Profits of Doom

The first time Russell Welty heard about the Year 2000 Problem--also known as the Millennium Bug or, in programmer jargon, Y2K--it sounded simple. Too simple.

The problem, stripped down to its essentials, is this: Most computers on the planet are programmed to calculate dates in a two-digit format--for example, 02/14/98 represents February 14, 1998. As long as all the dates involved in such calculations are in the twentieth century, no problem. But come the year 2000, many computers will have trouble digesting the date 01/01/00.

Exactly what might happen depends on the programs involved. Some computers could assume that "00" means 1900 and start spitting out erroneous data, figuring 15-year notes as 85 years overdue, sending notices to centenarians to report to kindergarten and regarding the useful shelf life of new drugs and food products to have expired decades ago. Some may treat last year's files as ancient or nonexistent. Some may give up and crash.

The Y2K glitch has been talked about since the 1980s, but until recently, few people outside of elite computer circles had any inkling of the scope of the problem. When Welty began to seriously study the issue a little over two years ago, it was widely assumed that the trouble was confined to huge mainframe systems operated by major corporations and government agencies.

But Welty, vice president of equity research at the Denver investment banking firm Hanifen Imhoff, soon became convinced that the glitch would have an impact on far more computers than was generally believed--from mainframes running government missile systems or issuing payrolls to midrange systems tracking product shipments, networks shuttling office e-mail, even your neighborhood ATM. (Home computers won't be much affected; Apple's Macs should greet the new year without incident, while most PC users may just have to reset their clocks.) For many businesses, which have built highly customized computing programs on aging hardware, Y2K poses a host of headaches, from confusion over the day of the week--January 1, 2000, falls on a Saturday, but computers stuck in the twentieth century could treat it as a Monday, fouling up security systems and work orders--to the dreaded "99" problem (some programmers used to archive files they didn't want to expire by dating them 09/09/99, ignoring how rapidly that date was approaching).

Without some kind of intervention, Welty realized, corporate America could see its software party like it's 1899. A former computer consultant, Welty also knew that the fix would be more painful than just updating a few lines of computer code--or a few hundred million lines, for that matter.

"People have taken this two-digit code as a standard over decades, and there's a lot of code that needs to be changed," Welty says. "It looks simple, but it's very complicated. You can change one line of computer code, and it can take you six hours to debug what you just did."

In recent months, the Y2K issue has become more than an obscure concern of tech-heads. It has leapt from the pages of progammers' newsletters to the cover of Newsweek (headline: "The Day the World Shuts Down") and onto the Internet, where Y2K gurus push new software and books and make dire predictions about the coming apocalypse. It has spawned government task forces, Wall Street jitters, and an intricate, ongoing debate about the cost of exterminating the beast. For example, the Gartner Group, a high-tech research firm that has been pumping out Y2K studies like there's no tomorrow, estimates that fixing the problem worldwide will cost between $300 billion and $600 billion--a range that some experts believe is wildly overstated and that others consider too low.

Even within the programming community itself, some skeptics view the issue as so much hype, a cynical ploy to scare computer users into scrapping their software for all-new versions. The Y2K glitch "is not a huge problem of computer software, nor a unique problem, nor a difficult problem to solve, but it is the focus of a huge and unique racket," declares software consultant Nicholas Zvegintov in an article in American Programmer. "Solving the Year 2000 problem is an exercise for the software novice."

But Welty and other financial analysts disagree. If it's so simple, they say, why are major corporations and government agencies shelling out millions of dollars and countless employee hours to address the problem? US West plans to spend around $50 million on its Y2K fix; the State of Colorado, $40 million. The Social Security Administration, which has been working on the issue since 1989 and is wrestling with more than 30 million lines of code, figures it will cost at least $30 million to keep the benefit checks coming past the century mark.

"We're not trying to create a scare, but the more you dig into it, the more the possibilities open up," Welty says. "What happens if the supply chain is knocked down for a week or two? We've all become dependent on immediate delivery, and there were companies that went out of business during the UPS strike."

