"We" are Y2K Compliant, the Others Not

January 7, 1999

Ask the bank, the hospital or the power company about their respective Y2K problems and each will tell you they've got the problem licked.

But ask each about the others and doubts begin to thicken like tule fog.

"We're pretty sure we've got everything under control here," says the Y2K project coordinator for one of the nation's largest banks. "But we're not so confident about the companies that provide our water, electrical power, gas and haul away our garbage. They have not been responding to our queries."

Sometimes the responses come but are less than hoped for. "We've gotten statements of compliance for some of our [biomedical] equipment vendors, but we'd feel better if they would send us certification" for each piece of equipment, said the chief information officer (CIO) at a Southern California hospital.

And at other times, no amount of information will suffice. "There are industries we deal with that neither we nor the government can control," says a bank CIO. "We can't be sure about the international arena, for one, and that is making us a little bit anxious."

Recently, the Y2K coordinators of some municipal water companies sat down behind closed doors with their electric-company counterparts to ask for the lowdown on Y2K progress, according to a South Bay risk management consultant with clients in both industries.

The water utilities evidently were not reassured and purchased backup diesel generators soon afterward, according to the consultant, Larry McArthur, CEO of San Jose-based Ascent Logic Corporation.

And so it goes. Just about every Y2K troubleshooter in America thinks he's getting the job done, but he's not so sure about the guy down the block.

Nor will he be any time soon, even though the whole country has been blanketed with letters from one company to another, each seeking such assurances. More likely, when the blizzard of Y2K-related mail subsides, few of us will know any more than we do today about the preparedness of those with whom we do business.

I've received some Y2K mail myself, from Merrill Lynch. It's scary to think how many such letters they must have sent out if I got one of them, minuscule as my business is.

I forecast stock and futures prices, and my equipment consists of two antiquated PCs, a state-of-the-art laptop and a vintage Macintosh.

As it happens, Merrill Lynch and I have a mutual client, a hedge fund that subscribes to my daily newsletter and which pays me out of a trading account administered by the securities firm.

"Dear vendor," Merrill's missive begins. "Last June, we sent a letter to you concerning preparedness for the Year 2000. We hope you have taken steps to coordinate your Year 2000 modifications with our mutual clients. If not, we ask you to do so."

I congratulate the world's largest brokerage firm for finding little old me and for sending the heads-up, but I have disappointing news for their compliance department: I don't have a clue about whether I will be ready for the Millennium Bug.

The Macintosh computer that I use to publish my daily newsletter will do just fine because it is a Mac, and Macs were designed to cruise past the 2000 date change without problem.

But the PC that tracks and charts stock prices for me is another matter. It runs software made by a Utah-based company that has not been entirely forthcoming.

They advised when I called them that their software contains no Y2K glitches, but suggested that I check with the computer manufacturer to determine whether my PC operating system is up to speed.

Problem is, the computer was built for me five years ago by a Sunnyvale company that no longer exists. And even if the firm were around to give me an answer, crucial questions concerning my satellite signal and power supply would remain.

For similar reasons, no one can estimate the damage that will result from the Millennium Bug, and neither can any business be sure that the vendors it does business with will have their act together.

This is not withstanding the countless millions of letters that companies have been sending each other recently, most of which will go unanswered by their recipients.

Who has the time to process all that information? If Company A mails out 300 Y2K letters to its vendors and suppliers, how can they even hope to read all the responses, much less evaluate each?

In fact, most of the CIOs and Y2K project coordinators I have spoken with have prioritized those letters in the hope that the most important of them can be reviewed and reconciled with their own pressing needs.

According to Ascent Logic's McArthur, CIOs send the letters not to enlighten those they do business with, or even to elicit information, but mostly to cover their butts as their lawyers have advised.

"They want to establish a due-diligence defense for when they get sued," says McArthur, whose firm has been doing Y2K risk assessment work for some of the biggest law firms in the country.

From a legal standpoint, he says that it will be more important for a company to be able to demonstrate that it followed a certain process in dealing with Y2K issues, and that its top officers were involved, than that it made all the right decisions.

Meanwhile, I remain skeptical of the upbeat reports I get from Y2K project managers, just as I am skeptical toward reassurances from their corporate superiors that business has never been better.

Both seem to ignore the fact that the U.S. is not alone in the world. Where economic issues are concerned, some of our most important trading partners, particularly in Asia and Latin America, are in dire economic straits. As to Y2K issues, no one is even suggesting that the rest of the world does not lag far, far behind in their remediation efforts, or that their lack of preparedness will not seriously impact the U.S.

McArthur, whose clients include many Fortune 500 companies and some of the largest underwriters in the world, says that a serious global recession is the "most confident prediction" he can make with respect to Y2K's potential effects.

It will be a "monkey wrench" in the gears of global commerce, he says, and will squash the "dead-cat bounce" of Asia's already severely weakened economies.

Minting of gold in the U.S. stopped in 1933, during the Great Depression.