InformationWeek

August 24, 1998

Avoid A Year 2000 Nightmare

Contingency planning can cure a manager's sleepless nights

By Caryn Gillooly

magine the satisfaction an IT executive will feel after successfully managing a multimillion-dollar project that ensures the year 2000 problem won't disrupt company operations. Imagine, too, the clock ticking past midnight on Jan. 1, 2000, and company operations halting as unexpected problems surface because of the millennium bug.

This daydream morphing into a nightmare could become real for many companies. Despite good intentions and hard work, not every year 2000 problem will be fixed within the next 16 months. And those that are fixed might not work as expected. As every IT manager knows, no system--no matter how thoroughly tested--works exactly as expected when it's introduced. Now picture hundreds of systems at a single company being re- introduced at the same time--Jan. 1, 2000--working perfectly. Dream on. "Things will go wrong," says Rick Scofield, year 2000 project manager at Omaha Public Power District, an Omaha, Neb., utility.

Late starters
Still, many companies have ignored these potentially catastrophic problems and haven't created contingency plans to work around date-induced system failures. Nearly half of 250 IT executives recently surveyed by InformationWeek Research say their companies haven't even started developing year 2000 contingency plans. Only one in four report that their organizations have completed such plans.

What is year 2000 contingency planning? Think of it as survival insurance. Simply, a year 2000 contingency plan is a fallback strategy to keep operations running in the event of any year 2000 failure, whether it be an in-house IT system crash or outside supplier not delivering promised goods on schedule. Contingency planning is not just an IT issue, it's a business issue--and in many cases, a business survival issue. A plan should be headed by the CEO or another senior business executive--not an IT manager--though technologists still need to be involved.

"IT causes the problem, but contingency planning is heavily business related," says Roger Buck, a year 2000 manager at Chrysler Corp., in Auburn Hills, Mich. "What will the business do to survive? That's a business decision."

Year 2000 contingency planning should not be taken lightly. Many companies are behind in fixing and testing code. Even if a company's IT systems are compliant, there are no guarantees its business partners' systems will be ready. And what if the date bug causes electric or phone systems to fail?

Contingency planning must be proactive; teams comprising business and IT analysts need to inventory an organization's IT systems, determine which systems are crucial for the business to function, and map out how a company can function if systems falter. Systems need to be identified with specific procedures, products, and services in mind. Once identified, contingency plans need to be documented. Personnel should be informed about contingency plans and trained on how to implement them. Procedures need to be tested.

No single solution can work for every business. Each plan has to be tailored for a company's specific needs. For example, a company might decide to live without a specific system for a time, change its business model, switch vendors, sell off parts of the business, close some units, merge year 2000-deficient operations with compliant ones, or develop manual backups.

pie chart

Corporate Sponsorship
The best way to start a year 2000 contingency plan is to assign to a high-level manager within each business unit the task of assessing the most critical business functions, then consulting with IT staffers to see which systems are the most likely to fail. But getting business executives on board in some organizations can be difficult, says William Ulrich, president of Tactical Strategy Group Inc., a year 2000 consulting firm.

Issues must be prioritized by the right people from the start, or decisions will be made haphazardly and contingency plans simply won't work. Indeed, business executives have the most to lose if systems fail and commerce grinds to a halt. "At the end of the day, if you can't transact business, the corporate officers will get sued," says Stanley Goldman, CEO of Technology and Business Integrators Inc., an IT consulting firm. "They're the ones with the highest stake in this."

Once teams are in place and risks have been assessed, companies must form plans based on their own individual corporate needs. Actual contingency plans, therefore, will vary as widely as the different organizations they're designed to support.

PreMillennial Moves
Many contingency plans take effect before 2000. Omaha Public Power recently replaced noncompliant, pre-1985 mainframes with year 2000-compliant open systems. Key Corp., the nation's 14th-largest financial services company, based in Cleveland, has a contingency plan that will be triggered at certain dates before the millennium. So, if a vendor does not provide certain materials by a specified date--say June 30, 1999--Key will order the goods from another vendor. Similarly, at Wachovia Corp., if a software vendor doesn't supply a year 2000 upgrade by a particular date, or the new software is too time-consuming to install, the company will fix the existing application itself. That's exactly what Wachovia did with its payroll system when the bank realized it could not install a PeopleSoft system on time, says Elizabeth Harris, a senior VP at the 18th-largest financial services company, which has headquarters in Winston-Salem, N.C., and Atlanta.