"Two years ago, when we first started telling money managers about this, we had a lot of people laughing at us," adds Barry Ollman, a Welty colleague at Hanifen Imhoff who deals primarily with institutional investors. "It sounded like this curious, faddish thing. People thought we were just nuts. But as the evidence came in, we've been more than vindicated."

In fact, the strongest evidence of the seriousness of the Y2K threat may be the emergence of a booming market for technology companies that offer the critical tools and services necessary to fix the problem. Some of the operations are clearly flashes in the pan--what Welty describes as "Two Guys Millennium Service" operating out of someone's garage--but others are solidly positioned to reap staggering revenues from the crisis. While corporate America is literally getting its clock cleaned, these companies--including several key players in Colorado that were all but unknown two years ago--are displaying growth curves that resemble the slopes of Annapurna.

"If we'd gone out to create a problem to stimulate our business, we couldn't have created a better problem than Y2K," says Tim Fitzpatrick, vice president of sales for Accelr8 Technology Corporation, a Denver company that's seen its earnings skyrocket over the past year and a half, largely on the strength of its Y2K software tools. "Yes, there is a lot of hype out there, but there is a real problem, too."

The Y2K evangelists at Hanifen Imhoff have seized on the phenomenon as a golden opportunity for investors; Welty and assistant Lance Marx issue a monthly newsletter charting the growth of Y2K-related stocks and tracking what banks, major corporations and governments are doing to fix the problem. They're hardly alone in such efforts, yet most high-powered investment firms have been slow to jump on the bandwagon. In many quarters, the dreaded Millennium Bug is still regarded as an affliction to be dealt with in private, like a nasty skin disease. Welty sees the tide turning, though, thanks in part to new, tougher Securities and Exchange Commission rules requiring publicly traded companies to provide more detailed disclosure of how they're coping with their computer nightmare.

"Most companies don't want their name publicly associated with the problem," Welty notes. "They're not even letting their [Y2K] vendors announce the contracts. But that's beginning to change. Instead of people hiding that they have a problem, it's going to become a benefit to say that you've hired somebody to fix this."

Bill Storrison, president of Ciber Information Services, a division of Ciber Inc., wants to make one thing perfectly clear: The fate of his company does not hinge on what happens on January 1, 2000. In fact, Ciber has "worked hard at not being known as just a Year 2000 company," he says.

"Not that there's anything wrong with that," he adds, with Seinfeldish alacrity. "But our business right now is running close to $500 million a year, and we're going to be a viable company in 2001, 2005, whatever."

The Englewood-based company was launched in 1974 as a computer-oriented temp agency, supplying programmers to short-staffed businesses. Over the years, through a series of aggressive acquisitions and the cultivation of Fortune 500 clients, it has blossomed into a techno giant offering a range of consulting services, staffing and software implementation to the likes of IBM, American Express, Ford, AT&T and US West.

In late 1995, Ciber became a publicly traded company, with Hanifen Imhoff as underwriter (a relationship that's dutifully disclosed in Welty's newsletters tracking Ciber's growth). The stock, which started trading at around $4 a share, rose to the low twenties within a year. Twelve months further down the road, it's in the low sixties.

Barry Ollman of Hanifen Imhoff views Ciber's surging business as a dramatic example of how much corporate America, after a wave of downsizing, has come to rely on "outsourcing" for much of its technology needs. "Big companies are becoming more and more overwhelmed by the complexity of their computer issues," he notes. "Outsourcing was the theme well before the Year 2000 issue came along."

At present, Y2K-related business accounts for only about 10 percent of Ciber's revenues. The exact figure is hard to nail down, Storrison says, since employees in his division may be working with clients on Y2K as well as other problems. In addition, the company's Ciber2000 Group has established what amounts to a Y2K factory, where more than fifty employees work on "off-site renovation": Companies ship their entire computer code to Englewood, and Ciber ships it back, weeks or months later, with the glitch corrected.

