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by Leon Kappelman & Phil Scott

Many of us are aware of the year 2000 computer date problem. But did you know that it can significantly hinder the viability of your enterprise? Or that the personal liability and negligence of directors and officials is one of many likely areas of related litigation? And forget about pleading computer illiteracy as a defense because the year 2000 date problem is a business issue, not a computer issue.

Even worse, most organizations are not really dealing with this problem, in spite of congressional hearings, directives from the Federal Financial Institutions Examinations Council (FFIEC), and much media coverage. (The FFIEC consists of the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision.).

You can count your organization among those on the information superhighway to disaster unless you know first hand that the year 2000 problem is a matter of urgent concern for board members and officers, as well legal, financial, human resources, audit, information technology, manufacturing, and other functional leaders.

At the present rate of progress, there will be interruptions of public and private services, business failures, shareholders actions, and regulatory intervention. And that's not the worst of it because telephone and transportation systems, water and sewage treatment facilities, chemical plants and oil refineries, and even nuclear power plants and weapon systems are also at risk.

In case you misread the congressional hearings, the FFIEC's memorandum, and the articles in Barrons, Business Week, Forbes, Fortune, the Wall Street Journal, and the other print and broadcast media, I'll explain. The problem is a simple one. Thirty-five years ago, computer storage cost ten thousand times (that's 1 million percent) more than it does today. So to save money, computer programmers saved storage. And one of the ways they did this was to use only 1 or 2 digits to represent the year. Thus 1965 was stored as 65. This practice saved trillions of bytes of disk space and billions of dollars. So far so good.

The problem is that many of those programs are still in use. They are the transactions processing backbones of most business, government, and educational organizations. Andy many of them will fail when the calendar rolls over to year 2000. Some even before the millennium clock rolls over.Some will fail by shutting down, and some by sending out erroneous data; but nonetheless, they will fail. To make matters worse, this space-saving two-digit-year practice is embedded in the chips, as well as the software, that runs most of the world's manufacturing plants, global positioning equipment, telephone systems, nuclear energy plants, bank vaults, heating and cooling systems, military weapons systems, water and sewer systems, oil refineries, and yes, desktop and laptop computers.

What's really at risk? No one knows for sure. But it's a lot. And before we can solve the problem, we really need to know the answer to that questions. There's little chance everything can be fixed in time, given the non-negotiable deadline and the finite amount of resources available, especially skilled labor, dollars, and time. Nor are there any good economic or social reason to fix everything. But before triage and prioritization can take place, the plans and budgets made, inventories and risk assessments are needed. Sadly, most organizations have not yet done this. And it is almost impossible to find out where companies, let alone the government and the military, really are in the process.

The world has become extremely dependent of computer technology. Many benefits have resulted, but this dependency is not without its risks.

Computer failures have been responsible for seriously interfering with, and even stopping, the delivery of products and services in health care, banking, security exchanges, retail, manufacturing, telecommunications, air traffic control, and electric utilities, to name but a few. What would happen if suddenly all of those computers began to malfunction ? The global economy would come to a screeching halt. A likely scenario? We think not.

But what if just 10% of them failed? Or even 1%? A strike at one brake manufacturing plant recently brought North American automobile production, at General Motors, to a grinding halt. Would the consequences have been better or worse if instead of not sending brakes, the plant sent defective ones? What if just one bank or stock broker or currency trader started sending bad data into the 2-trillion dollars-per-day global financial network. that is the nervous system of the world's economy? Surely, there are data validation programs to stop some of it. But they are not perfect and some of the bad data will get through and begin to corrupt the system. Remember, it was just one single software bug, in one computerized switch, that shut down AT&T's northeastern network.

If not mitigated, the year 2000 date problem has the potential to shut down, or severely hinder, nearly all the world's computer systems. While there is increasing awareness of the year 2000 date problem, most organizations have yet to take sufficient action to ensure that their systems are "millennium-date proof." Shortages of programmers, are already being felt. Consultants and service providers are starting to book up. Prices are already rising. Those who have begun to solve the computer date problem quickly learn that there is no silver bullet, and that the problem is bigger and more complicated than they ever suspected.

And the cost of solving it is huge: Typically 25-50% of the annual information systems budget for the average organization, with some estimates exceeding 5 times the annual budget. Total USA costs are estimated at over $200 billion. Globally, credible estimates run as high as $1.5 trillion. And no one really knows for sure. We fear for the health of the stocks in our portfolios and we worry about the ability of our bankers, brokers, and mutual fund managers to continue to provide services. We shudder every time we hear about another merger or acquisition, knowing it is highly unlikely that the hidden cost of solving this problem has been taken into account. And there is a near total lack of information available about it in annual reports, auditor's statements, 10Ks, 10Qs, and the like. Where are the financial analysts, auditors, accountants, the SEC on this? The potential economic impacts are tremendous.

