Y2K Causing Budget Shifts, Study Says

The year 2000 dilemma has caused companies to shift their budget dollars over the course of the past year; they're now spending equal amounts on non-IT-related and IT-related Y2K concerns. In addition, the gap between companies and governments that have been leading the year 2000 compliance race and those who are lagging has widened even further, according to Gartner Group's year 2000 compliance research director Lou Marcoccio.

Between 15% and 30% of IT budgets were spent on year 2000 compliance last year, according to the findings in the "Gartner Group Year 2000 World Status Update" for the fourth quarter of 1998, released today at the Gartner Group Symposium/ITxpo 99 in San Diego. This is up from 5% in 1997. But the biggest change in company spending comes from non-IT-related Y2K spending. Marcoccio says companies are spending as many budget dollars on risk assessment, contingency plans, and risk management as they are on IT-related-Y2K projects. "This is significant, considering that in 1997, we saw almost no spending on year 2000 outside of IT," he says.

The people taking responsibility for year 2000 has also changed, according to Marcoccio. Thirty-eight percent of large companies have shifted compliance responsibilities from the IT manager to the business manager. This is an increase of 5% from 1997.

Since Gartner's last report in October, Hong Kong and Mexican banks improved their compliance efforts, as did the largest Japanese companies, France's large companies, U.S. federal government agencies, infrastructure utilities and banks, pharmaceuticals companies, and airlines in developed companies.

But software and hardware companies can expect more lawsuits over the course of the next year. Marcoccio says that while many software and hardware companies have spent a lot of time releasing Y2K compliant products, the upgrades and add-ons to those products often times are not compliant. According to Marcoccio, about 6% of commercial software that claims to be Y2K compliant has follow-on versions that are not. "Companies think they are in the clear when they release the compliant version, and then run into trouble when they take their eye off the ball with their upgrades and follow-on products," Marcoccio says.

The highest amount of Y2K progress has been made by countries with the highest gross domestic product, industries conducting financial business, regulated industries, and infrastructure companies in developed countries. Marcoccio says large companies in these areas have completed 50% to 100% of the remediation of their internal systems, and have tested 25% to 100% of those systems. But, he warns, problems can still arise. About 10% to 15% of systems that have completed remediation will have a defect, and about 5% of tested systems will still have year 2000 defects after testing.

So just how many critical systems will have year 2000 problems, and when? Marcoccio says about 10% of all Y2K problems will affect crucial systems and take three days or longer to fix. About 25% of all failures will occur in the second half of this year, and about 55% of Y2K problems will arise in the year 2000.