Yet the Y2K threat is definitely having a ripple effect on Ciber's other activities; companies struggling with the millennial blues may opt for new software (one Ciber acquisition, Business Information Technology, provides support for the popular PeopleSoft business-software package) or other services. And with 4,300 employees situated in subsidiaries around the country, the company represents a sizable pool of skilled workers for what promises to be a highly labor-intensive job. Although much of the demand is still to come, programmers who know COBOL--an antiquated computer language used in many mainframe systems--are already in such short supply that some are commanding fees in excess of $100 an hour, compared with $40 a few months ago.

Storrison says Ciber is "investing heavily in recruiting" to head off a labor shortage. "It's an ongoing concern, but it doesn't scare me to death," he says. "In my division alone, I'd like to have another thousand employees if I could have them."

Faced with cost estimates stretching into seven or eight figures to make their code "Year 2000 compliant," some companies are electing to do the work in-house or to ship their code to cut-rate programmers in India. But in many cases, no quick fix is possible; the array of date-sensitive functions on a mainframe can be so formidable and the programming so labyrinthine from years of poor maintenance and jerry-built patchwork that deciphering its mysteries has been likened to an archaeological dig.

"Some of these systems are twenty or thirty years old, and no one expected them to be around this long," says Taner Kodanaz, vice president of the Ciber2000 Group. "Probably a hundred programmers have touched these systems. It's almost like layers of earth--things have lived and died, and you see this history of what's gone on in the system. When we go into the code, we have to understand what was done and why, so the changes we make don't affect other functions."

Kodanaz says his team has encountered such a wide variance in the way programmers have handled certain tasks--everything from "spaghetti code," with paths snaking in dozens of different directions, to largely unstructured black holes--that they've taken to storing certain constructs in a database so they can refer to them in similar situations. Even in well-maintained systems, the coding can occasionally resemble a second-grader's first essay. "There's a lot of bad grammar in coding," Kodanaz sighs. "They have subjects where the verbs should be."

Up against an inflexible deadline, some companies have discovered it's already too late to upgrade their entire system--the expense is often prohibitive, and there isn't enough time to transfer data and debug it. So they're forced to renovate their existing code, through either field expansion (converting all years to four digits) or "windowing," which leaves the dates as two digits but adds code that tells the computer how to interpret them--for instance, that all years over 50 belong to the twentieth century and those under 50 belong to the 21st.

Windowing is a popular option among Ciber's customers because it's cheaper than field expansion, but it has drawbacks, too. Adding code can slow down operations, Kodanaz notes, particularly if you have a high-volume database that has to perform a "date check" before it proceeds with a given operation. And there's no guarantee that software vendors will adopt the same cutoff dates--such as 50--for windowing.

"One program could interpret a date as 1945, another could see it as 2045," Kodanaz says. "Not only do we need to fix the Y2K problem among components, we have to make sure that different programs interpret the dates the same way."

Of course, many computer users, such as insurance companies, may require longer timelines than windowing can provide; some are already engaged in 21st-century calculations and are experiencing what Kodanaz delicately terms "points of failure." Without naming names, Storrison mentions "a major film processor out of Rochester, New York, that almost dumped a lot of dollars' worth of film" because a computer inventory control system rejected product with an expiration date of 00, figuring it expired in 1900. Some credit-card readers are having a similar problem with shiny new Visa cards.

"This thing is real," Storrison says. "Banks, financial institutions, credit card companies--these people have to get it done, but some of them started only recently. Now they're throwing a lot more dollars and labor at it."

Many companies are approaching the problem on a "mission critical" basis, scraping up the cash to fix the systems that actually run the business; other, less significant Y2K problems may not be addressed until 2001 or later. But some surveys suggest that a great number of corporations--more than half of all American companies, and much more abroad--are still at an early stage of assessing their problems, despite the impending deadline and the need to test programs over a period of months after changes are made.

