Though there appears to be a growing global awareness of the Year 2000 problem, two separate studies recently found that a host of companies and financial institutions have failed to fully address the issue.
According to one study released this week by the Institute of International Finance (IIF), many of the world's banks are confronting the technical and managerial issues involved in squashing the Year 2000 bug within their computer systems, but many other financial institutions have so far not undertaken all the appropriate measures to counter it. The IIF is a global association of finance institutions with more than 285 members.
A study released Wednesday by the computer services and consulting firm Cap Gemini found that even though the percentage of major corporations launching a Year 2000 strategy tripled over the last four months, many still find themselves desperately behind schedule, and more than a third have experienced failures associated with the date change.
Authors of both studies said while there is a significant amount of awareness about the Year 2000 issue among senior managers in the corporate world, time is running out for implementing programs and fixing the problem.
The Year 2000 bug is rooted in the way dates are recorded and computed. For more than three decades, systems have typically used two digits to represent the year, in order to conserve memory. With this two-digit format, however, the year 2000 is indistinguishable from 1900, or 2001 from 1901. As a result, system or application programs that use dates to perform calculations, comparisons, or sorting may generate incorrect results, or not function at all.
"Extensive technology reliance, the interconnectedness of the industry, and a greater sensitivity to market forces render financial firms more affected by Y2K than any other industry," IIF managing director Charles Dallara said in a statement. "Time is of the essence. [The IIF] report indicates that while many firms appear well prepared to deal with the Y2K challenges, the issue should not now be how best to renovate systems, but simply how to survive the millennium date change."
Even if just a few international banks fail, that could cause havoc in the banking industry, the report warned. In an effort to figure out which financial institutions are engaged in remedying the Y2K problem the IIF distributed a checklist consisting of 9 questions for CEOs of banks and more than 60 questions for Y2K banking teams within the industry.
According to a representative for the IIF, between 50 and 60 banks received and responded to the checklist. In addition, the 18 banks that make up the IIF's Year 2000 task force also responded and then evaluated all of the results. Banks such as Chase Manhattan, Citibank, Deutsche Bank of Germany, and the Swiss Bank Corporation are part of the task force.
The Cap Gemini report also revealed that more and more respondents have a "full-fledged strategy" to counter the millennium bug, but warned a great deal of work lies ahead, according to Jim Woodward, senior vice president of Cap Gemini America and head of its TransMillennium Services Group.
The Cap Gemini report found that the percentage of respondents who said they had a strategy in place to beat the Y2K bug jumped from 20 percent to 60 percent in the past four months. However, 37 percent of the respondents reported failures of computer systems blamed on the programming glitch.
The percentage of major employers with detailed Year 2000 plans jumped from 33 percent to 68 percent since December, the report showed. More corporations are also taking care of the problem themselves, according to the survey, which indicated a decline in outsourcing from 87 percent a year ago to 66 percent now.
However, the number of employers who acknowledged the need to beef up staff dedicated to the Year 2000 problem rose from 45 percent to 75 percent during the past 12 months. Of those surveyed, 15 percent said they expected to spend 31 percent or more of their IT budgets on pre-2000 work, with most estimating that the cost would exceed $100 million. A whopping 85 percent of the respondents said they had underestimated their Year 2000 costs.
The tracking poll by Cap Gemini America of IT executives has been in effect since March 1995 to gauge corporate America's readiness to face the year 2000. According to the firm, respondents to this poll compromise approximately one-seventh of the U.S. gross domestic product.