Time bomb! - Year 2000 transition problem - Industry Trend or Event - Cover Story

Software Magazine, March, 1997 by Patrick L. Porter, Deborah Radcliff

Depending on whom you ask, the Year 2000 two-digit date field problem is either a $600 billion to $1.5 trillion global crisis or an over-hyped marketing ploy that is feathering the bed of consulting firms and industry pundits as never before. Whether or not the Gartner Group's $600 billion estimate of the cost to fix Year 2000 date problems is accurate, one thing is certain: Beginning in 1997 and continuing through 1998, IS managers in large and small companies throughout the world will be working nights and weekends to make sure their mission-critical applications are YR2K compliant.

Software Magazine's editors recently spent time with four leading IS organizations in banking, government, health care and manufacturing to learn how they are bringing their companies into Year 2000 compliance. What follows are some lessons learned from our case studies of the Year 2000 strategies being implemented at Chase Manhattan Bank, the Central Intelligence Agency, Cox Health Systems and Hughes Electronics.

Banking At Chase, the Task Amounts to 200 Million Lines of Code

Of all the industries affected by the Year 2000 problem, none has a more urgent need to fix its date fields than banking and financial services. A two-digit date field in a core lending or savings application is a time bomb that has already caused a few unwary banks and credit unions to calculate inaccurate account balances.

Most have been dealing with the Year 2000 on a daily basis for years, executing manual "workarounds" whenever they issued a long-term mortgage or dealt in bonds whose maturities carried into the next century. As the millennium nears, however, more and more banking applications run the risk of malfunctioning. Moreover, manual workarounds are impossible in transaction systems where the daily dollar volume can mount into the hundreds of billions of dollars. Indeed, Chase Manhattan Bank in New York City -- the nation's largest bank with more than $336 billion in assets --launched its formal Enterprise Year 2000 effort more than two years ago precisely because bank officials realized that a technological fix was the only way to ensure that its trillion- dollar-a-day transaction processing systems would continue to function without error.

"In some cases it might be possible to do a work-around with a short-term manual intervention," says Steve Sheinheit, senior vice president, corporate systems and architecture at Chase. "But in general, banking has gotten to a point of scale where we're pushing between one and two trillion dollars a night. Millions of transactions go to make that up. You can't handle these things manually anymore. We are completely reliant on technology to make the business work." In short, some systems are so mission-critical that there simply are no fall-back positions. "That's why, rather than thinking in terms of contingencies, we think in terms of guaranteeing that it's done early enough that we're sure it's fixed," says Sheinheit.

Sheinheit and his deputy, Brian Robbins, vice president, enterprise architecture, standards and Year 2000 program, have direct and overall responsibility for guiding Chase and its 68,000 employees through their enterprise-wide conversion process. It's a daunting task. Sheinheit, Robbins and their colleagues must come to grips with more than 200 million lines of code running in 1,500 applications on more than 60,000 desktops, 400 midrange computers and scores of mainframes. The bank runs a laundry list of mission-critical applications, from check processing to commercial lending and deposit systems, consumer credit systems, insurance, payroll, cash management, securities lending and a host of trading systems. According to Sheinheit, Chase -- which invests $1.8 billion a year in information technology -- expects to spend from $200 million to $250 million over a three-year period on its Year 2000 work. "That's 4% to 5% of our overall spending per year or 12% to 15% of our applications, development and maintenance costs," he says.

Managers at Chase were aware of Year 2000 issues long before the bank launched its Enterprise Year 2000 Program in 1995. "A number of systems were updated already for the Year 2000 because they were already booking past the millennium," says Robbins. "The loan system and the trading systems dealing in long-term bonds all had to deal with this issue years ago." About two years ago the industry hype around the Year 2000 convinced a group of senior managers in the bank that such ad hoc solutions would no longer carry the day. "We put in place a cross-organizational steering committee we call the Leadership Council," says Sheinheit. Through its meetings the Leadership Council attracted attention at higher and higher levels in the bank until before long, Chairman and CEO Walter Shipley and President Thomas Labreque were on board and putting their weight behind the effort.

The first step in the bank's journey to conversion was to assess the problem and its potential solutions. Chase, which has completed two gigantic mergers in the past four years -- one with Manufacturers Hanover and the other with Chemical Bank -- has subjected its IS department to almost constant turmoil during that time. During last year's merger with Chemical, for example, the IS staff of Chase managed to whittle down the bank's total number of applications from 2,500 to a more manageable 1,500. But the stresses and strains of the mergers helped the bank enormously when it came time to tackle the Year 2000 issue, since IS had already completed an inventory of its applications.