"No one wants to take the heat for this," says Hanifen Imhoff's Ollman. "It's hard for some computer guy to go upstairs and tell the head of the company he needs $20 million that they hadn't planned on spending, just to stay in business."

Welty suggests that smaller businesses may simply be unable to finance the fix, prompting a wave of bankruptcies and mergers in certain industries. "Can Chase Manhattan or Citibank spend $200 million on this? Of course they can," he says. "But what about some small bank in Nebraska or eastern Colorado? For some companies, the only option is to be bought out by someone."

If Welty sounds like an alarmist, it may be because government and major financial institutions have been downplaying the issue. Al Gore, the "technology vice president" who will probably be running for office in the year 2000, has been oddly silent about Y2K. The federal Office of Management and Budget has grudgingly revised its estimate of the amount the government will spend on Y2K problems from $2 billion to $3 billion, but outside studies suggest the fix could cost around $30 billion. Last week President Clinton announced the formation of a White House council to coordinate federal Y2K efforts--a move some critics regard as long overdue.

As for Wall Street, Welty says few analysts are fixated on Y2K because "it's a negative story for the investment community. It doesn't generate revenue for them. Wall Street is full of eternal optimists, and this is a downer."

But Welty and Ollman both believe that external forces will drive companies to get cracking, providing a blizzard of contracts for Ciber and other companies positioned to cash in on the Y2K boom. SEC rules will require companies to tell their shareholders what they're doing about the bug. Banks will start looking at the Y2K situation in loan evaluations. Major manufacturers will follow the lead of the Big Three automakers, who recently sent a joint letter to thousands of suppliers advising them that if they want to keep their customers, they'd better be "Y2K compliant" when the big 00 rolls around.

Hovering over the scene is one more incentive: a litigation time bomb. Lawyers are already salivating over the prospect of shareholder lawsuits against companies whose stock plunges because of a Y2K problem. (A few Y2K-related suits have already been filed, and some states are scrambling to draft legislation immunizing government agencies from such actions.) Who will be held responsible? The board of directors? Software vendors who peddle stuff that has only two-digit date fields? Companies that promise quick fixes and then don't complete the work on time?

"Personally," says Welty, "I wish I could invest in law firms."

Eleven years ago, Tom Geimer took over an almost worthless company with the aim of salvaging what he could for shareholders. Since that day, anyone lucky enough to hang on to the stock has had reason to toast Geimer--and the coming millennium--about four thousand times.

That's roughly the percentage increase in the value of stock in Geimer's company, Accelr8, over the past two years, thanks in part to its Y2K business.

Accelr8 started out as a company called Hydroseek, a penny-stock venture engaged in buying and selling water rights in Colorado. The business went belly-up in the late-1980s real estate bust, and the company's founders bowed out, leaving behind a shell corporation with little capital and no prospects. Geimer, who ran his own securities firm, had been the stock's underwriter.

"I felt responsible for the shareholders who'd bought stock and then had management abandon them," he recalls. "I took it upon myself to find another business to put into that shell and rebuild the company."

Geimer took the company out of its dry hole and into the computer business, focusing on products for Digital Equipment Corporation's VAX/VMS systems--aging midrange computers favored by the military, government agencies and many large manufacturers. His first venture into product development was an abysmal failure; three months after Accelr8 embarked on an accelerator board that would make a VAX run faster, another company announced a Unix-based workstation that was ten times more powerful than Accelr8's product--and only 50 percent more expensive. It dawned on Geimer that the future lay not in hardware, but in coming up with ways that VAX users could "migrate" their data and applications to newer and speedier machines without having to rewrite all their software.

For several years, Accelr8 was basically a tool company, hawking migration products to the VAX market. Then business abruptly took off. After a stock split, the company opened 1996 trading at 50 cents a share; by year's end, it closed at $19.56--and Geimer, who controlled options for 1.2 million shares of stock, was a very happy fellow.