Other pre-Jan. 1, 2000, approaches include stockpiling wares, whether raw materials needed to manufacture a product or the finished product itself. But this solution poses problems for many companies that have adopted manufacturing procedures that don't require extensive warehousing, because raw materials are delivered to factories just in time to be made into finished products. These companies may lack the warehousing space to store products. Finding space, if possible, could be costly.

A more dramatic move would be shutting a business unit by 2000. If a subsidiary is marginally profitable, or is losing money, closing it may be less costly than trying to run it in a broken state.

As 2000 approaches, companies are beginning to monitor the year 2000 compliance of their business partners. In fact, Chrysler's contingency plan focuses almost entirely around third-party vendors. It is teaming up with other automakers through the Auto Industry Action Group to assess how suppliers are faring with their year 2000 efforts. "We're confident in our own business computer systems," year 2000 manager Buck says. "We need to think of the things we can't test well."

Omaha Public Power goes one step further, looking at the year 2000 compliance of their suppliers' suppliers. "If we have four suppliers and they all use the same distributor, and that distributor hasn't met his Y2K plans, we don't have the diversity of options we think we do," year 2000 project manager Scofield says.

Not all contingency plans deal with critical matters. Omaha Public Power will explore having items such as office supplies, preprinted billing forms, and even toilet paper shipped early so employees won't be inconvenienced if year 2000 problems occur.

Staff Assignments
Once 2000 arrives, companies need to have enough employees available to address date-field problems as they surface. With financial institutions, the biggest risk could come not from failed systems, but from systems producing bad data. Key will focus on having people available to literally balance and check its financial information. One of Key's contingency plans is to identify which employees must be on site and which ones will be on call. "Either way," Kennedy says, "we have to have our core people on site; we'll have to have people analyzing data."

Indeed, a major planning headache come the millennium is how companies will position IT staffers to address unforeseen problems in systems thought to be compliant. When new systems debut, they can be scheduled to meet staffing needs. Not so with remediated year 2000 systems. They'll all be reintroduced Jan. 1, 2000. "The whole world is cutting over to a new system all on the same day," Kennedy notes.

Come January 2000, companies might implement manual backups. One concern of Omaha Public Power's Scofield is telephone service might be knocked out because of the millennium bug. To keep communications open among plants, Scofield is considering giving employees walkie-talkies.

"If I've got people prestaged, I won't have to worry about pagers," says Scofield. "I can put people at each power plant--have a guy out there sitting in his pickup truck with a two-way radio."

Yet manual backups in many instances aren't executed easily. In fact, not every system can be backed up manually. And obstacles must be hurdled for those that can be backed up manually.

Take payroll, for instance. When was the last time paychecks were issued manually? Who on staff remembers how it was done? The payroll department probably employed many more people when checks were distributed manually. Manual backups usually require hiring more people. Additional personnel and the training they'll require will cost lots of money.

How much is enough?
Exactly how much money should be budgeted for contingency planning is hard to determine. Like the solutions themselves, costs can vary widely. Many companies account for contingency planning within their year 2000 budgets. Wachovia, for instance, earmarked nearly 20% of its $55 million year 2000 budget for contingency planning.

Sometimes, no amount of money or contingency planning can save a company from a shutdown. "There's no generator powerful enough to run our manufacturing floor," says Chrysler's Buck. "If we're without power, we'll be down."

Nevertheless, business and IT managers can prevent most year 2000 failures from halting operations by planning for these worst-case scenarios.

Photo by Dennis Buck

SOLUTION SERIES

Avoid A Year 2000 Nightmare

The Business Partner Connection

Keep The Lawyers At Bay

Consult The Experts On Year 2000 Woes