Life with computers at risk should Y2K disease prove deadly

From airport traffic control to tax refunds, from “just-in-time” package deliveries to time-sensitive hospital equipment; from fire and police services to defense commands, products and activities we take for granted could slow or stop.

That’s the Year 2000 problem scenario, a disquieting possibility that is nagging increasing numbers of public and private leaders.

In a year and a half, as the new millennium opens, the lives of everyone not residing in some Stone Age redoubt will be affected to an unknown extent by a bizarre glitch in many of the world’s computers and software products. Even the minimum likely outcome is worrisome.

Take the disruptions of last year’s United Parcel Service strike, when hundreds of businesses failed, combine them with the recent service stoppage on 40 million pagers when the Galaxy 4 satellite broke down, and replicate such effects in other sectors of the U.S. economy and around the world–simultaneously.

Other outcomes could be worse. Nobody knows how bad it could be. They do know that “it” will happen on Jan. 1, 2000. A program to stimulate greater public awareness, understanding and action is needed. Yet a communications gap between the culture of the technology industry and that of the political world is slowing the response to the 2000 problem, or “Y2K,” as it is coming to be known.

The individualistic people in the technology industry do not naturally make connections between their world and the realm of everyday public life. They tend to fear the government when they do not scorn it. People in the public sector often have difficulty comprehending the economic and social impacts of technology. To them, tech is just another industry to be taxed, regulated and litigated. But at the start of the new century, a programming foible of years gone by–compounded by repetition–threatens to make obvious the big, unavoidable connections between technology and public policy.

The problem arose from widespread use of a coding technique to save digital space in computers–shortening the designation of years by eliminating the number denoting the century. The date “1998” is merely rendered “98”, for example. Even if some people thought of the troubles that might occur when the year 2000 rolled around, in the fast-changing world of high technology, systems were not expected to last long enough to matter.

The unanticipated result as the year 1999changes into 2000 is that many computers will read “00” to mean “1900.” They will have no way to control the resulting calculations appropriately. Whole systems, including personal computers and mainframes, and software products of various kinds, could malfunction, spit out errors erratically, or simply crash. With them would crash the billions of orders and transactions and industrial processes upon which our lives have come to depend.

At potential risk are:

• critical infrastructure (water, power, telecommunications, transportation);
• government services at all levels;
• banking and finance, here and overseas. The very uncertainty about the prospects for these functions could trigger an anticipatory economic contraction well before 2000.

Huge private and public repair efforts already are under way. Some national banks’ Y2K bills are running up to $600 million. A Securities and Exchange Commission study released last week estimated that the top Fortune 250 corporations alone expect to spend some $37 billion on the problem.

Many companies’ systems are fixed already. But that won’t necessarily protect them from failures experienced by their suppliers, or their customers. Nor will it protect them if their computers interact with systems that are not fixed. Analyst Mark R. Anderson, who spots technology trends from his highly wired aerie in the San Juan Islands, sees “networks” as “the greatest Y2K problem. If my computers are fixed, and yours are not, I’m not sure I want to be linked to yours that (Dec. 31, 1999) midnight.”

To put the matter in personal terms: Your bank assures you that it is entirely and certifiably compliant. But if that bank starts getting bogus data from malfunctioning computers at other banks -say, from overseas- or finds that it cannot get information at all from federal financial institutions, its own systems could be compromised.

Edward Yardeni, economist with Deutsche Morgan Grenfell in New York, citing the tardiness of private and public entities in confronting the Y2K problem, estimates the chance of a major recession as 60 percent. “The likely recession could be at least as bad as the one during 1973-74, which was caused mostly by a disruption in the supply of oil. Information, stored and manipulated by computers, is as vital as oil for running modern economies.”

A Federal Reserve study a few months ago estimated a repair cost to private business in the United States of about $50 billion and to the economy of only a fractional percent of growth, but those estimates already are probably out of date. A private study by Y2K specialists at the Gartner Group in Palo Alto, Calif., sees a $115 billion dollar domestic tab and a $600 billion cost worldwide.

It is instructive that the head of one vitally affected federal agency, the IRS, does not even dispute the extent of potential danger. Commissioner Charles Rossotti told a Congressional committee this spring, if repairs cannot be made in time (and IRS is far behind), “There could be 90 million taxpayers who won’t get their refunds, and 95 percent of the revenue stream of the U.S. could be jeopardized.’

