The Y2K Drain

Statisticians and research houses are busily tallying the current and anticipated costs of cleaning up the Year 2000 mess. The best numbers I’ve seen to date come from International Data Corp. (IDC), whose calculations haven’t changed appreciably over the past several years as it has worked with more real data. IDC’s estimate of the clean-up work is just under $300 billion worldwide -- $122 billion will be spent in the United States. These outlays span a seven-year period from 1995 to 2001.

Some people argue that this staggering sum will be exceeded by the legal costs incurred in fighting Y2K-related lawsuits. At least this money won’t come out of the IT budgets!

There you have the total Y2K costs, real and otherwise. Or do you? To my knowledge these numbers do not include the economic concept of opportunity cost.

A great number of companies, while fighting the good and necessary fight for Y2K compliance, have done so at the cost of not undertaking new application development, or by radically reducing new development disproportionately. I believe many CFOs seized upon the Y2K phenomena to rein in spending on projects they never fully understood.

How great a proportion of total IT spending do you think is represented by the $300 billion in Y2K fix-it outlays? Would you believe less than 3 percent, by IDC’s estimates? It is true that the proportion for last year in the U.S. was more than 5 percent. But that will drop off significantly in 1999 and precipitously in 2000 before all but going away in 2001.

IDC found that Y2K expenses to this point have been largely centered in the IT organization, even though business unit spending on IT in large U.S. companies today comprises 47 percent of total IT spending. So the cuts in funding for new application development on big systems have been severe.

This is all water under the bridge, because the cuts have already taken effect. But what about the next few years, especially 1999 and 2000?

The data from IDC and others show that spending in the next two years on Y2K compliance in the U.S. will be largely desktop- and server-oriented, much of this going to replace complete systems. This will coincide with the availability of Windows 2000, which is viewed by many as the key to new application development.

Will the fate suffered by large systems development be the same one that befalls new application development in the Windows 2000 and NetWare 5 worlds? I think if the bean counters have their way, the answer will be yes at many companies. You, Mr. or Ms. IT professional, must shed some light on the Y2K subject within your company.

For starters, point out that overall spending on Y2K compliance is not as great a percentage of overall IT spending as most people think. The perception that Y2K is sucking up all available resources is derived partially out of the amount of press attention to the problem. But it hasn’t been that expensive, relatively speaking, and fixing it has resulted in a lot of nice, new development platforms waiting to support new applications.

Also, look for examples of companies similar to yours undertaking exciting new application development projects. You can find examples of them every week in this and other publications. Never underestimate the alarm executives sense when it appears they are not keeping up with the competition.

Finally, assuming your company is well along with its Y2K compliance -- unlike the state of Arkansas, where zero percent of its systems have been certified -- carefully begin the process of putting Y2K behind you. This has been an emotional issue from the outset. Getting yourself and others around you to focus on the end of a long journey will eventually help in focusing more attention on other things, like new application development. --Bill Laberis is president of Bill Laberis Associates Inc. (Holliston, Mass.) and former editor-in-chief of Computerworld. Contact him at

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