09/17/98

Part Four of a Five-Part Series
Once in a Millennium: The Year 2000 Problem

Part 4 -- Pilgrim's Progress
by Yi-Hsin Chang (TMF Puck)


This Feature

Part 1
A Problem, Not Armageddon

Part 2
The Source of Y2K Doomsaying

Part 3
What the Y2K Problem Actually Is

Part 4
How Companies Are Working to Fix It

Part 5
The Problem is Y2K Hype, Not Software

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As doomsayers and the media speculate on what could happen on January 1, 2000, corporations and government agencies are quietly working behind the scenes and making progress on tackling the Year 2000 problem. For instance, the Y2K problem has already been fixed at many credit card companies that already have issued new cards expiring in the Year 2000 and beyond. Some online brokerages that allow customers to open an account on the Internet require that they input the full four digits in a year, not just the last two. Most major companies have been working to address the Y2K problem for at least a couple of years and aim to finish correcting the bug and be ready to test their systems by the end of this year (1998), a year ahead of time.

In July, major stock exchanges and brokerage firms turned the calendars in their computers forward to see how well Wall Street will handle the move to the Year 2000. Instead of a total meltdown, the 29 brokerages and 13 stock markets and utilities that participated in the beta test were able to input scripted trades, report data, and communicate with the stock markets and utilities to complete a four-day trading and settlement period, simulating December 29, 30 and 31, 1999, and January 3, 2000 (the first day of trading that year). The Securities Industry Association plans to sponsor a broader industrywide test next March and April. The New York Stock Exchange has already completed systems modifications for its trading and comparison systems and plans to implement all other required changes by year-end 1998.

Many companies tout their Y2K remediation efforts on their websites, and some even feature real-time countdown clocks to January 1, 2000. Take IBM. The computing giant pledges that all current and future versions of its products will be Y2K ready. In addition, the company's VisualAge 2000 software's Coverage Assistant tool has cut code testing time by up to 90% and improved productivity sixfold. Using the tool, health and accident insurer Mutual of Omaha anticipates it will finish testing and have all of its applications Year 2000 compliant by the end of the year.

According to its Y2K website, Dell Computer started its Millennium Program Office in February 1997 and doesn't expect the transition to the Year 2000 to disrupt its normal business. It plans to get Y2K compliance confirmation information from its suppliers by the end of this year. New kids on the block such as America Online are well prepared for the Year 2000 because its infrastructure dates back no further than 1994 and was constructed to be Y2K compliant from the start.

Doomsayers have been painting fearsome scenarios trying to scare people into believing that they will lose power and access to phone lines, that the computers at their banks will crash, that social security and Medicare payments will stop, that, basically, all hell will break loose. If they actually took a rational approach to the problem and did a little research, they would see that a lot is being done and has been done across various sectors in preparation for the Year 2000. Here's a quick sampling:

Banks and Financial Services
* Chase Manhattan began actively managing the problem in 1995, establishing a program called Chase 2000. The company plans to have all of its critical systems Y2K compliant by December 31, 1998.

* NationsBank set up a companywide Year 2000 Project Team in October 1995 and plans to meet compliance by year-end to allow for testing and cleanup well before 2000.

* First Chicago NBD began tackling the problem in 1995 with its Century Date Program and expects to have its systems largely certified compliant by the end of this year.

* First USA started addressing the problem in 1996, and several of its systems are already compliant. It, too, aims to be ready by December 31, 1998.

Telecommunications
* AT&T's Y2K site details how it's working to deliver a "smooth transition" and "seamless service" during the millennium change. "We don't anticipate any Year 2000-related problems in providing service to our customers before and beyond January 1, 2000."

* WorldCom developed its strategy in 1996 and expects to make all necessary changes and start testing by the first quarter of 1999 to allow for a year of testing.

* Bell Atlantic's goal is to be Y2K compliant by July 1, 1999, but the company anticipates that much of its network will be ready by the end of this year. Its Enterprise Year 2000 Program is working to make Saturday, January 1, 2000, "just another day."

Utilities
* American Electric Power, one the country's largest investor-owned utilities, is spending $56 million to $68 million to modify or replace its computer hardware and software. While some of its systems don't contain date-sensitive material, the company plans to make all mainframe applications ready by June 1999 and all client/server-midrange and embedded systems compliant by the end of September 1999.

* Duke Energy started its Year 2000 Readiness Program in 1996, and its goal is to have its systems ready by mid-1999. "Our goal is to provide safe, reliable energy services to our customers and a smooth transition into the 21st century."

Daily Sustenance
* The nation's largest supermarket chain Kroger began looking into the Y2K problem in 1995 and anticipates it will finish identifying and correcting all business-critical problems by the end of this year.

* The nation's largest poultry processor Tyson Foods' Y2K statement is short and sweet: "Tyson Foods, Inc. launched a formal Year 2000 initiative in October 1997. The assessments on our hardware and software have been completed. No major problems were found. Our Year 2000 project should be completed in October of 1998, and we expect no significant impact from the approaching millennium."

Government
* Perhaps unfortunate for taxpayers wanting to put off paying Uncle Sam, the Internal Revenue Service plans to have all its information technology systems ready by January 31, 1999.

* The Social Security Administration says it is "confident that all its benefit payments will continue uninterrupted in the new century." The agency plans to have "thoroughly tested" its ability to make payments after January 1, 2000, before the end of 1998.

* Not to be hindered by rain, sleet, or snow -- or by Y2K -- the U.S. Postal Service began its efforts in 1993 and is working to ensure that all equipment and systems will be Year 2000 compliant "well ahead of the turn of the century."

* The Federal Aviation Administration has set a schedule requiring all systems to be compliant by June 30, 1999, and is developing contingency plans in the event of system outages. All testing is slated to be finished by March 31, 1999.

* The Pentagon has "attacked" the Year 2000 problem and aims to have a "mission-capable" force able to execute national military strategy. Having spent more than $1.9 billion on the problem, the Department of Defense expects all fixes to be completed by December 1998, but is also drafting contingency plans for its weapons systems and other critical functions.

In short, most companies and government agencies are fully aware of the Year 2000 problem and are working to address it. Many companies mention their Y2K efforts as a matter of course in their 10K and 10Q filings to the SEC. Using such filings, Dow Jones subsidiary Federal Filings has compiled a database, available via email or CD-ROM, showing the impact of the Y2K problem on Fortune 500 companies and the estimated cost of becoming compliant.

Don't forget that it's in a company's best interest not only to provide uninterrupted and unaffected service to its customers, but also to make sure all systems are able to bill and collect for those services. If there's a lot of money on the line, the cost of remediation can easily be justified, and you can bet the problem will be solved.

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Next: Part 5 -- Don't Believe the Hype
The biggest Y2K problem is the hype, not software. In part 5, Yi-Hsin explains why you shouldn't buy into it.

Other articles by Yi-Hsin Chang (TMF Puck):
-- The Color of Money
-- A Closer Look: Gap Inc.
-- Market of Stocks