“Could be.” Nobody knows for sure. A lot can happen in a year and a half.

“It’s still unclear how much pain there will be,” says Microsoft’s Bill Gates.

One reason for uncertainty is that many information systems are not, as it were, technologically transparent. Instructions may be embedded in locations where one does not expect them. Old systems may have idiosyncratic, even whimsical, programs written by someone long gone and in an obsolete program language.

The rickety IRS system, for example, dates from the 1960s. Given the workload in bringing critical systems to a point of Y2K compliance, Gates is among those who propose that, “From today forward, ‘triage’ is the order of the day.” In the battlefield, a surgeon applying the triage policy divides casualties by categories of those who are in good enough shape to ignore, those past saving and those who can be saved with prompt action. Triage for information services means deciding which systems are of relatively low priority and can be repaired later, those that are past saving and must be replaced or abandoned, and those needing immediate fixes.

That Gates has anything at all to say on Y2K these days is commendable. Many businessmen are afraid to mention the subject. Business Insurance, a trade journal, reports that “Security is tight for many corporate conversion projects because of the concern that their stock prices might fall when the word got out about how much it will cost to bring their systems into compliance.” Even the Securities and Exchange Commission is having a hard time getting information from companies, according to testimony before a Senate hearing last week. But before long, as public awareness grows, enterprises that cannot boast of major efforts to become Y2K compliant could become the ones risking stock owner displeasure. Nothing hurts a stock price like a breakdown in basic corporate functions.

Business leaders also are being warned by their lawyers to keep quiet because of the threat of lawsuits. The Journal of the American Bar Association estimates that there will be a trillion dollars worth of claims as a result of Y2K. Trial lawyers already are holding conferences to examine opportunities for suits against tech companies and others if their systems fail. But again, with time it may become clear that those companies will fare best that are most active in preventing Y2K trouble and trying to help others – including the public.

Actually, the government itself may have contributed to today’s punitive legal atmosphere by its aggressive actions on other matters, from monopoly suits against Microsoft and Intel, to efforts to stop telecommunications and cable mergers. The federal government, by keeping such a low profile on Y2K for so long, also has slowed public education on the overall Y2K threat. The government did know about it. Almost two years ago, after receiving a special report from the Congressional Research Service, Sen. Patrick Moynihan, D-N.Y., sent an urgent letter to President Clinton, alerting him to the Year 2000 problem, and warning that it “could have extreme negative economic consequences during your second term.” He later publicly termed Y2K a potential “national emergency.”

Yet it was only four months ago that the White House appointed John Koskinen, a former Deputy Director of the Office of Management and Budget, to head a new President’s Council on Year 2000 Conversion. Koskinen is an experienced crisis manager, but his job is still less that of a policy “czar” than that of a facilitator. He has a small office and three employees.

Of course, by now few large corporations need education from the federal government on the seriousness of Y2K. But the same cannot be said of small businesses. Surveys show that many of these remain blissfully indifferent. The National Federation of Independent Business and Wells Fargo Bank have discovered that only one in six small businesses has even looked into the subject. Richard Bergeon, president of Systemic Solutions, Inc., in Seattle and co-author (with Toronto consultant Peter deJager) of “Managing 00: Surviving the Year 2000 Computing Crisis,” predicts that, given present trends, “as many as 50 percent of small businesses may fail.”

Meanwhile, White House special adviser Koskinen has tried to lower expectations of what his office can do to help the economy as a whole. “We have to figure out how we can help people organize themselves. There’s no way for me or the federal government to manage this problem.” Regarding the government’s own functions, Koskinen has promised a full report on preparations by early 1999.

But Congress is not about to wait that long. After holding several discouraging hearings this winter and spring, Rep. Steven Horn, R-Calif., a former university president who heads the House Government Reform and Oversight subcommittee on technology, last week graded the federal efforts an “F”. He demanded that “The president and his administration must set priorities if the conversion is to be successful… Now is the time for the president to designate the Year 2000 problem as a national priority.”

