ITAA's Year 2000 Outlook March 27, 1998 Volume 3, No. 12 Published by the Information Technology Association of America, Arlington, VA Bob Cohen, Editor bcohen@itaa.org ITAA's Year 2000 Outlook is sponsored in part by BDM International, Inc., CACI International Inc., DMR Consulting Group Inc., IBS Conversions, Inc., Softworks, Inc. and Y2Kplus, Inc. Contractors Ask Feds for Y2K Relief When it comes to Y2K system fixing, Uncle Sam just can't seem to catch a break. First it was agencies refusing to spend money for the necessary repairs. Now, some federal contractors may be saying "thanks, but no thanks" to the work being offered. In e ffect, these are Y2K labor contracts that companies cannot afford to accept. As it turns out, fixed labor hour rates, much favored by government agencies, do not work well in a marketplace where wages can jump 20 to 25 percent every six to ten months, ac cording to some firms. With more lucrative state and private sector opportunities beckoning, several IT companies, working in conjunction with ITAA, are asking the General Services Administration (GSA) for relief. The problem stems from mega contracts agencies use to acquire IT products and services. Take the example of Government-wide Acquisition Contracts (GWACs). These are contractual vehicles in which a subset of contractors have been selected to compete for multiple awards parceled out over time. To win a spot on a GWAC contract, the companies have bid fixed labor rates. And because GWACs are expensive and time-consuming for the government to put in place, they stay in place for up to ten years. In the Year 2000 pressure cooker, a contract with labor rates intended to last ten years is, to say the least, optimistic. Such contracts may include "accelerators" to keep pace with the cost of living. These sweeteners tend to be in the 3- to 5 percen t range…hardly in keeping with the type of double digit demands forcing contractors to put "the pedal to the metal" on employee salaries, bonuses and benefits. Enter the GSA. GSA's Federal Supply Service (FSS) also offers agencies an avenue to acquire Y2K remediation services. These services are offered at rates which tend to be higher than GWACs but not in keeping with the marketplace either. An ITAA member c ompany delegation has appealed to the FSS to consider a rate increase now, not when the schedule is renegotiated in March 1999. "I can't hire the people to do this work," complains one executive at a systems integration company. This individual's firm will pass on GWAC work but at least poke at opportunities available on the schedule. Companies say they want the work, but not at rates where they are forced to subsidize the federal government. "We're all hungry for business," this person says, "So I may squeeze into the GSA rates. That means hiring people you can afford or people who may not be as qualified to do the job. The work may not be performed well and the customer may not be happy, but the government got its rate." Why the margin squeeze? This executive says database professionals once making $60,000 are now expecting upwards of $90,000. Senior program managers are also verging on six figures. Experts in languages like Model 204, Adabase, IDMS and Datacom DB go a t a premium too. And some of it just goes with the territory. According to this executive, "My customer says 'I need four senior Y2K people with top secret clearance next week.' He is not talking about a retired bus driver or cafeteria worker…I'm all for training but 6 00 plus days left is not a lot of time. The shortage is driving rates up." So this particular company has four full time recruiters scouring the countryside for people with experience in legacy database languages, COBOL, and mainframe environments. "You can't take someone fresh from a computer trade school, drop them in a feder al agency, and say, 'go for it,'" this executive maintains. Companies may be passing on federal contracts for strategic considerations too. One large systems integrator with hundreds of millions of dollars in fourth quarter Y2K business is limiting future business to Fortune 500 companies and major agencies with potential for on-going work. Where does that leave federal agencies? "If it's a low bid contract, we wish them luck," says a company representative. This person says his company intends to take a very hard look at accepting new Y2K business by third qu arter 1998. "There just won’t be time to get the work done," he says. Clearly, not every firm can afford to be this selective. "We haven't walked away from anything," says one smaller services firm. Sending a shot across the bow of the high end competition, this person says, "Our rates are decent. [Competitors] negotiate d superficially low rates and junior programmers. That's not reality. They weren't taking into consideration the scope of a Year 2000 program. It can be a real can of worms…Most companies based everything on the