Squashing the Millennium Bug

With the year 2000 less than two years away, far too many in business remain unaware or unconcerned about what could be the century’s greatest technological challenge-the year 2000, or Y2K, problem, also known as the Millennium Bug. Companies that don’t squash the Millennium Bug will suffer the aftermath well beyond the year 2000, into 2001 and maybe beyond.

The Y2K problem will strike unprepared catalogers and suppliers at 12:00 a.m. on Jan. 1, 2000. At that time, unless the date field has been corrected in every application of a computer system, the system will recognize the year “2000” as “1900” and either calculate incorrectly or outright crash. Blame the problem on computer developers of decades past who, to conserve computer memory, used only the last two digits, rather than all four, to specify a year.

To resolve this problem, companies ideally need to be already working on it so that they can test their improved systems throughout 1999. While more than 80% of Fortune 500 companies have started working on the problem, most experts say that only about half of catalogers will be ready. “Eighty weekends remain before the year 2000, and many catalogers are just beginning to rewrite systems,” says Simon Haigh, vice president of Assist, a Salt Lake City-based business management software firm.

The cost of eradicating the Millennium Bug could make it the most expensive single problem in history, says consultant Capers Jones, chairman of Softwear Productivity Research in Burlington, MA. For instance, because only 10 of the 50 state governments have started working on the Y2K bug, “telephone, air, shipping, postal services, and factories could be shut down for up to 10 days, with some companies going bankrupt,” Jones says. “It won’t be until the second half of 1999 that the size of the problem will become fully known.”

Beating the deadline According to many computer experts, such reports of the effects of the Millennium Bug are hardly exaggerated. And with the clock ticking, catalogers are scrambling for a cure.

The $600 million multititle cataloger Hanover Direct took an “aggressive approach to the problem five years ago,” says Mike Contino, senior vice president, chief information officer. By October 1996, Hanover had started reviewing all applications and platforms to determine which needed to be upgraded. The goal was to be Y2K-compliant by the end of ’98, “which would give us one year of being in production to access daily, weekly, quarterly, and year-end closings,” Contino says.

A consultant had originally estimated that Hanover would need 20,000 hours to upgrade all its computer applications and platforms. A year later, the consultant revised that estimate to only 5,000 hours. The company had also estimated that an extra $400,000 would be required for outside labor to upgrade the computer systems; Contino won’t say exactly how much the project will ultimately cost.

General merchandise mailer Fingerhut is more open about its projected costs. Martin Beukhof, director of systems development for the $1.8 billion company, says that so far, the Y2K Bug is costing Fingerhut between $11 million and $13 million in upgrade costs. “We have 13,000 programs; 10,000 need to be compliant,” he says. By May, the mailer had completed 33% of them and was financially close to plan.

Fingerhut has had to modify the demands of other major projects in order to work on the Y2K problem. “We have staff dedicated to development work and the Millennium Bug,” Beukhof says. “The real challenge is keeping everything coordinated-knowing when to shut down the old systems while simultaneously working on new development. A great amount of planning and scheduling is required.”

In 1996, Fingerhut assessed its most critical mainframe applications-those dealing with accounts receivable-and had them Y2K-compliant by the end of 1997. “Then, as we convert, we test,” Beukhof says. To test the systems, Fingerhut artificially advances them to the year 2000 and runs a “parallel process,” such as a mail order transaction, to ensure that the results in the mock year 2000 are the same as in the current environment. The final stage of testing will involve integrating the systems to ensure that, for instance, order information entered into one computer can be passed on to the computer that processes the order or payment system.

Fellow general merchandise catalog Spiegel is also on budget with its $7 million-$10 million Y2K cost schedule, says spokeswoman Allison Scherer. “We did an analysis of the issue in ’96 and ’97,” she says, from which employees classified the systems into four categories: those that were Y2K-compliant and required testing; those that could be made compliant at the same time other program enhancements were made; those requiring a separate project to make them compliant; and those that needed to be replaced. The cataloger began implementing the changes in 1997, starting with information services, with the goal of being compliant by December ’98 “with a few exceptions planned for ’99,” Scherer says.

For smaller catalogers with limited resources, exterminating the bug can be painful. But some small companies, such as Elliott’s Hardware, a Dallas-based retailer that expanded into cataloging in June 1997, believe they will have the problem under control. Kyle Walters, Elliott’s retail store and catalog manager, says upgrading the company’s computers will require only several hours of work; the systems administrator is expected to finish the task in August. “We will take care of everything for $2,000,” Walters claims.

Shades of Light, a $1.5 million lighting cataloger in Richmond, VA, bought its Y2K-compliant software two years ago and tested it last year without problems. “It’s not a big deal for us, as we don’t have custom-written software-we have package software and simply keep updating it,” says owner Ashton Harrison.

Catching the bug from vendors But even if you think you’re ready for Y2K, you’re only as prepared as the people you work with-vendors and service suppliers. If they haven’t kicked the Millennium Bug, they could pass the problem on to you.

Spiegel has mailed Y2K-compliance queries to 1,400 suppliers and will evaluate their responses over the next several months to determine whether the vendors will be compliant by the end of ’98. The mailer is developing contingency plans should critical vendors not be prepared, Scherer says. “If a vendor isn’t compliant, there’s a good chance that it won’t be able to provide goods or services.”

Like Spiegel, Hanover Direct sent out a questionnaire late last year to its 6,000 vendors to survey how prepared they were for the year 2000. All were asked to respond by March 15; as of April, only 15% had. “Two thousand merchandise vendors aren’t just our internal problem-they will affect people with whom we do business,” Contino says. Names of nonrespondents and of vendors not Y2K-compliant will be forwarded to Hanover Direct’s six catalog groups, “so that they’ll be aware that they could experience problems dealing with those vendors,” he says.

Indeed, regardless of how carefully companies have plotted their Y2K strategy, they’ll need to be prepared for unforeseen problems during the 1999-2000 transition. As Scherer says, “Despite all our efforts now, no company can guarantee against failure in the millennium.”

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