Barrage of Y2K lawsuits begins

Nearly 80 Year 2000-related suits have been filed so far, up from only three as of January 1998, according to the most recent findings released yesterday by the Gartner Group.

Taking into account lawsuit demand letters, which are just short of an actual filing, Lou Marcoccio, the research firm's lead Y2K analyst, said 790 demand letters for new Y2K suits are on the books, compared to just 11 such letters in 1998.

Most of those cases comprise companies suing their software suppliers, said Marcoccio. But he also expects hardware makers and insurance companies to come under fire.

More and more insurance companies are choosing to waive any accident or death insurance claims related to Y2K, he said. "This will kick off more lawsuits."

Marcoccio's latest forecast comes at the same time that Congress is hammering out legislation that seeks to limit "frivolous" Y2K lawsuits.

In addition, the Gartner analyst believes the highest number of Year 2000 computer failures will occur from the third quarter of 1999 through the first quarter of 2001.

"There is a lot of misinformation out there. A lot of people are expecting January 1, 2000," to be the day of mass failures, which just isn't true, he said.

Only 8 to 10 percent of Y2K failures will occur during the first two weeks of 2000, he estimates. About 25 percent of glitches related to Y2K will show up during 1999, particularly in the second half of the year.

About 55 percent of all Y2K failures will happen through the entire year 2000 and 15 percent of all Y2K failures will take place during 2001, he estimates.

Many companies and governments have not planned for system failures within these periods, and most are only planning to address failures occurring within the first four weeks of January 2000. This means companies will need support and fixes for longer periods than they are anticipating, but it also means that all system failures will not need to be dealt with and fixed at the exact same point in time, Marcoccio said.

In 1998, another significant change occurred in Year 2000 corporate spending.

Spending on information technology related to Y2K issues grew 3 to 6 times from 1997 to 1998, but spending on the Year 2000 problem other than IT needs, grew dramatically during 1998.

At the start of 1998, spending other than IT was less than 5 percent of what companies were spending on IT to reach Year 2000 compliance. By the end of 1998, that spending became equal to the amount large companies spent on IT Year 2000 work.

Large companies showed significant progress, Marcoccio said. About 83 percent have begun Year 2000 testing of their systems, and 72 percent have started business risk assessments and contingency plans.

By comparison, in the second quarter of 1998, only 58 percent of large companies had begun testing and only 3 percent had begun contingency planning. Roughly 38 percent of companies shifted the responsibility of Year 2000 compliance from IT to a business function or an executive business manager. Many found this necessary to accurately assess business risks and implement contingencies quickly, to reduce the risk of business being interrupted due to the glitch, according to the Gartner Group.

Smaller companies are a good 18 months behind larger businesses in their Y2K progress. "There is no risk assessment or contingency planning," going on at the smaller firms, Marcoccio said.

In the global arena, he praised separate efforts by the United Nations and the World Bank to address the Year 2000 technology problem on a global scale, but also criticized them for merely raising awareness and not tackling the problem in tangible ways.

"They've done little as far as getting these countries to take hold of the problem," said Marcoccio.