Crash: President Clinton must move fast to avoid disaster

It seems likely that pressure will continue to grow on the president, and on Vice President Al Gore, a technology enthusiast, to expand federal readiness efforts. Publisher and possible Republican presidential contender Steve Forbes has been particularly outspoken, terming the situation a “leadership crisis, rather than a technology crisis.”

Horn and Forbes have gained credibility from reports issuing lately from the government’s independent General Accounting Office and the inspectors general in various departments. The reports cite deficiencies in most departments, indicating that at the present rate of change, a number of major federal functions are unlikely to be Y2K compliant on time. For example:

• Some failures of mission-critical defense systems are “almost certain,” reported the GAO, unless the pace of fixes is greatly increased. The Department of Defense has spent $2.9 billion, but lacks key management and oversight controls, the GAO says. If the Defense Message System fails, “it would be difficult to monitor enemy operations or to conduct military engagements… Aircraft and other military equipment would be grounded.”
• The Labor Department already has spent $160 million of the $200 million allocated to it to help states convert computers that handle unemployment insurance. Labor’s inspector general told a congressional committee he fears for the department’s “benefit payment systems for job corps students and injured coal miners, longshore and harbor workers and federal employees and their families.” Only 13 of 61 systems in the Labor Department have been identified as Y2K compliant.
• The Education Department is so tardy that it still has no comprehensive Year 2000 plan.
• Despite recent improvements, it is uncertain that the Department of Health and Human Services will be able to process some $200 million in Medicare payments or the $170 billion awarded annually in research grants for cancer and other diseases. The problems of HHS, like the IRS, are compounded by computer problems beyond the Y2K threat.
• Experts told the Horn Committee that the Federal Aviation Administration is so far behind in Y2K readiness that it may have to ground planes in 2000. However, White House adviser Koskinen is more optimistic, believing that the FAA will have completed its repairs by the end of the year and will have another year for testing.

The Social Security Administration, with 92 percent of its project completed, is in better shape than any other federal agency. The Horn Committee graded it an A+. But, as Internet columnist Victor Porlier notes, the agency has been working on the problem for seven years, yet even it is not finished. What does that say about the prospects of agencies that have barely begun?

Also, how will a fully functional agency such as Social Security persevere in sending out checks and meeting its own payroll in 2000 if a dysfunctional IRS and Treasury Department cannot collect and distribute federal money?

Finally, says Porlier, Social Security’s experience, wherein systems had to be tested early and repeatedly, underscores the importance of adequate time for testing and debugging before systems can be certified as truly 2000 compliant.

That time is fast disappearing.

The state of the states is (somewhat) better

State and local governments are in varying stages of readiness, the State of Washington being about as well prepared as any.

Steve Kolodney, information services chief in Gov. Gary Locke’s administration, has been selected to head a working group in the National Association of State Information Resource Executives (NASIRE) that coordinates among the 50 states and between the states and the federal government. At home, he enjoys good cooperation from the Legislature as well as executive departments.

Fortunately, the State of Washington started working on payroll, welfare and other information systems as early as 1993. Nonetheless, it already is practicing triage, emphasizing the priorities of public safety, health and social services, financial and accounting systems, and, only then, “everything else.” Some systems in that latter category may not get repaired until well after January 2000.

Among the state operations presently most at risk, according to a May 18 assessment, are the Department of Fish and Wildlife, the Department of Health, the Department of Parks and Recreation, the Department of Ecology, and Eastern Washington University and Washington State University.

But as a bonus for its comparatively early investigations, Olympia also is locating some information systems it simply can eliminate. Department of Transportation officials, for example, have identified 105 systems they can dump. Advance planning also has allowed the state to set up common standards of compliance and to establish a group of five independent auditors to assess whether progress reports from departments are trustworthy.

Washington’s Utilities and Transportation Commission, likewise, is one of only a handful of comparable state bodies in the country that has held a Y2K hearing with utilities operating in the state.

Some states, such as Alabama, are just getting started on Y2K preparations. A change of political administrations in Illinois apparently slowed work on Y2K there. Even advanced states are just now establishing close working relationships with subunits such as cities and countries. Most of the nation’s school and utility districts are still not adequately involved.

But the advanced states are still well ahead of the federal government, which has been widely rebuked for lacking a sense of urgency