A Look Back at Y2K and the Millennium Bug – Industry Trend or Event

Leslie Mizell

There were three results of the Y2K apocalypse the media promised us for 12:00:01 a.m. Jan. 1, 2000-you either made a lot of money; lost a lot of money; or got an extra $100 out of the bank, bought some batteries and canned hash, and kept your fingers crossed.

The frenzy surrounding the idea that the world’s computers would recognize the 1/1/00 date as Jan. 1, 1900 and malfunction was great for software companies, computer manufacturers, and consultants of all shapes and kinds. But Y2K turned out to be primarily a media-generated story, and New Year’s Day dawned-anticlimactically–virtually problem free.

Don’t say the experts didn’t tell us.

“I still don’t see any evidence of a likelihood of serious disruptions,” said Nicholas Zvegintzov, president of the Software Management Network, back in December 1998. “Being afraid isn’t evidence.”

But we were afraid–or at least our leaders and officials were. Worried that electricity, water, and sewer service would break down; that computer glitches would disrupt worldwide telecommunications; that global stock markets and banking systems would crash.

Blame the fear on computer consultant Peter de lager, who wrote the 1993 ComputerWorld article “Doomsday 2000” that’s credited with sending up the first red flag about the “millennium bug.” In the months leading up to January 1, de lager fielded more than 2,000 interviews. “Every time I spoke to reporters,” de lager says, “I repeated ‘If we don’t fix it, then we have a problem.’ And it was reported: ‘Peter de Jager says we have a problem.’ There’s a difference.”

With its catchy “Y2K” moniker and end-of-the-world hype, most newspapers, magazines, and TV shows focused on the sensational aspects and drowned out the voices of reason with tales of survivalists stocking up on canned food and ammunition.

“The software systems were either fixed, ignored, turned off, or never had a problem to begin with,” says William Ulrich, author of The Year 2000 Software Crisis.

Actual Y2K bugs

Surprisingly after all the hype, the actual systems which suffered Y2K problems received only limited press. The exception was a Department of Defense (DOD) satellite system that failed as the New Year hit Greenwich Mean Time–the DOD was unable to process information from the satellite’s ground-processing station for two days. Ironically, the Pentagon later reported the outage was triggered by software designed to prevent Y2K failure.

Other problems included:

* About 50,475 Medicare claims that were returned because they were dated 1900 or 2099. The bug was traced to providers who hadn’t upgraded their systems.

* The Federal Aviation Administration’s air-traffic control system reported inaccurate date displays that had no effect on safety issues. A Low Level Wind Shear Alert System failed to operate at eight sites, but was back to normal within two hours. A Kavouras Graphic Display System rejected weather data because it believed the year was 2010; 13 automated flight-service stations couldn’t update weather data until the glitch was repaired.

* Processing daily updates of Oregon’s food-stamp system failed, resulting in the installation of a new system the next business day. Data-tracking systems for the state’s Child Support Enforcement, Temporary Assistance for Needy Families, and other social agencies reported glitches that were fixed by January 7, but resulted in a one-day delay in payment to clients.

* Louisiana reported a 10-hour service interruption on Leap Day when its Medicaid Eligibility Verification System didn’t recognize the February 29, 2000, date as valid. Alternate systems were available until the problem was fixed.

* Sunquest Information Systems filed a lawsuit against the investment firm Morgan Stanley Dean Witter for selling them a company–a $5 million Compucare database division–that was riddled with Y2K bugs, despite assurances to the contrary. The case was settled out of court for an undisclosed amount.

Money spent–and spent

No one doubts the Y2K problem could have created nationwide or worldwide problems had the date approached unforeseen. But almost everyone agrees the $600 billion spent on compliance was too large a chunk of change and was primarily used to ease people’s minds.

Congressman Stephen Horn, chairman of the Subcommittee on Government Management, says the potential impact of the Y2K problem made the federal government designate it a high-risk area in February 1997. “Our purpose was to stimulate greater attention to assessing the government’s exposure to Y2K risks and to strengthen planning for achieving Y2K compliance for mission-critical systems. We produced a series of guides and reports [to provide] approaches to enterprise readiness, business continuity and contingency planning, testing, and day-one planning. In addition, we issued over 160 reports and testimony statements detailing specific findings and recommendations.”