Geimer attributes the exponential growth to two key events. The first was the company's 1994 decision to offer consulting services as well as tools, a move that boosted product sales and landed Accelr8 several contracts for big migration projects from clients such as Union Carbide, Procter & Gamble, Kellogg's and the U.S. Army. The second was Geimer's trip to a conference in Salt Lake City in 1996, where he heard a Department of Defense official talk about the military's efforts to get a handle on its Y2K problems.

As soon as he returned to Denver, Geimer says, "I gathered all our technical guys and asked, 'What does the Year 2000 mean to us?' The initial thought was that it didn't mean anything because the VAX/VMS operating system claims to be Year 2000 compliant. But then you ask, 'What about the applications that are running on it?' That's where the opportunity was, because there were 7,000 applications sold to those users."

While virtually everyone else was worrying about IBM mainframes, Accelr8 was uniquely positioned to take advantage of the Y2K software problems in the VAX market. It was a niche market, sure, but what a niche--more than 400,000 hulking dinosaurs running a melange of programs written in different languages. The company had already developed an in-house tool that could quickly scan thousands of lines of computer code and assess the degree of difficulty in performing a migration project; with a little bit of tweaking, the scanner could be used to seek out date fields and evaluate Y2K problems.

Late in the summer of 1996, Acceler8 rolled out its first version of a Y2K scanner. Subsequent refinements have produced a sophisticated tool set known as Navig8 2000 that allows the user to perform a quick system inventory and identify potential date problems in any of eight programming languages. The product can't automatically fix Y2K glitches--those still require a programmer at the helm--but Geimer contends that it can save a company countless months of toil and considerable cash.

"If you have your top technical people doing this, you're taking $200-an-hour employees and applying them to a menial task," he says. "You can take a $30,000-a-year guy who's just out of college, and with our software guiding him through the code, he can fix it just as easily as your top person."

Its Y2K product line now accounts for roughly 80 percent of Accelr8's revenues. The company has landed contracts with Ford, Corning, Unisys and several other major companies that don't have any time to waste in upgrading their midrange systems. "There aren't enough people in the world to solve the Year 2000 problem," says Harry Fleury, Accelr8's president, "so the idea is to automate the task as much as possible."

Y2K investors tend to regard service companies like Ciber as more attractive than product vendors such as Accelr8, since the service companies often enjoy longstanding client relationships that will continue after the Y2K fix is completed. But that doesn't mean the handicappers at Hanifen Imhoff aren't bullish about Accelr8. "If they're successful with their product, they're going to generate a lot of cash over the next two or three years to invest in future acquisitions or other products," notes Welty.

Geimer plans to be in business well past the year 2000. Accelr8 has already weathered one attack of Y2K-related hype on the Internet, which, over a four-day period last year, drove its stock from the low teens to thirty and then back to sixteen dollars a share. After a year of steady gains and increasingly promising earnings reports, it now trades at around $25--with even better news ahead, its CEO insists.

"The Year 2000 problem isn't going to be solved by January 1, 2000," Geimer notes. "You'll probably see a two- to three-year carryover. Secondly, the migration business is still the core of our technology, and we intend to build on that, from VAX to Unix to the Windows NT platform. We got this Y2K problem because people became complacent about their old legacy code. Rather than facing up to the fact ten years ago that it needed to be modernized, or budgeting for it five years ago, they just let it go.

"That decision has created this incredible opportunity, not only for Year 2000 products, but to sell them the next generation of technology--which they haven't taken advantage of for fifteen years."

Geimer says his company's greatest challenge isn't cracking the Y2K problem but persuading manufacturers to move beyond the slow-but-familiar VAX technology. "They get into what I call the oil-and-grease mode," he says. "They don't invest in the information age; they use every piece of equipment until the last widget has been produced. The heavy industries in this country have not, because of competitive pressure, spent money on hardware and software."

