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1997-11-17 12:19:14


EDS, which Supplies the Banks with Software, Is Not Compliant



A representative of EDS testified before the House Banking Committee on November 4. He admitted that EDS is not compliant. It may not get y2k-compliant by 2000, he said. But it will be y2k-tolerant.

He had better hope that the banks' depositors will be tolerant.

EDS will be ready for testing on (of course) December 31, 1998.

He listed the standard problems: noncompliant vendors, the shortage of programmers, coordination by all those who exchange data with each other.

This list never goes away. It will not go away. Referring to it in public testimony does not solve these problems. There is no master plan, and there is no international agency with the authority to impose one even if there were.

Look at the list industries that comprise EDS's customers. Then ask yourself: If EDS is not compliant, what about all these customers?

* * * * * * * *

EDS is recognized throughout the world as the pioneer of the computer-services industry. Our history stretches from the early 1960s -- the infancy of the Computer Age -- when we began by doing routine data processing for clients on computers we didn't own. Today, we own and operate what is arguably the private sector's largest and most powerful computer and communications infrastructure, and provide the complex systems and technology services required by today's global corporations.

Our service to the financial services industry began nearly 30 years ago. Currently financial services represents the second-largest industry group served by EDS, contributing 14 percent of the company's $14.4 billion in revenue in 1996. Our clients cover the entire spectrum of the diversified financial services industry, including commercial banks, credit unions, thrifts, securities firms, investment banks, real estate companies, mortgage banks, insurance companies, mutual funds, brokerages, and consumer and commercial finance companies.

Our services are as varied as the types of financial industry clients we serve. We provide the electronic data processing (EDP) support for the majority of core and ancillary products and services offered by today's depository financial institutions, including electronic funds transfer, direct deposit, ATMs, credit and debit cards, and checking accounts. . . .

We can now report that all substantial changes to ensure that EDS' financial institution systems are Year 2000 tolerant will be completed by December 31, 1998. Additionally, we are in the process of compiling an inventory from our vendors of their Year 2000 strategies to ensure compatibility with those interfaces.

Let me take a moment to draw the distinction between "Year 2000 compliant" and "Year 2000 tolerant," which we believe is more useful term. As we use the term, a data processing system may be Year 2000 tolerant -- that is, it will accommodate Year 2000 dates and provide correct information -- but may not be compliant in the usual sense of the term. . . .

. . . It is a safe bet that the majority of our financial institution clients have software products and direct interfaces to outside firms that are independent of their contract with EDS. In these cases, we often are unaware of these outside relationships. In such cases where we have no knowledge of the interface, the financial institutions themselves must address the Year 2000 issue with those other business partners. . . .

First, banks have multiple interfaces with numerous entities in the routine conduct of their business -- with customers, the Internal Revenue Service, vendors, suppliers, federal agencies, and business enterprises. The point is, the Year 2000 issue extends far beyond this industry sector. And while a financial institution may have solved its own internal Year 2000 issues, the various parties with whom it interacts may not have modified their systems similarly. Again, the challenge for financial institutions will be to coordinate with all of its business partners to effect a smooth transition.

A related issue is vendor compliance. All business enterprises, and particularly financial institutions, use computer products and services provided by outside vendors, which could be in varying stages of compliance. The vendor community is being overwhelmed by the high number of certification requests from their clients. As such, vendors are challenged to provide the necessary information to companies whose internal operations are dependent on the information and on ultimate compliance. Again, a common standard for certification will be a tremendous benefit in this area.

Resources are another issue. Financial institutions may find it hard to obtain personnel who have the expertise needed to solve their Year 2000 problems. The resource pool is rapidly drying up. Banks that need to hire qualified individuals may encounter a shortage of qualified people at significantly higher costs or may be unable to retain their current resources.

Another issue is adequate testing time. Many financial institutions underestimate the time needed to do adequate testing and to do the essential modifications based on test results. Experience tells us that 50 to 60 percent more time should be spent in the testing phase than on the preceding phases.


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