Too Late to Fix Y2K

"The first 90% of a project takes 90% of the project's time. The last 10% takes the other 90%" Programmer's Slogan on Software Projects

Owing to past neglect, in the face of the plainest warnings, we have now entered upon a period of danger. The era of procrastination, of halfmeasures, ...of delays, is coming to its close. In its place we are entering a period of consequences... We cannot avoid this period, we are in it now... Winston Churchill, 12 November 1936 Testimony to the House of Commons: Debate on National Defense Posture

This is not yet widely known. It is simply too late for business, government and the world to fix the y2k bug any where near completion. We are now well past the point of no return. Don't expect to hear this from the government or corporate Public Relations personell, it is their job to prevent panic. Sweating, nail-biting ( and resigning) Chief Information Officers will continue to send optimistic sounding reports and stories to the media indicating they are 'On it.' Much genuine good news will also be heard, but will be the exception--not the rule.

In fact, many don't even care, and vastly underestimated the consequences of y2k. Many are just waiting and hoping for a quick-fix "Silver Bullet" that will never arrive . A July ,1998 SEC filing found that an astonishing 73 percent of U.S. firms had not begun their actual code remediation. According to a July 1998 analysis of federal securities filings, nearly 60% of the nation's 250 largest corporations still have not even completed their year 2000 assessments ( 5% to 10% of a y2k project). Recent May 1999 data by Weiss found the following progress of the largest 500 companies:

Overall, the 538 nonfinancial companies rated by Weiss have budgeted $26 billion for Y2K-related preparations, but have spent only $13.6 billion, barely half of the funds allocated.

75 percent of small businesses have not even addressed y2k (confirmed by another study ) and 50% plan to do nothing (a full 83% are vulnerable ). Among Britian's Largest companies, which give the "everything's A-OK, 90% are on track" mantra that is rampant among misleadingly optimistic reports, 20% have not yet taken a full inventory of the problem and a further 45% have not completed their millennium bug strategy ( BBC ). In another June 1999 report, Almost a third of the UK's Top 1000 companies will not have completed their Y2K programs by the year's end and 19 per cent had not completed the first stage of inventory preparation. Worldwide, 75% of countries have done nothing on y2k.

Experts agree that any organization that hasn't started a full y2k effort as of late 1997 has little chance of success. Anyone starting by May 1998 can, at best, hope to fix 60% of their systems.

This is a global phenomenon. Because of the huge investment required, managers procrastinated and ignored it as a trivial matter. Due to this disasterous short-term forethought, our whole way of life is about to change .......BIG TIME. The once ridiculed Gartner Group estimate of $300-$600 billion is now up to $858 billion, and will rise even more as we approach the millennium. The actual estimated costs (if repaired) would be 1.3 trillion dollars . The overall costs associated with y2k repairs, failures and litigation range from 2 to 4 trillion dollars. The litigation due to y2k failure alone at more than a trillion dollars (just in the U.S.) These cost alone make it the most expensive project in real terms--besides WWII---in history.

The sheer magnitude of the y2k bug is the reason why it can't be fixed on a systemic basis . Non-compliant companies cannot electronically exchange data with compliant entities. I.E., do business with one another. It's futile for a company to get its computers compliant when thousands of its suppliers are not; or the phone lines are dead; or the power is off; or the banking system is not functioning. See: domino effect . General Motors is experiencing 'catastrophic' problems in all its plants and has 2 billion lines of code to repair. In a third-quarter report released by the SEC indicates that out of the $560 million it has budgeted for y2k repairs, only $85 million was spent through all of 1998 and $40 through all of 1997. GM has up to 85,000 suppliers. In order to function, GM and ALL its suppliers must be co-ordinated and year 2000 compliant. Considering the small percentage of those who will even complete repairs, the potential domino effect can be clearly imagined. An entire production line could be shut down from the failure of just a few critical suppliers. This will be occuring everywhere, all at the same time, in every sector of the world's economy. The domino effect is what will bring the economy to a virtual crash throughout year 2000.

Costs continue to rise beyond all previous expectations as well:

Figure 2. Y2K Repair Estimates ⁶

Company	Past Est. (millions)	New Est.(millions)
Aetna	$139	$195
ATT	$300	$900
Bankers Trust	$180-$230	$220-$260
Cendant	$25	$53
Chase Manhatt.	$300	$363
General Motors	$400-$500	$890
McDonald’s	$8	$30
Merrill Lynch	$375	$560
Sears	$63	$143
Xerox	$116	$135

There are also a severe shortage of cobol and assembler programmers. The US needs another 500,000 experienced programmers that are just not there. The few there are may start packing their bags and leave town in 1999 in anticipation of y2k.

The central fact of software projects: 46% late%, 28% fail or are canceled before completion. In very large projects (25 or more million lines), 50% are cancelled. Unrealistic deadlines for y2k projects are frequently quoted. The standard quote for completion issued by many corporations for code remediation WAS Dec. 31,1998, leaving a year for testing. The vast majority did not come close to making it. The Gartner Group estimated 80% would miss the deadline. (looking back, that number seemed a bit optimistic, huh?)