By now most major corporations have at least some notion of the kind of problems the millennium could pose for their mainframe accounting and payroll systems, as well as the workhorse midrange computers and client-server networks that keep their businesses running. But business systems aren't the only "mission-critical" operations that rely on computer chips. One of the most critical areas also happens to be one of the least examined: the so-called embedded systems that run the physical plant itself.

Embedded systems encompass everything from the devices that control office-building elevators, air conditioning and security systems to the chips that operate the dashboard clock and automatically adjust the seat in a new luxury car. They're also essential to a wide range of industries--from mining and manufacturing to energy and public utility companies--in the form of "plant control systems," which regulate processing and emissions, monitor production and inventory, churn out required EPA reports and shut down assembly lines when alarm sensors go off.

For every ten business systems in a major manufacturing concern, there are probably two hundred such components on a factory floor. Until recently, though, few companies had bothered to examine their control systems for Y2K problems--and what they're finding is disturbing.

"The recognition that there are problems at the embedded-system level is pretty late in developing," says John Jenkins, CEO and chairman of TAVA Technologies, a company that specializes in providing consulting and software for plant control system integration. "Even our own people, until about nine months ago, tended to think that date-related issues aren't part of process control. The reality is that dates have a lot to do with it."

Compared with mainframe computers, many of the control systems in factories are relatively simple gizmos. But the vast number of them and the degree to which they rely on each other to keep the whole operation running pose a formidable challenge for Y2K-busters. "Think of the business system as a narrow, deep silo of millions of lines of computer code," says Jenkins. "On the factory floor you have a bunch of buckets, each with a few thousand lines of code. You have to search out each one; you can't strip out your code, send it to India and have it come back clean."

TAVA was formed last year out of the merger of five similar companies, including Denver-based Topro Systems Integration. The company, which now has 350 employees and offices in ten cities, reported revenues of $36 million in fiscal 1997. Jenkins expects double-digit growth in the coming year--total new orders in the first half of 1998 are expected to exceed $28 million--as the Y2K-related business continues to expand. TAVA already has nearly three dozen Fortune 100 clients seeking help with their Y2K problems, including some with hundreds of plants.

Like Accelr8, TAVA has developed special tools for identifying Y2K problems. The company compiles an inventory of plant control systems and checks it against a database of thousands of known Y2K compliance problems. Over the past six months, Jenkins says, plant inspections have revealed that 20 to 30 percent of the systems are checking out as "noncompliant" or "suspect"--meaning that they could fail under certain circumstances.

"Every plant we've been in has had some problems," he says. "Some are trivial and readily fixed. Some are significant."

How significant? Until a company checks out all of its control systems, no one really knows. A recent survey of British manufacturing companies found that less than a quarter of them had even begun such an audit; one chemicals-company executive responded to the survey by saying, "We would be amazed if there is not a major chemical disaster somewhere caused by Year 2000 problems with embedded software."

But even glitches that don't amount to full-scale disasters can still damage a company's equipment--and its bottom line. Jenkins describes "an energy management system that's used in the utility industry that made it fine from December 31 to January 1 on a test--and then went right on through January 31, 32, 33, and 34." He has come across a defective $600 control device that could bring an entire production line to a screaming halt. And his engineers have found plant security systems at the mercy of a lowly desktop PC.

"On one quick walk-through," he recalls, "the card-readers were okay, but the host computer that was managing this stuff had a fatal BIOS [Basic Input/Output System]. If that hadn't been attended to, on January 1 people couldn't get into the plant. The bigger risk is that someone could get locked in someplace where they need a bar code to get out."

Most of TAVA's Y2K clients are still at the "pilot stage" of assessing their problems. Others are balking at the cost involved--an understandable reaction, Jenkins says, but a troubling one. He estimates that huge multinational companies with dozens of plants have at least a year and a half of work ahead to repair and test their systems.

"The frustration is that here we are, one month into 1998, and most people still don't get it," he says. "We have to start most conversations by beating people into submission on the point that there is a real problem."

