InformationWeek
Defining The Business Value Of Technology
June 8, 1998
Race To The Finish
continued...page 2 of 2
Top Priority
Despite the fact that Prudential's year 2000 work will be done this year, it's still the company's top IT priority going forward--given its concern that not all partners are up to speed, says Bill Friel, Prudential's senior VP and CIO. "Internally, this will be nailed in '98," Friel says. "But it's something you can't turn your back on until it's done."
Telecommunications carriers and utility companies are high on the list of concerns of year 2000 project managers. Karthik Chandromouli, head of the year 2000 project at Toyota, says the automaker "needs to test the integrity of its global network." That includes getting assurances from carriers that their systems are year 2000 complaint--but so far, the response from carriers has been mixed, says Chandromouli.
Federal regulators require banks to complete their projects this year, but some carriers won't finish their projects until next year. Bell Atlantic, for example, is not scheduled to complete its project until mid-1999. That makes it difficult for banks to comply with regulatory requirements or establish contingency plans. "It is a problem," acknowledges Ellen Seidman, director of the Office of Thrift Supervision. "We are going to have to figure out a way to deal with the situation where pieces are missing."
More Work To Do
Bell Atlantic admits that it has much to do. The phone company has more than 350 kinds of equipment within its network, all of which have to be tested. "The complex stuff can't happen until all of the individual pieces are compliant," says Skip Patterson, executive director of the year 2000 program office at Bell Atlantic.
That doesn't bode well for comprehensive end-to-end testing anytime soon with external systems. "We're quite sure that we're not going to deal with everything, given the total number of interconnections and possible permutations and combinations," says Patterson. Bell Atlantic is ranking which of its routes carry the most important traffic, based on monetary transactions or safety concerns.
Electric companies are working hard and spending millions of dollars to prepare their systems for 2000, says Jon Arnold, chief technology officer of the Edison Electric Institute, which represents investor-owned electric utilities. Arnold acknowledges that testing of operational systems that can't be shut down makes the job more complicated. But in an industry that routinely deals with service outages, he says, year 2000 is considered little more than "an operational issue." Arnold says utilities should finish year 2000 testing between December a nd mid-1999. He acknowledges that not all utilities will provide their customers with completion dates--partly in an effort to avoid liability issues.
Links between businesses and government agencies are also a concern. Nearly 40% of the IT managers surveyed by InformationWeek Research say government project delays would impact their operations. Horn, who as chairman of the House subcommittee on government management, information, and technology issued the failing grade to federal agencies, says the government needs to do a better job of setting year 2000 priorities. Horn is calling for President Clinton to become more directly involved. "He has to receive weekly reports and keep the pressure on," the congressman says.
The White House's year 2000 point person, John Koskinen, assistant to the president and chairman of Clinton's Council on Year 2000 Conversion, plans to increase the
frequency with which some federal agencies report their year 2000 status, from quarterly to monthly. Appointed in February, Koskinen has moved to address the issue of year 2000 interfaces and dependencies, urging federal agencies to establish liaisons with state and local counterparts. At the state level, Koskinen says, attention is focused on local entities that may be weak points in the national infrastructure. Koskinen says Clinton may publicly address the year 2000 issue this summer.
State agencies will be in reasonably good shape for the millennium change, says Steve Kolodney, director of the State of Washington's Department of Information Services. "I think the states are working hard to convert their own critical applications that keep business going," he says. "Where we worry, though, is with the large companies that are connected to smaller service providers in the rural areas. Will a local telecom be ready? The same goes for electrical providers that serve small areas that are part of large r service grids."
The consequences of not meeting the 2000 deadline are worrisome. The health-care industry, for example, could face the prospect of getting estimated instead of actual payments from the Health Care Finance Administration, says the White House's Koskinen. HCFA's system pays out more than $250 billion a year to the health-care industry. Banks are also vulnerable. If a bank's customers experience year 2000 problems that might have been avoided with testing, the bank may be forced to make a cash settlement or wind up in court, says Oliver Herzfeld, VP and assistant general counsel with J.P. Morgan & Co. and an adviser to the SIA's year 2000 task force.
With these kinds of stakes, it's no wonder that businesses are waking up to the need for intercompany year 2000 testing. As Chase's Sheinheit says, nothing is certain until everything comes together. Even then, he says, "Everything doesn't really come together until Jan. 1, 2000."
--with additional reporting by Hakhi Alakhun El and Mary E. Thyfault
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