InformationWeek
Defining The Business Value Of Technology
July 19, 1999
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Businesses are cutting the cord with suppliers that aren't year 2000 compliant
Some 15% of companies have already suspended or terminated contracts with partners that aren't Y2K compliant, according to an InformationWeek Research survey of 250 IT managers. Another 23% of respondents say they plan to suspend relations with critical partners that don't meet their compliance deadlines over the next six months.
"We started out contacting them by letter, asking for a report on their Y2K status," says David Babler, staff engineer responsible for Y2K at AG Communications Systems, a telecom equipment maker. "If they didn't respond, we sent a purchasing agent to their site to check things out. In a few cases, what we found out worried us enough that we went to other vendors."
Other businesses are taking similar steps as they seek to guard against system breakdowns in their intricate chains of dependencies with suppliers, customers, and other business partners. In addition to requesting Y2K status information and visiting supplier sites, some companies are asking for independent certification of compliance and conducting tests with partners.
Cause For Alarm
Most businesses, especially large companies, are hustling to finish remediation work and systems testing by year's end. Respondents to the InformationWeek survey have completed on average 84% of their Y2K remediation and testing work. Just 4% say they won't be finished by Dec. 31.
Some companies are more concerned about weak links in their supply chains. "There will be some downtime associated with problems at our supplier sites," says Dwight Gibbs, chief technologist at Motley Fool, an online financial-services company. "It might be one router that fails and leaves us cut off from one supplier. It might be a lot more than that. We just don't know."
Broken Links
Illustration by Doug Panton
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t started with a polite letter. Then things got ugly. Now the relationship is over. Such is the story being told by an increasing number of IT managers alarmed by the year 2000 status of some business partners. With less than six months to go before the millennium, some companies are no longer threatening or cajoling their suppliers and other partners to get their computer systems into compliance--they're cutting the cord.
BankBoston N.A. has received reports on Y2K status and contingency plans from more than 100 of its suppliers, and it's tracking their progress closely, says Steven McManus, communications manager. If a supplier falls behind schedule, BankBoston sometimes calls the company's senior executives to discuss the problem. If the supplier falls too far behind, BankBoston warns, the partnership could be in jeopardy. "A few of them are on that kind of watch," McManus says, "but fortunately, we haven't had to terminate anybody yet. There's still a little time left."
Reasons for the concern are as numerous as the suppliers themselves. Some are too far behind to be certain of repairing all their Y2K problems in time; others are simply unresponsive to requests for status reports. IT managers interviewed declined to name the companies they have terminated due to Y2K issues, but the types of suppliers involved range widely, from electronics suppliers to telecom service providers.
Many businesses are finding those weak links the hard way, according to a survey published in May by Y2K services vendor Cap Gemini America. Of the businesses that have experienced Y2K failures during the last year--about 72% of all those surveyed--more than a third say the problem broke their supply chains.
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