The expected onslaught of lawsuits related to the Year 2000
technology problem has become a reality, according to a new survey.
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
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
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 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.