The Website for the President’s Council on Year 2000 Conversion (www.y2k.gov) averaged more than 45,000 hits per week–with 3 million in the week of the rollover date–and its toll-free number averaged 15,000 callers per month.

Of course, the money, in general, was well spent, since the nation’s computers are now not only more modern and maintained, but also more integrated. And the investment continues to pay off. For example, Detroit was hit in mid-June with a massive power failure, as its century-old municipal system failed. It took two days to restore electricity to all the 4,500 buildings affected, but the power provided in the outage’s early stages came from generators bought–you guessed it–in case of Y2K emergencies.

“Y2K turned out to be this big nothing,” says Gregory Bowens, Detroit mayoral spokesman. “But the $1.5 million the city spent on generators turned out to be money well spent.”

The Y2K hangover

Far more severe than any problems in January was the way the Y2K bug bit the stock market this autumn. The technology market had long been overvalued, but the balloon finally burst when artificially inflated sales of software, computers, appliances, and other industries that did well during the Y2K scare fell off in 2000, resulting in drastically reduced profits.

Sunbeam, for example, reported an $80 million loss in the second quarter, and company officials blamed the drop on the late-1999 consumer demand for gas grills, stoves, lamps, and power generators. “It cannibalized 2000 sales,” says chief executive officer Jerry Levin.

But Sunbeam’s problems pale in comparison to Compuware’s, a software company specializing in custom applications for mainframe computers–the same mainframes that needed extensive, expensive retooling for Y2K compliance. Throughout the 1990s, Compuware was able to double profits every year, culminating in $2 billion in revenues and $352 million in profits in 1999.

Although most Y2K spending ended late in 1999, Compuware, nonetheless estimated its revenues would grow 35-40 percent in 2000 because it was training its Y2K experts as e-commerce consultants. But clients who were afraid to change software vendors in 1999–a time when Compuware raised its rates–bolted in 2000, and retraining employees proved more time-consuming than the company had thought.

In April, Compuware announced it would earn only 13-15 cents a share for its fiscal fourth quarter, less than half the estimate, and its stock dropped 40 percent in one day. The price never recovered: Its 52-week low at press time was $5.62, and its average is more than 80 percent below where it was a year ago.

Of course, Compuware is only one example, and other mainframe software providers, such as Computer Associates and BMC, have also dropped. Computer sales as a whole are way down, since anyone even considering upgrading an old computer did so last year. PC sales have also been impacted by the slow adoption of the Windows 2000 application.

The upside

The good news as we approach the real end of the millennium is that never before have the nation’s computers been as compatible and as well maintained, and never before have there been so many contingency plans for system failures.

“It was a really boring New Year’s Day,” says Dave Wennergren, the Navy’s deputy chief information officer for e-business and security. “But that meant all our preparations paid off.”

The men and women serving on the Navy’s U.S.S. Topeka, stationed in the Pacific, were the first to enter the year 2000, but the Navy has 800,000 personnel inhabiting every time zone in the world. Y2K compliance was a particular problem. Some 2,000 information systems had to be examined, and rollover scenarios were extensively tested.

“For every Y2K problem we found, there were four or five other interoperability problems we wanted to fix,” Wennergren says. “Now the Navy knows where every computer is and where its interdependencies lie.”

The same is true of the government. “Y2K was a wake-up call,” says David McClure, an associate director for information technology management issues at the General Accounting Office. “It showed us how integrated information technology is into everything the government does. [And it] made us get a grip on how vulnerable government information systems are to disruptions. Y2K focused the debate over what would happen if systems were tampered with or brought down or even destroyed. Cyber security came to the forefront as a result of the dialogue about Y2K.”

So whether or not your stock portfolio has taken a hit, you can rest assured that your government is in better shape this December than it was last December. And you can also be glad you’re not Gary Britt of Tampa, Fla. To prepare for Y2K, he and five friends bought $35,000 worth of dehydrated food–400 cases worth. In August, the forty-something Elvis impersonator started placing classified ads to sell the food, hoping to recoup 75 percent of the group’s money, and, one assumes, reclaim their basements and garages.

According to her Y2K-bugged computer clock, Leslie Mizell (LAMizell@aol.com) wrote this story on June 10, 1980.

COPYRIGHT 2000 Quality Publishing

COPYRIGHT 2002 Gale Group

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