Tech Industry

Study: Other Y2K spending to surpass IT costs

Corporate costs for Year 2000 conversion work will be surpassed by other non-IT spending related to the glitch, an analyst with the Gartner Group estimates.

In the coming year, corporate costs for Year 2000 conversion work will be surpassed by other non-IT spending related to the glitch, an analyst with the Gartner Group estimates.

By the end of 1999, costs related to companies' Y2K public relations, Y2K risk assessment of supply chain business partners and investors, as well as contingency planning, will become two to three times more than what it costs a company to bring its own computer systems into Y2K compliance, Gartner's director of Y2K research Lou Marcoccio told CNET's News.com.

The price tag connected to bringing a company's computers into Year 2000 compliance is considered the IT cost of addressing the Year 2000, while any cost outside of that process and still related to the Year 2000 glitch is considered outside IT spending.

In January, 1998, Marcoccio estimated that non-IT costs for Y2K was only 5 percent of the total Y2K IT spending. In January 1999, "it is now an equal amount of IT spending," he said.

Globally the IT cost to handle the computer problem ranges anywhere between $300 billion and $800 billion, with a total worldwide Y2K cost--non-IT and IT combined--estimated at $1.5 trillion, according to estimates from various analysts.

Because of the computer-based business infrastructure of the global economy, where embedded microprocessors are omnipresent, and the evaluating, testing, and in some cases replacement of such devices is an expensive process, the cost to address the Year 2000 glitch has been compared to major natural catastrophes and medium-scale wars, analysts say.

Back to Year 2000 Index Page As 2000 approaches, more and more companies have begun looking beyond their own systems' compliance and evaluating the bigger Y2K environment around them. Risk assessment, contingency planning, and quarterly disclosures to the federal government all demand funds, said Marcoccio.

Although IT Y2K spending has been on the rise for some time, "the outside of IT cost is what is going crazy," he said.

The Year 2000 glitch can cause computers to read 2000 as 1900, since most older computers were programmed to read a two-digit year date. That bug could cause machines to either crash or transmit bad information.