Businesses, industries and governments throughout the world are in the midst of fixing the computer glitch commonly called the "Year 2000 Millennium Bug"—compared to a ticking time bomb waiting for the clock to strike midnight on December 31, 1999.

Simply stated, this is the problem: The software on many computers employs a two-digit shorthand for the date, so that the year 1982, for example, is written as 82. Unless the date fields are changed to reflect the arrival of the new century, computers won’t be able to distinguish the year 2000 from 1900. In this scenario, computers could crash or become temporarily inoperable, or begin processing information based on erroneous dates—which could cause errors in billing, stall payments, render records obsolete, or cause connected machinery to malfunction.

The results are frightening. Without proper attention now, manufacturers could grind to a halt as their production schedules are corrupted by improper date-coding. Customer orders could go unfilled. Building security systems could fail, refusing to read coded cards or keys. Airline flight schedules could be thrown into disarray due to flaws in the air traffic control system computers. The Internal Revenue Service computers could begin spewing out millions of false tax notices. Bank records of loans and mortgages could become fouled up. Stock transactions could fail to clear.

Trying to prevent these scenarios will be costly. The Gartner Group, a Connecticut technology consulting company, estimates the global cost of year 2000 conversion at $300 billion to $600 billion, based on the overwhelming size of the job and the late start by most governments and businesses. Gartner’s calculation of the federal government’s portion of the bill: $30 billion.

How did we reach this Information Age impasse? Basically it is a legacy of the 1960s and 1970s when computers had a tiny fraction of the memory and disc space they do today. In order to conserve that precious space, programmers limited date fields (embedded deep in the basic code that runs computer operating systems and application software) to six digits—YYMMDD—two for each year, month and day, assuming that the hardware and software would be replaced long before the end of the century. Yet these "legacy" systems, Cobol the most common among them, proved more durable than their creators imagined.

Most recent computer hardware and software have been designed to recognize the difference between 1900 and 2000. And yet much of the world’s computer data (fully half, by some estimates) and the automated systems driven by them—such as bank vaults and traffic signals—still use a two-digit year and consequently can identify the decade, but not the century.

No one has yet devised a "silver bullet" to attack the problem, or a program that can search out and convert every date field in a computer’s operating system or software. Every computer system and every program that is date sensitive must be opened up and changed to become year 2000 compliant—an incredibly labor-intensive job analogous to resetting the VCR and microwave clocks when daylight saving time begins.

Changing the dates isn’t the hard part, experts claim. The challenge for programmers familiar with the old software codes—no longer being taught in schools—is determining which lines of computer code actually contain date-relevant data, and then pulling out and repairing just these pieces while making sure everything else doesn’t crash down around them.

To put the problem in perspective, the IRS has more than 50 different computer systems running 19,000 separate applications from more than 62 million lines of program code. And that is just for the core business of processing 200 million tax returns and collecting $1.4 trillion in government revenue. Even large corporations with mainframe computers often have millions of lines of computer code that must be examined.

Compounding the situation is that because so many computers are linked together worldwide in terms of exchanging data, an error in any of the systems could cause a ripple effect throughout the chain.

Peter de Jager, a Canadian computer expert who, in 1993, was one of the first to sound the year 2000 alarm, recently conducted a survey of business progress in addressing the problem. He found that no more than a third of private companies know exactly what they have to do to fix their systems and when they are going to do it.

"The difficulty is not so much in changing the date references in the computer code, but rather in testing it," he asserts. "If you change one line, you have to test the whole system." Experts estimate the cost of testing—both internally and with an organization’s suppliers and business partners—to be 50 to 60 percent of the total conversion cost.

The testing process involves a form of time travel in cyberspace: the computer’s calendar is advanced to a date in the 21st century, then the system is run both forward into the new century and backward to the 20th century to assure that calculations run smoothly.

This sort of trial is the only way to be certain that, for example, a bank’s computer can correctly calculate mortgage or credit card payments that cross the century line. A consumer can run such a test by setting a VCR clock to December 31, 1999, and programming it to record a program the next day.

There are three possible outcomes with such testing, according to Richard Kearney, the KPMG Peat Marwick partner in charge of the consulting firm’s global year 2000 practice.

The first is success, in which the computer recognizes the new date and functions properly.

Otherwise, one of two things can happen, says Kearney. "The computer may not execute commands at all. Or it will run the calculations and come up with all the wrong answers, in which case you have a very serious problem—ranging from millions of rejected credit card transactions to a huge data processing breakdown."

Achieving year 2000 compliance can be more complicated than explaining it. "The problem is very industry specific," notes Marcus Feder, Ernst & Young’s specialist for the Pacific Southwest area. "Retailers, manufacturers, health care and biotech companies—all have different issues to tackle."

Regardless of your industry, here are some practical steps you can take:

- Bone up on the issue: read, surf Web sites, go to conferences and seminars. Because this issue is industry specific, contact your trade association and ask for relevant information. Generally, become as knowledgeable as you can on compliance-related issues.

- Audit your company to specifically identify potential problem areas. Lynn Edleson, national director of the computers assurance practice, Coopers & Lybrand, suggests, "Look for anything with a chip in it."

Does your business operate PCs built before 1994? Even some PCs built since that time are suspect and need to be properly evaluated. Apple computers have been compliant from the beginning.

Also remember to consider the software you use. Even some of the most recent applications may have compliance problems.

- Prioritize your year 2000 problems once they’ve been identified. Which items are absolutely critical to the smooth functioning of your business and which can wait? Feder of Ernst & Young calls this "risk ranking" and suggests grouping problems into high, medium and low-priority categories.

