Y2K! - year 2000 computer date change problem - Nightmares - Technology and the CEO: Nightmares, Daydreams, Solutions

Chief Executive, The, Feb 15, 1998 by Christopher Elliott

When it comes to the fabled Year 2000 problem, Ed Liddy figures he got lucky. "Six years ago we had some forward-thinking people who saw this as a legitimate problem," says the president and chief operating officer for Allstate Insurance Co. in Northbrook, IL. "We devoted our resources to it early on."

The "this" he's talking about is the millennium bug, the software flaw that reads only the last two digits of a year in order to save memory. Trouble is, when the year flips from "99" to "00" it could freeze computer systems, because programs can't distinguish between 1900 and 2000. Everything from accounting spreadsheets to elevators and airplanes could be paralyzed by what's become known in tech-lingo as the Y2K problem.

Not everyone is as fortunate as Liddy, who says most of his mission-critical systems are ready for the next century. While some executives pursued compliance as if their businesses depended on it, others have left the problem to mid-level managers or, worse still, they've done nothing at all. "If you're reading this story and you're the CEO of a major company and you don't know what's going on with your Year 2000 initiative, then you're in deep trouble," says Joel Goldhammer, a vice president at A.T. Kearney in Alexandria, VA.

With just over a year before the turn of the millennium, chief executives are becoming painfully aware of their potential Y2K troubles. Solutions range from hiring programmers to sift through millions of lines of code to outsourcing the IT department lock, stock, and barrel. But all these fixes generally have one thing in common: they're already well underway. At Allstate, for example, the repairs started in early 1994 after the formation of a technology compliance team. The insurance company developed a special software filter that automatically scanned every date-related routine and changed it. Allstate began with its most vulnerable systems - the ones that processed payments on policies and handled accounting - and then worked its way to the less critical ones.

Liddy says two things are important to achieving fast Y2K compliance: "Having good technology people and hands-on involvement by the CEO. You have to devote your resources to the problem and you need sponsorship at the highest level." Jeff Leon, managing director for Year 2000 consultants Russell Reynolds Associates, couldn't agree more. "CEOs can't just say, 'Run with it,'" he says. "They have to be involved at the very least with re-setting their companies' priorities for technology investment."

Recalibrating the information systems at a large corporation may seem like an act of futility. Why? "It looks like you're spending money on something with no strategic value," says Leon. Which is exactly why the CEO must lead the charge toward compliance. Only the top executive can allay fears that most of the IT budget is being sunk into a bottomless pit.

It isn't, of course. Bringing the systems up to compliance could prevent operations from grinding to a halt on January 1, 2000, according to Irene Dec, vice president and program manager of the Prudential Insurance Co. of America's company-wide Year 2000 program. "The Year 2000," she explains, "isn't a technology issue. It's a business issue."

Prudential committed itself to a Y2K overhaul in 1995. It started by taking inventory of all its systems and then combing through each computer and network to remove all the known bugs. "This is not a bottom-up kind of project," Dec says. "It is a top-down project. It can't be something driven by the project-management level. The financial and resource commitment is significant. You need the CEO to give his or her support, and not just say, 'Hey, let's let the IT folks do it themselves.' If you do that, you face a high probability that you won't be able to do business after 2000."

The primary threat to executives trying to square away their Y2K challenges may not come from within the company, but from outside. John F. Davis, chief executive of Pegasus Systems Inc. in Dallas, believes smaller vendors that aren't Year 2000 compliant could harm a business more than managers think. "The potential for disaster is very real," he says. "And as the CEO, you have to pass the sense of urgency along to your franchisees and partners."

Pegasus, which processes electronic travel reservations for about 28,000 hotels, is pushing its properties - some of which are small, family-owned hotels - to make their systems work past 2000. Already, there's been some trouble making room reservations at these hotels beyond the turn of the millennium, which is why Davis has stepped up the pressure to fix the systems.

Davis is only one of hundreds, if not thousands of managers with their work cut out for them, according to consultant Goldhammer. "Think of the Year 2000 as the Lord coming to Noah and saying, 'There's going to be a flood.' What did Noah say? 'Riiiiiiight.'" Put differently, resistance to changes is considerable - but in the end, it's necessary for survival.