After studying the situation carefully for almost two years, we are convinced that unless there is a remarkable increase in the rate of progress being made to solve the computer date problem, we may be in for a crisis that will make the "savings and loan crisis" look like child's play. Moreover, we are convinced that unless organizations of all types begin to share solutions and best practices to a degree unheard before, too much damage will be done. the degree of interdependency is too great. General Motors cannot allow one major supplier, among the hundreds it relies on, to fail because of this. The global electronic financial network cannot afford one institution to corrupt the system.

Technically speaking, taken one program or one file at a time, the year 2000 date problem is also trivial. The real problem, the real crisis potential, is in the simple facts that most programs talk to other programs, most fields are shared by several programs, much of the world's daily economic transactions take place electronically (e.g., the banking system, the stock and bond markets, the currency and commodity exchanges, the grocery and department store checkout counters, EDI, EFT, ATM machines, Social Security direct deposits, etc., etc., etc.), and dates are critical to keeping all this digital documentation and communication and infrastructure functioning properly.

Was that which became the "saving and loan crisis" of the '90s a "real crisis" when the first warnings were sounded in the '80s? Probably not, but it had the potential to come one. And certainly it did become a real crisis because it was not faced and resolved in a timely manner. Shall we wait this time too? We hope not!

Thank about it. Think about the implications. Think about those digitally connected the entire global economy is. then ask yourself, am I part of the problem or part of the solution? If you are not sure, ask yourself some of the questions that a trail lawyer might ask you in court a few years from not: As a corporate director/officer, shouldn't you have known about a problem that threatened the survival of the enterprise, especially since it has been known of for over 20 years and well-publicized since 1995? Shouldn't you have seen to it that action was taken to mitigate these threats. Shouldn't you have asked your subordinates about this problem? Shouldn't you have made sure legal council was aware of it? Shouldn't you have disclosed the projected impact on earning per share in financial statements?

And if you think your information systems department is taking care of it, don't count on it. In many cases the year 2000 computer date problem is their "family secret" and they are hiding it even from themselves. Denial and procrastination turned a few billion dollar saving and loan problem into a hundred billion dollar plus saving and loan crisis. Likewise, most of Europe was conquered before the world got serious about restraining the Nazis. Will it take a "fall of France" or a "Pearl Harbor" this time too?

There is a great deal of mis-information and mis-conception about the year 200 date problem. Some estimates are proffered, but no one really knows the overall cost or magnitude. That is because, although there is increasing awareness, most organizations have yet to take sufficient action to determine the size and cost of their own problem, let alone ensure that their systems are "millennium-proof." And yet, this is probably the most complicated, comprehensive, and costly project most organizations have ever faced. Moreover, it affects every imaginable kind of software and hardware; all the connections among and between applications and data, including inter-organizational links; as well as a multitude of other computerized facilities and mechanisms.

The global economic implications of this are profound. To tackle this issue, every organization (and society at large) needs to overcome responses such as denial and anger, and move on to productive problem solving. Given the scope of the effort required and the non-negotiable deadline, now is the time for action. An unprecedented degree of cooperation, communication, collaboration, and commitment, both within and among organizations, will be required to succeed.

There is still time to mitigate most of the crisis potential out of this year 2000 date problem. But time really is running out and far too many directors, officers, and other managers; businesses, governments, and other organizations; politicians, journalists, and other public figures; brokers, portfolio managers, and other investors; economists, financial analysts, and other individuals, are simply not yet part of the solution. How about you?

(c) 1996 Leon A Kappelman. Published in Com.Links Magazine with the authority of the author

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Leon A. Kappelman, Ph.D. is Co-chair of the Society for Information Management's (SIM) Year 2000 Working Group, an Associate Professor of Business Computer Information Systems in the College of Business Administration at the University of North Texas, and Associate Director of the Center for Quality and Productivity. He is author of "Information Systems for Managers", McGraw Hill (1993). He can be reached at kapp@unt.edu

Phil Scott, retired information systems consulting partner with Ernst & Young LLP, in Dallas, Texas. He has over 30 years experience in the information systems field, and is currently Marketing Director for Harvard, Porter & Associates.

Copyright Notice: The not-for-profit distribution and use of this manuscript is authorized when done to raise awareness of, or to help solve, the year 2000 computer date problem, so long as credit for authorship is duly noted and the following ownership and contact information included: "(c) 1996 Leon A. Kappelman. All rights reserved. Box 13677, Denton, Texas 76203; Phone: 817-565-3110; Email: kapp@unt.edu" All other rights reserved.