Study Says Y2K is Now Consuming Large Chunks of IT Budgets

While a lot of money is being spent on the Year 2000 fix, analysts offer widely conflicting views on exact amounts. Researchers from Gartner Group (Stamford, Conn.) conclude that 30 percent of IT budgets are being devoted to Year 2000 remediation efforts this year, up from 5 percent in 1997. Year 2000 budgets will peak at 44 percent in 1999, according to Gartner. However, IDC (Framingham, Mass.), looking at technology spending outside IT departments, only puts this percentage at 6 percent of IT spending for this year.

Worldwide IT spending has slowed, and Y2K money is coming out of other IT initiatives, observes Lou Marcoccio, Year 2000 research director with Gartner Group (Stamford, Conn.). Gartner's recent survey of 15,000 companies finds that 91 percent of overall IT budgets were flat or reduced between 1997 and 1998. In addition, companies have already begun to scale back hardware purchases to shift funds to Year 2000 remediation efforts.

In one piece of relatively good news, Gartner Group finds that there is less outsourcing of Y2K efforts among larger companies than originally expected, helping to put a lid on labor costs, Marcoccio says. Most demand for outside Y2K work will come from smaller companies over the coming year. However, many small companies have not even begun Y2K work, he adds.

Progress among industries and nations on Y2K remediation also varies widely, especially when measured against Gartner's Compare Scale, which ranges from initial awareness (Level 1) to full compliance (Level 5), Marcoccio explains. Many insurance, investment services, and banking organizations have reached the third level of the scale, in which systems are inventoried and assessed, and remediation strategies are underway. However, most industries are still mired at Level 1 readiness. By 2000, only about 20 percent of companies will have attained Level 5 readiness, he predicts. Healthcare, education, semiconductor, chemical processing, agriculture, food processing, medical and law practices, construction and government agencies are furthest behind.

Another 15 percent of companies claim to have achieved completion of Level 4, or "operational sustainability," according to Marcoccio. Gartner Group projects that 50 percent of companies will achieve this goal by 2000.

Internationally, the United States, Canada, The Netherlands, Belgium, Australia and Sweden are leaders in Year 2000 remediation work, Gartner Group finds. Eastern Europe, Russia, India, Pakistan, Southeast Asia, Japan, most of South America, most of the Middle East, and Central Africa all lag the United States by more than 12 months. Most of Western Europe is six months behind the United States, except for Germany, which is 12 months behind, and France, which is eight to 10 months behind.