It must be noted; after actual inventory, assessment and 'code conversion' is done, only a fraction the work has been accomplished. The remaining 40%-70% of y2k time and effort involves extensive testing! But to be fully compliant means fully tested. of those who do have y2k projects, half have no plans for testing. A survey of 1,680 U.S. and European companies by Cap Gemini America (New York) finds that 40 percent of respondents do not plan to conduct "end-to-end" Year 2000 testing. Another 50 percent do not plan even testing involving business partners. This means GUARANTEED FAILURE.

On Nov 22,1998, Rep. Horn (Rep.) has given the U.S. government an "D" grade on its y2k conversion. The IRS will not make it, The Department of Defense will not make it, Dept of Education, labor, Energy, State, Transportation, Treasury (which issues all govt. checks).... the list is very long. It is estimated that only two thirds of its mission critical systems will be ready by 2000.

The 1997 third quarter report from the OMB (Office of Management and Budget) showed 27% of 'mission critical' systems were repaired and tested. The May 1998 report showed 40% were repaired. The latest Feb '99 report shows 79% are compliant This is actually a dishonest mis-representation; The number of "mission critical" systems have actually been systematically lowered by being reclassified as non-critical, thereby artificially raising progress rates. The May 1998 report shows 7,336 systems, down from 8,562 in the 1997 2nd quarter report. The lataest Report shows the number of "mission critical" systems has been lowered to 6,404! The actual number of completed systems has not progressed significantly. Therefore progress has, in reality, has hardly moved and is extremely slow. At current rates of completion, they should finished in about a DECADE or more. To see analysis on the U.S. Govt. and charts of progress, CLICK HERE

The Social Security Administration has been converting its 30 million lines of code since 1991. After completing 90% of the conversion in late 1997, it suddenly discovered that it had 33 million more lines to repair! (it recently said it is now compliant--we should hope so, it took 7 years to get to 90% complete and one year to get from 90 to 100% --and even this is misleading as it doesn't mention the extra 33 million lines!) After carefully reading these reports, we can conclude that much of the U.S. Government is doomed.

A frightening percentage of world governments , corporations and institutions are threatened with overnight computer chaos and extinction. Of those who have y2k projects, many haven't even begun any repairs. They're still in the 'committee' forming stage to "look into the problem"....Even those who started repairs years ago will miss the deadline. According to a World Bank survey, 65 percent of the countries surveyed have no Y2K programs at all.

The rest of the world is even farther behind the U.S. In a survey of 139 developing countries, the world bank found only 54 had initiated national Y2K policies, 21 were taking concrete remedial steps to safeguard their computing systems and 33 reported high-to-medium awareness of the problem but were not currently taking action. In Canada, according to this report from the Global Millennium Foundation, as of March 1999, they have spent less than half of their y2k budgets. Europe is woefully behind. Pre-occupied with its 'euro-dollar' conversion, precious y2k resources are being diverted. A recent survey showed 74% of German companies will not make it before 2000. Japan seems to be doing nothing . Italy has just barely begun! In Australian small businesses, only 25% are taking action to solve y2k. 98% of Hong Kong's small and medium sized enterprises--which form the backbone of Hong Kong's economy, have little or no understanding of the Y2K problem.

As a country, the US is the most involved in y2k conversion, but will not even be close to full compliance before 2000. So how then can Canada, Australia, Britain and France possibly succeed when they are 6-12 months behind the U.S.? Only recently has the Mexican government established a formal commitee to begin... assessment! Asia, Russia and Japan, experiencing economic hardships, have put y2k repairs on the back burner. They too are underestimating the seriousness of y2k and will suffer for it.

Banks are spending billions of dollars in a full-bore last minute scramble to fix it. Yet it is now 1999 and very few have claimed compliance. It may turn out to be an effort in vain.... Even if 70 or 80% (it will be less) of banks are 100% compliant and tested, the remainder will still bring down the international system of finance, commerce, and means of payment, and throw us into a depression. A corrupted financial institution cannot effectively communicate with a compliant system without creating havoc on the whole system. Compliant banks would have to cut themselves of from the rest. Even if 100% of banks are compliant, what good would it do when large sectors of business and government are not? Or if the power goes down or bank runs in 1999 shut them down anyways?

There are also 25-40 billion embedded micro-systems. 1-5% of those are not year 2000 compliant. But we don't know which ones or where they are! They would have to be individually tested and replaced to weed out the bad apples. Also, chips older than 3 years are no longer in production and can't be replaced. There has been very little attention paid to the chip problem, even though it could (according to some experts) surpass the mainframe problem. Only 9% of business and government agencies are attempting to fix defective chips. Power plants are particularly important and at risk.

To get all this done before 2000 is not possible,.... and won't be done.

For the big picture, and analysis of how the world's economic structure will be affected, see: Macroeconomic Thesis

See also Gary North's "Too Late" category for newest updates.

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