Remember that your distribution and supply chain will be affected as well. For example, will receivables be put on hold if a customer’s computerized accounting system crashes? Will your manufacturing line need to be stopped if a plastics shipment is missing?

- Draft a plan for how you’ll tackle this issue and allocate resources. According to the experts, some 20 to 30 percent of your solutions will fail to work. Companies that have already undergone testing report that this phase can consume 50 percent of a year 2000 compliance project. Testing to your satisfaction early enough to fix the problem is key.

Your plan needs to include contacting your software providers. If you use industry-specific applications, check with your industry association as well as with the software publisher. Those who use banking-specific applications should get in touch with their bank or financial institution.

- Implement your plan as soon as possible. Feder advises that, "October of 1999 is not a good time to start."

Off-the-shelf software testing illustrates some potential problems with waiting too long: upgrades may not be available because of increased demand; integrating new software with company systems usually takes much longer than expected; and compliance costs will escalate as the deadline approaches.

Not only will demand push up prices, but a shortage of credible experts could increase the risk of charletons trying to make a quick buck. The sooner you begin the implementation process, the sooner you can address unexpected complications.

On the surface it may seem that year 2000 compliance is a resource sink-hole that adds no real value to your operation. But the time and expense put into such a project may do much more than keep you in business.

Once your company is compliant, you could gain a significant advantage over any competition that fails to take similar precautions and has to shut down at the turn of the century. Furthermore, a compliance project gives you the opportunity to fully upgrade your operating software and computer systems, review your organizational processes, and get your enterprise ready for a new stage of growth and development.

By thinking critically about year 2000 compliance and setting a response plan in motion, you can not only keep your firm running into the new year, but give your business the technological advantages it needs to stay competitive into the next century.

"When I attended a meeting for the state Management Consulting Services group in 1996 to discuss the year 2000 problem, everyone was talking about mainframe computers," recalls Jeff Fadley, a founding principal of The Hydra Group, a Los Angeles consulting firm. "Nobody was talking about PCs, so I brought up the issue. A lot of small businesses owners love their older PCs and software, and have never upgraded to year 2000 compliant systems."

Fadley remembers how he personally approached the year 2000 issue. "The first thing I did was to literally comb the Web for information." After doing this, Fadley was well equipped to tackle his own compliance problems as well as those of his customers.

"Everyone is dealing with year 2000 complications with regards to BIOS (basic input output system), operating systems and custom applications," he remarks. "But what about the shrink-wrap retail applications?"

Upon realizing this, Fadley’s researchers contacted common business application software publishers to find their first compliant versions of the products in question. "Since then we’ve upgraded the applications as needed," explains Fadley. "I’ve also begun checking and correcting all the code I’ve written to be sure it’s compliant."

The Hydra Group, Ltd. is an organization committed to providing high-quality consulting services for small- to middle-market companies. "We focus on helping our clients deal with immediate problems," says Fadley. "For instance, we work with companies trying to make it through 1998 and leave year 2000 compliance consulting to others."

According to Fadley, "vendors wanting to sell year 2000 consulting services have generated a lot of hype. But this doesn’t mean the problem isn’t legitimate. Keep in mind that the year 2000 is coming whether or not you plan for it. The core question I ask small business owners is: ‘do you really want to be surprised?’"

When the dreaded millennium bug strikes, thousands of businesses around the nation are expected to adopt a standard problem-solving technique: sue somebody.

Legal wrangling over the pervasive year 2000 computer glitch could produce up to $2 trillion in lawsuits, experts say—far more than the expected costs of altering computer programs to fix the problem.

"When a glitch is identified as a year 2000 problem, people are going to sue," predicts Claudia Rast, an attorney with the Detroit law firm of Dickinson, Wright, Moon, Van Dusen and Freeman. "There will be all kinds of targets out there for potential lawsuits. It’s a huge, huge domino."

Problems that could expose companies to lawsuits over year 2000 problems include:

- Companies hired to correct the problem may miss a line of programming with the bug, disrupting computers and possibly causing financial loss.

- Shareholder lawsuits against company directors and officers for failing to correct the problem.

- Warranty disputes with software companies for failing to provide 2000-compatible programs.

- Disagreements over employment contracts and trade secrets as computer programmers, in short supply and highly valued, move among companies.

"Lawyers are going to make a lot of money off this," notes Steve Bruss, a 2000 expert with Syntel Inc., a worldwide computer service firm in Troy, Michigan. "When problems start surfacing, you’re going to pull out your contracts and look for someone to blame." Source: Gannett News Service

How the 2000 Bug Could Affect Ordinary Consumers

The millennium bug isn’t just a business issue. The average consumer likely will be affected, and possibly in surprising ways.

"We are so dependent on computers that we don’t realize all the ways they impact everyday life," comments Jason Matusow, year 2000 strategy manager for Microsoft Corporation.

Here are some potential problems that could occur if the bug isn’t cured:

- Your driver’s license expires because the motor vehicle department cannot recognize dates after December 31, 1999.

- Your credit cards will be rejected because payments are 113 years overdue.

- You’ll have trouble withdrawing money from your bank because the computerized timer mechanism won’t recognize the date and unlock the vault.

- Your broker miscalculates your capital gains, bond payments and other transactions because of faulty dates.

- Your social security payments are cut off because the agency’s computers miscalculate your age.

- Your tax payments are erroneously billed as overdue by the IRS.

- Your pharmacy refuses to refill a prescription because the computer says it has expired.

- Computers shut down some elevators, thinking they are overdue for maintenance.

- Your home VCR fails to record a show because it mistakes the year. Source: Gannett News Service and The New York Times

Excerpted with permission from Small Business Success, Volume XI, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration.