<a name="4"> Year 2000 Date Problem: Partners in compliance <a name="5"> Computer Weekly (UK)

9th January, 1997

Year 2000: Partners in compliance

While large organisations are feverishly working away to solve their year 2000 problems, it's easy to forget that business relies on its suppliers, which are often much smaller companies. So how are they going to overcome the millennium date change? Sharon Smith reports.

With the dawning of the new century just three years away it would be easy to assume that every business in the UK must not only be aware of the millennium-IT problem but actively engaged in addressing it before it is too late. You would be wrong, however, as all the evidence seems firmly stacked the other way.

According to a newly published survey by IDC on behalf of IBM, only 61% of companies in the UK claim to have planned for the year 2000 issue. Of these, most have not even started to put their action plans into practice. The survey also found that it is the bigger organisations, with more than 1,000 employees, which profess most concern about whether their computer systems are year 2000-compliant compared with smaller firms, which appeared more complacent or unaware.

But smaller companies' complacency is dangerously misplaced. The report warns that small and medium-sized businesses are not only as exposed to the problem as their bigger colleagues, but that they will also affect the fortunes of the large corporations with which they trade commercially. A business that has not ensured that its IT system is year 2000-compliant poses a potentially dire commercial threat to any organisations it interacts with, jeopardising those companies' own IT and business systems and damaging their efforts to be millennium-safe.

While bigger firms at least seem to be more aware of the problem than their smaller cousins, most have still not acknowledged, let alone started to tackle the threat posed by suppliers and trading partners which are still oblivious to the year 2000 issue. The IDC survey found that 71% of European companies exchange data with outside organisations, but that only 31% of these businesses are collaborating with trade partners on the year 2000 issue.

Jyoti Banerjee, managing director of Tate Bramald Consultancy, agrees that the irony is that the larger companies which do fork out vast sums in man-hours and technology to tackle the issue are still at the mercy of those which do not. He believes that, despite the high number of big corporations which are estimated not to be dealing with the problem as they should be, the state of play with regard to small and medium-sized companies is even more serious.

"The first thing is that smaller companies are still mostly unaware of the year 2000 problem," he asserts. Banerjee attributes this myopia to several factors including the belief that while the issue has received wide coverage particularly in the IT press, it has failed to reach the small/medium company audience.

"The Government, Inland Revenue, Customs & Excise, accountants, lawyers and all the different people who come into contact with small businesses should also be asking them what they are doing to prepare for it. But they're not. Large businesses should be checking up on their suppliers and trading partners because if they've not fixed their computers then all the expenditure of the bigger company on the problem will be reduced to nothing. But I've not seen much evidence so far of this happening."

The Government is trying to redress the situation. In October this year science and technology minister Ian Taylor set up Taskforce 2000 whose aim is to help the business sector to address the issue. Also, Bournemouth East Tory MP David Atkinson is planning to introduce a private member's bill requiring businesses to assess whether their IT systems can cope with the millennium date change and if not to implement an action plan by law. If the bill gains support it could be law before the general election.

Atkinson says the apparent lack of action is understandable: "It's human nature not to think about things that are still three years away, to put things off until tomorrow. But in this case we can't get to 31 December 2023 then hold the clock permanently back at five minutes to midnight: we have to act now."

One of the main reasons for smaller companies failing to act is a misconception that it does not affect them, according to Tom Glasson, assistant executive director of Taskforce 2000 and chairman of the UK Year 2000 Interest Group. "They tend to think that it's purely a mainframe problem or only affecting Cobol, which is wrong of course: any company using hardware and software of any kind is affected."

In their defence Glasson adds that a smaller organisation does not have the same in-house resources that a larger concern can draw upon to tackle the problem nor the same level of awareness that a big firm ought to have. Smaller companies do have a millennium problem but it is slightly different to that of big corporations' in that small to medium-sized businesses are likely to be more dependent on software packages supplied from outside sources than firms that have in-house programmers in possession of vital source codes.

Such dependency renders small firms particularly vulnerable, not least because, according to Glasson, when they do eventually seek help they are not likely to be first in line: "Bigger companies are likely to have the first call on expertise and smaller firms are likely to be bottom of the pile when it comes to having access to consultants, and they will have to pay for such help too." The immediate cause for concern, says Banerjee, is that non-compliant software is currently on sale and still being bought by companies which do not even realise that it will not cope with the year 2000.

"Ninety per cent of the software being sold to small and medium-sized companies is not year 2000-compliant. The software vendors' excuse is that they'll have a future upgrade but of course clients will have to pay for it and the problem is that companies are buying financial packages, expecting them to last five years without even realising that they won't do so: 30% of companies will not be planning to upgrade within the next five years. "This software should be sold with a health warning so that at least buyers can be forewarned," he argues.

But Sage, a leading supplier of financial software, denies the allegations. David Pinches, UK marketing director at Sage, argues that research has found that customers replace software within a three-year cycle and that the company has launched a drive to ensure that those clients are made aware of the millennium problem. He says, "We're making sure that our software is millennium-compliant. Version 4 of Sage Sterling, our main range and which is now available, is year 2000-compliant.

"We also offer upgrades on existing software to cope with the year 2000 which the majority of our user base will pick up over the next three years and which will cost £99 for a range of additional features including Internet access." But others fear that despite the efforts of software houses like Sage, many smaller companies will still be left high and dry at the dawning of the new century and will be keen to seek revenge via the law courts. Banerjee foresees a worse scenario: "There will be companies going under in the new millennium."

Small suppliers going to the wall will adversely affect their larger clients which will have to find new trading partners. But Banerjee says that those same large corporations are at risk now. "A company using an accountancy package unaware that is not year 2000 compliant, could for example be assessing a fixed asset depreciation over a five-year cycle where the year 2000 will be calculated as preceding the year 1996. This will mean that profits will be miscalculated and tax bills will be wrong but how will the company know at the time?"

Banerjee says the effects of such miscalculations could be passed on inadvertently to other trading partners to build up over a long period of time. Commercial processes will also be put at risk but in the ensuing muddle and confusion it will be the smaller company which inevitably comes off worse, warns Evan Grant, a member of the IBM European Year 2000 project.

"Interaction between companies is at the heart of the problem but it's something that barely anybody has begun to work on yet. Small firms tend to rely more on one customer than vice versa so they'll suffer more if they lose one," says Grant.

"Business processes will be put at risk. For example, just-in-time supply practices where products are ordered electronically at the last minute to prevent stock lying around on shelves and becoming obsolete, will be jeopardised if a supplier's computers can't cope with the orders in the new millennium."

Copyright © Reed Business Publishing 1997

[Year 2000 Date Problem - Index Page]