Financial Times, 11/10/98 New millennium bomb fears By Christopher Price It is too late now for European and US companies to defuse the millennium bomb in their computers, a comprehensive survey has revealed. The survey, carried out by Cap Gemini, Europe's biggest software and services company, urges governments to give up a broad-based approach to the problem and focus their efforts on fixing computer systems that operate essential services. The millennium, or 'Y2K', bomb refers to problems arising because older computer systems are unable to recognise the date change from 1999 to 2000. Geoff Unwin, Cap Gemini's vice-chairman, said: "As companies and organisations begin tackling the computer bomb, they find the situation is worse, more complicated and more expensive than they expected." The company said that as a result the estimated cost of defusing the bomb in the US and Europe had risen 20 per cent in the past six months to £508bn. The report's pessimistic conclusions will be backed up tomorrow when Taskforce 2000, the UK pressure group, is expected to report that a quarter of UK government departments and agencies are badly prepared. Robin Guenier, head of Taskforce 2000, said: "Governments should treat this issue as an emergency." Cap Gemini found that US companies had spent 61 per cent of their estimated cost of fixing the problem, while European organisations have almost reached the halfway stage. But the Americans were less confident than the Europeans that their systems would be adjusted in time. "Why is the US less confident?" asked Mr Unwin. "Because they have seen the size of the problem." Of the total increase in planned expenditure on defusing the millennium bomb that has emerged in the last six months, the share going to computer hardware has risen by more than half to $169bn. Estimated software costs have increased 12 per cent to $200bn, while staff costs have risen 17 per cent to $489bn. One result of the channelling of resources into the problem is that other information technology projects are being postponed. "We are beginning to see a large and growing backlog of postponed IT initiatives," said Mr Unwin. He denied that his company was using the issue to stimulate business for itself, with only 6 per cent of its work related to the problem: "This issue goes beyond corporate matters - it is absolutely essential that immediate action is taken to protect the vital services in society." ******* Portfolio Strategy Service Dr. Edward Yardeni, Chief Economist June 30, 1998 Phone: (212) 469-5715 #24 Fax: (212) 469-5725 E-Mail: [EMAIL PROTECTED] Web Site: http://www.yardeni.com/ THE Y2K REPORTER Prepared Remarks for Conference on Y2K National Security and the Global Economy Sponsored by United States Army War College National Press Club, Washington, D.C. GLOBAL STRATEGIC CONSEQUENCES OF Y2K I. Plausible Worst-Case Scenario There is much that we don’t know about the Year 2000 Problem. On the other hand, we know that there is a great deal at risk for all of us around the world. Numerous experts, testifying at recent Congressional hearings, said that serious computer malfunctions could play havoc with our military defense systems, electric power grid, telecommunication network, and government tax collection and support payments. The economic and geopolitical upheaval caused by Y2K could be staggering. Indeed, I believe there is a 70% probability of a global recession in 2000. It could be at least as severe as the 1973-74 global downturn, which was caused by a disruption in the supply of oil. In a similar way, Y2K disruptions in the flow of information could also cause a significant global recession. Blackouts and frequent brownouts are likely, especially if embedded computer chip systems in utilities malfunction. In the US, the phones might work, but the network could be saturated with callers attempting to deal with various annoying Y2K problems, including buggy personal computers, erroneous bills, and undelivered tax refund checks. Overseas calls to some very important countries may be impossible to place for some time. This would be very disruptive to world trade, and to the just-in-time manufacturing system in the United States, and around the world. In a plausible worst-case scenario, the global recession could last 12-to-24 months. Business failures would soar, as would jobless rates. The resulting political upheaval would be unpredictable. Protectionist backlashes could further depress world trade and cause deflation. Increased warfare might be another consequence of Y2K economic instability. II. Strategic Plan With so much that could go wrong, I am amazed that there is virtually no national, and certainly no global effort to assess the risks, and to prepare contingency and disaster recovery plans. In my April 7, 1998 keynote speech, "Time to Declare War on Y2K," at the Year 2000 Roundtable of central bankers and banking regulators sponsored by the Bank for International Settlements in Basle, Switzerland, I presented an outline of a seven-point global Y2K strategic proposal for the G8 leaders. 1 The G8 leaders met in mid-May 1998 and issued a communiqué that acknowledged the seriousness of Y2K, but failed to mention any serious next steps to deal with the problem. Indeed, Y2K was discussed as point #25 in the 25-point communiqué. In other words, the response from our global leaders has been pathetic. There are enormous national security issues at stake for the United States. Yet, there is no leadership coming from the United States or any other of the G8 nations. They are doing virtually nothing to increase global awareness, to accelerate the pace of remediation, or to prepare for the potential failure of vital systems. I predict that the public will soon become very alarmed about Y2K, and demand that our leaders lead. Once they do so, I hope they will consider some, if not all of the proposals in my seven-point plan for dealing with Y2K. I would like to take this opportunity to review my plan, and add some new ideas... (from www.yardeni.com) Louis Proyect (http://www.panix.com/~lnp3/marxism.html)
