InformationWeek

At a Senate Commerce Committee hearing, Ed ward Kelley Jr., a Federal Reserve governor, called fears of a recession induced by the year 2000 overblown. "But I do not think that we shall escape unaffected," he said. The expenditure of resources to fix the coding problem will hurt labor productivity. That, he said, could shave a tenth of a percentage point off annual economic growth in the next two years. With the gross domestic product amounting to about $7.4 trillion a year, that could mean $7 billion less growth each year.

The Fed official said year 2000 projects reported by 95% of Fortune 500 companies are projected to cost $11 billion, suggesting a $50 billion price tag for all U.S. businesses. But that figure does not include capital spending for hardware and software upgrades and replacements, and is probably just the tip of the iceberg, Kelley said, as companies learn more about their circumstances.

The situation faced by the nation's utilities, where one noncompliant company could affect many, may be difficult. Most telecom carriers, fo r example, hope to complete year 2000 efforts by the end of 1998 to leave time for testing next year. But there may be a problem with hardware and software vendors' switching technology.

"Some of them may not be compliant by December 1998," says Jerry Bonello, year 2000 program director at Frontier Communications in Rochester, N.Y. "If a carrier has any problem with equipment and can't switch or interconnect a customer to our network, that customer could experience an outage."

The FCC, which last month created a year 2000 Web site , is seeking to "make sure every company under our jurisdiction is taking steps to deal with the problem," chairman William Kennard told the Senate panel. If the responses are not satisfactory, he added, "we will have to take more rigorous action."

"Every sector of the communications industry" is potentially vulnerable, Kennard warned. "Given the complexity of the task," he said, something is bound to be overlooked. "The challen ge for theindustry is to fix its major systems so that the year 2000 problem is, at worst, a nuisance."

Shutdowns Possible
In the power industry, nuclear plants have just begun taking inventory on the embedded systems that control operations, and are finding hundreds of them, many of them unique, and all highly dependent upon interfaces with other systems, says Barry Kallander, VP and general manager of business solutions at Litton Enterprise Solutions Inc., which has contracts with 12 plants to conduct inventory and year 2000 assessments of embedded systems, and is developing a central database for plants to share information. Fixing a plant's embedded systems could require an unscheduled shutdown, costing millions of dollars a day in lost revenue.

Utilities questioned by John Deere Credit have provided little detail about their year 2000 programs, saying only that they are "addressing the issue," says Ronald Frank, who's responsible for year 2000 assessments at the Des Moines, Iowa, agr icultural lender. As a result, Frank may not be able to start crafting contingency plans in July as he had hoped.

In general, most companies are not making much information about their year 2000 projects publicly available, according to an analysis of 1,000 Securities and Exchange Commission filings by Giga Information Group (see charts on p. 215). Only 225 companies projected their total costs, which averaged $27 million per company. Among electric and telecom companies, 32% did not disclose anything about their year 2000 project status and 22% are running late.


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