Gartner issues gloomy Y2K report

Software Magazine, Sept, 1998 by Patrick Porter

A newly published Gartner Group survey on the status of Year 2000 work at 15,000 companies in 87 countries reveals that most industries are ill-prepared for the dawn of the new millennium. The most stunning statistic: Nearly one-quarter of the companies surveyed had yet to begin any Y2K work. Not surprisingly, nearly 80% of those laggards were small businesses with under 2,000 employees. But even big companies, those with more than 20,000 employees, are struggling. The reason? Flat budgets. More than 90% of large companies had level-funded or reduced their IT budgets between 1997 and 1998. That means a growing percentage of all IT money is being spent on Year 2000 work and there's not enough money to go around. Last year, for example, only 5% of IT budgets we re spent on the Year 2000. This year, nearly 30% of IT spending in big companies will be devoted to Y2K work. And next year? In 1999, 44% of IT spending will be devoted to the millennium bug.

The study uncovers a few surprises. One is the relative lack of out sourcing to Y2K factories. Large companies will send only 7% of their code to such facilities, far less than had been expected. Lou Marcoccio, the study's author, says IS managers have been prevented from outsourcing because they lack the funds to pay for such services. "Most large companies had planned to outsource more to third-party vendors, software factories, and consultants, assuming they could supplement their IT budgets to pay for those resources," says Marcoccio. "However, IT budgets have remained relatively flat. These strategies have not worked because of cost." In addition, the process of managing service providers has been so onerous that many companies simply decided to do the job in-house.

The study also finds that few industries have managed their Y2K work well. Firms in telecommunications, utilities, and transportation--industries that directly support the world's economic infrastructure--are only marginally better than the worst practitioners in health care, food processing, and government. There is one dubious standout, however. The insurance industry has done a superb job of lobbying for new laws to relieve them of liability for Y2K-related business interruptions. So far, more than 40 state legislatures have voted to protect insurers.

Doomsayers who predict the millennium bug will cause a global recession will find the Gartner study especially stimulating. The U.S. leads in remediation efforts, with most of Western Europe lagging by six months, except for Germany, which trails U.S. efforts by 12 months (France is only 10 months behind). The Middle East, excluding Israel, is 12 to 18 months behind the U.S., as is most of the rest of the world, including Eastern Europe, Russia, South America, Southeast Asia, India and Japan. The study predicts a high likelihood of catastrophic business failures in many of these countries.