they can really guarantee that all programs and hardware for their ATMs will be Year 2000 compliant -- just in case you want to withdraw some cash on Saturday, January 1, 2000. And it's only a small step from here to envision the potential chaos in the larger financial markets. All it takes is one major financial institution that is not fully Year 2000 compliant and the panic will begin.

Methodology for Year 2000 Compliance

The first step is awareness. Be sure that everyone in your business is fully aware and sufficiently involved in resolving the Year 2000 problem. Secondly, conduct a Year 2000 compliance assessment for your computer systems as quickly as possible. This assessment should include clarifying how much of the problem will be resolved by in-house staff or outsourced consultants. Consultation with partners and customers should also be part of the strategy. Next, the third step- the actual conversion -- should be carried out. Following that, the fourth step is testing for compliance and interoperability, which experience has shown can take up to 50 percent of the total time frame. To allow for testing, this means that for medium-to large-sized companies, conversion projects must be completed by the end of 1998. Small companies can't assume they have more time, because compliant software upgrades may not be available (especially sector-specific applications) or, to make matters worse, they may not have interoperability with other applications. Finally, once conversions are complete you will be able to return to regular operating procedures. Monitoring will be necessary for at least a year.

Now Is The Time

There is no good news if you ignore the millennium bug or fail to act. You will be stung. But with some insightful planning, you can use this time as an opportunity to integrate system improvements with your compliance projects. And you'll be ready for those extra customers when your competitor's systems crash and burn.

A Year 2000 Win/Win
Decision to Make Now