Experts debate Y2K
cost | Year
2000 resources |
Year 2000, June 8, 1998 How much will it cost to fix the year 2000 problem? Probably less than we've been hearing, wrote Paul A. Strassmann in his Computerworld column on May 18. Strassmann used first-quarter 1998 filings with the Securities and Exchange Commission to estimate that companies are budgeting only $50 billion to fix year 2000 troubles - a surprisingly low 8.3% of their annual information technology budgets. That column triggered an E-mail debate among other millennium experts, Leon A. Kappelman, Capers Jones and fellow columnist Ed Yourdon, who say the cost of fixing the problem will be much higher than Strassmann's projections. What follows is a virtual roundtable discussion on the subject:
Leon A. Kappelman (University of North Texas and SIM Year 2000 Working Group): I find some of Strassmann's conclusions troubling. In a nutshell, the SEC data is weak due to off-Y2K-budget items (for example, upgrades, replacements) and underreporting errors (85% of corporations think their year 2000 estimates are too low [Newsweek, May 18]). As the Society of Information Management's Year 2000 Working Group points out in our new white paper, there is often an enormous disconnect between upper management (those who approve SEC paperwork) and the people running Y2K projects (those who answer the SIM study questionnaires). From what I've seen about these projects, I'd place my money on the project managers.
And these project
leaders tell us that their enterprises are spending about 38% of one year's
IT operating budget dealing with their Y2K problems - and that that number
only marginally includes embedded systems and desktop/PC problems.
In light of no
standardized definitions for things such as "Y2K compliance"
or "Y2K expense" and what I think is management's bias toward
underreporting this figure, I suspect the SEC figures are on the low end
of the scale.
Since optimism and underestimates are the norm for software, and since year 2000 estimates are more complicated than normal software estimates, I suspect the SEC reports may be optimistic. What often happens is that the project manager initially creates an accurate or conservative estimate. When it is presented to senior management or clients, the conservative estimate is rejected and arbitrarily replaced by a more aggressive estimate and schedule.
Ultimately we have to get down to numbers. Is it $300 billion-plus as alleged by Gartner Group, or is it closer to $50 billion for U.S. corporate accounts?
My estimate for
overall U.S. costs prior to the Y2K event is for $177 billion since I also
included hardware upgrades, database repairs and other costs outside of
software. I estimate that another $497 billion was for post-2000 litigation,
damages and recovery. These are not in the SEC data, I suspect.
As I noted in my Computerworld column, while the SEC numbers have greater credibility than anything published so far, I do not feel we should depend entirely on the SEC data until we see a larger sample from companies that have passed through the testing phases of Y2K remediation.
As noted by Machiavelli:
Always assume incompetence before looking for conspiracy.