62% of Major Firms Doubt Full Year 2000 Compliance

Fewer than half of America’s largest companies (48 percent) expect all of their critical systems to be prepared for the Year 2000, according to a new survey by Cap Gemini America Inc., an information technology and management consulting leader.

One in five companies (18 percent) expect that 75 percent or less of their critical systems will be "completely tested and compliant" by December 31, 1999. Thirty-six percent expect between 76 and 99 percent of their applications to be ready for Year 2000, and 2 percent anticipate completing work on 50 percent or less of their systems.

Three-quarters (75 percent) of respondents have experienced a "Year 2000-related failure," up slightly from 72 percent last quarter. Fifty-five percent reported such errors last December. The most frequent failures involved "financial miscalculation or loss" (92 percent), followed by "processing disruptions" (84 percent), "customer service problems" (38 percent) and "logistics/supply chain problems" (34 percent). Two percent reported Year 2000-related "business disruptions." Virtually every respondent (99 percent) anticipates "an increase in systems failures into the remainder of 1999 and beyond."

The Cap Gemini America survey also finds corporate management strengthening its hand on a number of fronts to protect business from Year 2000-related damage.

"With full readiness beyond the reach of many leading firms, responsibility for Year 2000 management has passed from the hands of the CIO into the hands of the CEO," said Jim Woodward, Senior Vice President of Cap Gemini America and head of its TransMillennium Services group. "The time has finally arrived when top management views the Year 2000 challenge as a business problem and not merely a technology problem."

According to the Cap Gemini America report, the percentage of top managers planning to take charge of Year 2000 "crisis management centers" rose from 62 percent in May to 84 percent – an increase of 35 percent. Such centers – dedicated to addressing potential problems relating to the millennium date change – are now planned by 96 percent of respondents, up from 85 percent last quarter. All respondents report an increased focus on business continuity efforts over the last quarter.

Business management is bolstering its Year 2000 role in other ways besides taking charge of crisis command posts. The percentage of major corporations now "potentially likely" or "very likely" to sever ties with non-Year 2000-compliant suppliers of services and products rose from 87 percent to 92 percent over the past quarter. Firms "very likely" to stop doing business with non-compliant partners leaped from 21 percent to 36 percent since May -- a 41 percent increase. The proportion of top managers content to delegate Year 2000 contingency planning to information technology (IT) departments has shrunk from 35 percent last October to 12 percent -- a 64 percent decline. And large firms are now universally willing to participate in joint Year 2000 command centers within their industry, in command posts crossing industry lines, and in global, cross-industry, crisis centers.

Independent verification and validation (IV&V) – the process used to check the quality of renovated code – has emerged as standard industry practice, the Cap Gemini America survey showed. Nearly nine of ten major firms (89 percent) rank their need for IV&V services as "high," a 71 percent rate of increase from 52 percent last December.

"Many firms handled much of their Year 2000 work in-house, and now recognize that their results need outside verification," said Woodward. "IT executives want to show top management that the job was done right."

The survey, one of the longest-running corporate polls to systematically monitor Year 2000 preparedness, includes responses from information technology directors and managers of 144 major U.S. corporations across all major industrial sectors and 17 federal, state, and local government agencies. It is carried out by Rubin Systems, Inc. for Cap Gemini America.

In spite of the persistent incidence of Year 2000 failures, IT managers of the nation's largest corporations report improved performance in meeting Year 2000 deadlines. While 92 had reported increases in "milestone slippage" both in December and May, only 81 percent are now experiencing an accelerated incidence of missed deadlines.

A growing proportion of corporate America views Year 2000 readiness as a competitive advantage. The percentage of firms likely to incorporate Year 2000 compliance into their marketing messages has increased since December from 65 percent to 89 percent.

For more information, visit Cap Gemini America Inc.’s Web site at www.usa.capgemini.com.