YEAR 2000 BUG STILL ON THE LOOSE IN FINANCIAL FIRMS: COSTS ARE GOING UP AS THE DREADED 00 GETS CLOSER AND CLOSER

On Jan. 2, 1998, Chase Manhattan Corp.’s check-processing system nearly killed a raft of stop-payment orders when it balked at an expiration date it had never seen before: Jan. 2, 2000.

The bank’s programmers raced in to fix the glitch, and there was no serious fallout. Yet it was an ominous sign that the time left for fixing the millennium bug — the inability of most computers to distinguish between 1900 and 2000 — is critically short.

“If a company hasn’t converted its systems by the end of this year, it should expect to be in contingency mode to make sure it can operate its business,” says Michael Mullins, chief executive of Comtex/Norell Information Services Inc., a New York-based systems integrator that is helping firms get ready for 2000.

Big companies are now rushing to overhaul their systems for the next century. They are spending hundreds of millions of dollars on fixes, delaying other development efforts and devising contingency plans for potential disasters. At the same time, small and medium-sized firms are just waking up to the fact that their computers may stop working when the new century dawns. They are finding repair costs rising and resources growing scarce.

1998, 1999 . . ..

Companies have known about the problem for years, but most waited until the mid-’90s to attack it. The crisis stems from a 40-year-old computer programming convention of describing years using only two digits. When 2000 arrives, computers are likely to interpret the two-digit year “00” as 1900 instead of 2000. The possible hang-ups range from computer-operated elevators refusing to open their doors, to air traffic control systems that won’t accept flight plans for dates after 1999.

panic, say consultants

Technology consultants, a number of whom are peddling year 2000 remedies, are forecasting widespread calamity. Companies themselves, wary of Wall Street’s reaction, publicly are expressing optimism. A full 87% say they expect half their systems to be ready by the end of this ye
ar, although only one in three has a detailed plan in place, according to computer consultants Cap Gemini America.

How many will meet the deadline is impossible to say, but no one doubts that the ride into the new century will be a bumpy one.

Experts are growing increasingly alarmed. If the fixes aren’t in by the end of this year, they say, there won’t be enough time to test new systems before the millennium arrives.

Financial services firms, which have the most to lose from the millennium bug — by some estimates, big Wall Street firms lose $1 million for every minute a server is down — are the furthest along. They are scrambling to mend their systems by the end of 1998 so they can spend next year testing them.

“Some 50% to 60% of the effort is testing,” says Brian Robbins, senior vice president in charge of Chase Manhattan’s year 2000 program. “You’re betting the business, and testing is where everything comes through the funnel.”

Chase has 29 teams assessing its hundreds of computer systems in 54 countries around the world. It is spending $250 million to evaluate software, reprogram computer code and install new systems. Other development efforts, such as crafting enhancements to existing systems, have been put on the back burner until after the turn of the century.

Big challenge for small firms

Big companies may safely ignore some glitches, but many small and medium-sized firms have not even started searching. A study by Chicago-based accountants Grant Thornton found that less than half of the country’s small banks have tested their vaults and time-sensitive security systems to see if they are affected by the millennium bug.

“They’re relying very heavily on their vendors, but they’re not asking when the vendors will be compliant,” says Diane Casey, national director of financial services for Grant Thornton.

With regulators breathing down their necks, banks have an added incentive to act quickly. However, many other small and midsized companies are on their own
..

“Some are still in denial,” says Phil Friedman, chief executive of New York-based consultant Computer Generated Solutions. “They

think they can wait until the end of 1999.”

There’s still time, say experts, to fix and replace systems, but costs are escalating and resources are beginning to dry up. Programmers’ salaries rose 20% last year and will rise another 20% to 50% in 1998, according to research firm Gartner Group. The cost to rewrite a line of computer code could easily triple next year to $3 from $1.

A number of firms are exporting programming work to companies overseas, and consulting shops are starting to get squeezed.

“If you need me to augment your staff, I can probably get you 20 people,” says Peter Bonjuklian, senior vice president of New York-based Transaction Information Systems Inc. “If you want me to take project responsibility, it’s a different story. There’s only so many project managers out there.”

Crain News Service