Jenkins understands what his clients are up against. Many have downsized their plant engineering staffs, and the survivors must cope with the "real-time world" of a round-the-clock processing plant. "If something's broken, you've got an hour to fix it, so someone will go in and write a crude patch program that stays there twenty years," Jenkins notes. "And every time you change your control system, you have a big risk of plant shutdown. So there's a natural reluctance: If it's still putting out product, don't mess with it."

But as the witching hour approaches, companies that want to keep the product flowing will have no choice but to mess with it. Recently TAVA announced an agreement with Bristol-Meyers Squibb to provide its Y2K software and support for roughly 125 plants worldwide. Jenkins says the deal shows how Y2K can lead his company into relationships with clients on a global scale that will endure well past the millennium.

"All that we're doing in Y2K enhances our base business," he says. "The opportunity for us downstream is to end this Y2K event with a strongly expanded client base on a corporate-wide basis."

If there is an upside to the Y2K frenzy, it isn't simply that a few high-tech companies and opportunistic investors stand to make a killing off it. The huge outlay of resources now being directed at the problem promises to transform the way businesses and government agencies deal with information technology. And that could be a good thing.

"We're seeing the fruits of twenty or thirty years of undisciplined, piecemeal development," notes Welty of Hanifen Imhoff. "From a corporate perspective, the encouraging thing is that it's going to force executives to realize the importance of information technology to their business. It's going to focus management attention."

The problem has certainly captured the attention of the State of Colorado, which is devoting an estimated $39.5 million to Y2K work--primarily for upgrading mainframes in the departments of personnel, revenue, and human services--and posting progress reports on the Colorado home page. Although few systems are actually being replaced, state officials regard the process as part of a much-needed overhaul.

"We've got a comprehensive inventory of our computer systems now, which we've never had in the past," reports Brian Mouty, statewide Year 2000 project manager. "That's invaluable for future decisions. And we've done a better job of cleaning up the code than before. We've found programs that we never used."

William White, who heads up US West Communications' Year 2000 project, also sees some possible hidden benefits in the venture. "Certain companies have started to figure out that getting yourself Year 2000 compliant is actually a marketing advantage," he says. "That's part of the tack I've taken internally. We want to make sure we're compliant and hand that out to our salespeople."

Telecommunications companies are probably less susceptible to Y2K problems than many other technology-based businesses--dial tones aren't date-sensitive--but White says his company will spend "at least" $50 million on various software issues, including upgrading the billing system and making sure that work orders aren't issued for the wrong day of the week. The company has been battling the beast for two years and expects to have all of its critical systems compliant by the summer of 1999.

Some minor glitches, affecting only internal systems, may not get done in time, White adds, "but our objective is that our customers perceive no Year 2000 impact. Period. That way the press can't come back and have a field day with US West."

White acknowledges that there's little chance that US West will recover its massive Y2K investment from added service, but he insists that "other efficiencies" will come out of the process. "We have technology that's ten years old and at the end of its life cycle," he notes. "We will end up having upgraded our computing and network environment to a very current level, and we will see some gains coming back from that. Whether it will be a net gain is hard to tell. But if we did a poor job of this, what do you suppose the impact would be on our revenue stream?"

It's best to take the long view when considering the Y2K quandary. The short one has already cost too much. The whole mess arose out of a simple set of keystrokes, the decision to designate years in two digits rather than four. That decision may have been justified back in the days when electronic brains took up entire rooms and memory capacity was at a premium. Yet the practice survived, through generation after generation of instant upgrade and instant obsolescence.

No one dreamed those old codes would still be running right up to the brink of the millennium. No one looked ahead. And now the shortcuts of the past have caught up with us. The bill falls due at century's end.

The irony of the situation isn't lost on White. "This all started because we wanted to shorten a date and be very efficient," he says. "Now we have the Year 2000 problem, and we've already shortened it to Y2K. Here we go again.


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