The Gartner Group is the source of the prediction of a worldwide y2k repair cost of $300 billion to $600 billion.
A spokesman testified to a House Ways & Means subcommittee on May 7. He brought bad news.
"Our research indicates that governmental agencies in the United States -- state, local, and federal -- are generally at about 15 percent complete in their year 2000 projects, which would place them on the threshold of entering Level Three on the COMPARE Scale. There are, of course, some agencies further along than others, however the majority are still far behind in their work."
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Statement of John Bace Research Director, Gartner Group, Inc.
Testimony Before the Subcommittee on Oversight of the House Committee on Ways and Means
Hearing on the Year 2000 Computer Problem
May 7, 1998
Before I get into the details of our research, allow me to tell you something about the Gartner Group. Founded in 1979, we are the world's largest information technology (IT) research and advisory firm with more than 33,000 individual clients at more than 9,000 organizations worldwide. We cover this very fast-growing industry with more 750 analysts located in 49 countries around the world.
We published our first research about the upcoming impact of the Y2K problem on IT organizations back in 1989. We are sorry to say that we can only deduce that our warnings and suggestions have gone mostly unheeded. Our current research -- completed in the first quarter of 1998 -- on the state of the IT infrastructure regarding year 2000 makes us very pessimistic. . . .
We believe that the fundamental computer programs, those that are used to run most companies, have in some cases already experienced a year 2000 anomaly. Indeed, some production planning systems that use a five year resource balance view, hit their Y2K wall three years ago. Insurance companies and financial institutions that calculate interest rates have been wrestling with and doing work-arounds the zero-zero year for some time.
In each case, as these companies hit their Time Horizon to Failure (THF), normal operations were interrupted and the resources of the enterprise were thrown in to fight the problem in a crisis mode. Most have handled these year 2000 problems successfully and have done nothing more than create a small ripple through the economic structure of the company.
What worries us at the Gartner Group is that as we approach New Year's Eve 1999, more and more companies will hit their Time Horizon to Failure on more and more different applications. As result, more and more business functions within each enterprise will be negatively impacted and need to be dealt with in a crisis mode. We are afraid that there just will not be enough talent and resources available, given the amount of time left, to handle all of the potential failures in a timely fashion. As a result, companies could lose the ability to process invoices, issue payroll checks, or collect taxes for an unpredictable amount of time as they wrestle with each system failure.
Other companies who are dependent upon electronic commerce, EDI, or just-in-time manufacturing need to be concerned about the integrity of the systems of their trading partners and their supply chain. For example, the inability of a parts supplier to be able to correctly read inventory levels at a manufacturing company, could shut down another firm's production line. . . .
As normal business operations are interrupted there will be follow-on economic disruption. . . .
Finally, before I get into the details of our research, allow me to share one last observation about the year 2000 marketplace. Some estimate that Y2K has the potential to become the most litigious event in the history of civilization. Indeed, if the Internet is any indication, and depending upon the type of search engine you use, you may find nearly one-half of the results from a search on "year 2000 or Y2K" to be from law firms or class action groups preparing for the result of the new millennium crossover. Lloyds of London, at an underwriter's conference in June of 1997, estimated the impact of year 2000 total cost for just the United States at one trillion dollars. The Lloyds figure included not just the cost of hardware, software, and services for remediation, but also the cost of litigation, actual and punitive damages, and lost opportunity cost. . . .
Our research indicates that governmental agencies in the United States -- state, local, and federal -- are generally at about 15 percent complete in their year 2000 projects, which would place them on the threshold of entering Level Three on the COMPARE Scale. There are, of course, some agencies further along than others, however the majority are still far behind in their work.