cost of fixers. That's a minute part of the problem. They bid rock bottom rates to win the contract. Most companies feeling the saddle burn operated on [the wrong] set of assumptions." Report Sees Y2K Woes for Foreign Exchange Markets The Year 2000 rollover could cause major operational failures for the foreign exchange marketplace, according to a recent report from the Computer Science Corporation (CSC). Single day disruption costs could reach into the hundreds of millions of dollars . "Sustaining Stable Financial Markets through the Millennium" looks at the potential of Y2K noncompliance problems to trigger systemic impacts. The research examines the possible effects of failure at a major foreign exchange player, a group of smaller institutions and a clearinghouse. CSC based its findings on interviews with 90 representatives of financial institutions, regulatory bodies, associations and clearinghouses. In addition, company researchers examined the nature and volume of foreign exchange transactions, past failure rat es, and failure rate changes as the result of three potential Year 2000 scenarios. The CSC report identifies Y2K-noncompliance cost and risk categories. "Cautious trading," for instance, involves lost profits as a result of trading slowdowns or trading limited to only those institutions considered compliant. "Non-compliant transaction costs" will mount for firms that can’t satisfy their obligations. "Backoffice bottlenecks" will cut throughput, increase operating costs and cause interest penalties. The tab for a big bank on a single day could reach upwards of $660 million and $3.3 billion in a 5-day period, according to the study. Big numbers to be sure. "Associated costs of a Year 2000 operational disruption could be many times greater than the d irect costs of the failure itself," the report notes. "…bottlenecks caused by Year 2000 non-compliance could cause settlement failure rates to jump from the current 1 percent to as high as 5 percent—a 400-percent increase." Clearinghouse problems could pose the most expensive risks, with high end costs projected at more than $1 billion per day or $5.2 billion over five days. If settlement failures begin to ripple outward on a large scale, the study’s respondents warn the system may be stressed to the breaking point, "causing significant liquidity or credit problems and threatening the stability of the market." If multiple institutions hit the Y2K wall, that could severely test the ability or willingness of central banks to offer bail outs. The ability of contingency plans to cope with such a circumstance are unclear, the report notes, and the heavy demands pla ced on central banks by such a contingency could lead to a liquidity crisis. "If the central bank’s funds are tied up or unable to be distributed, the system may experience gridlock." The report notes that the current level of Y2K preparedness makes the failure of a clearinghouse, major foreign exchange player or group of small institutions "a real possibility," and that there is no way to assure that adequate prevention measures will be in place in time. "It appears unlikely that industry-wide risk control initiatives will have the critical mass or acceptance within the next 2 years to mitigate the systemic impact of Year 2000 non-compliance." Thompson Sets Y2K Hearing Sen. Fred Thompson, Chairman of the Governmental Affairs Committee, has scheduled a Y2K hearing for April 1. The hearing is expected to focus on the Federal efforts at contingency planning, fixing embedded systems and how agencies are working (or not wo rking) with the States. Called to testify are Y2K Czar John Koskinen, DoD Under Secretary and CFO John Hamre, and deputy secretaries from Health and Human Services and Agriculture. DoD Appoints Y2K Director Defense Information Systems Agency (DISA) Procurement and Logistics Deputy Director William Curtis has been tapped to head up the Pentagon’s Y2K efforts. Curtis is expected to report to the deputy CIO, office of the assistant secretary for Command, Contr ol, Communications and Intelligence. Curtis is a retired Army colonel who joined DISA four years ago. Closer to Home Y2K Czar John Koskinen is considering an inter-industry advisory council to expedite the nation’s response to the Year 2000. ITAA President Harris Miller and a delegation of IT company executives met with Koskinen today in Washington, D.C. and posed the industry council concept. Miller also urged Koskinen to press for a national address on the issue by either President Clinton or Vice President Gore. The Prudential Insurance Company of America of Newark, New Jersey has received ITAA*2000 certification. ITAA*2000 is the industry’s century date change certification program. The program examines processes and methods used by companies to perform their Year 2000 software conversions. Business to Business Crystal Systems Solutions Ltd., Herzliya, Israel, has been awarded a Y2K contact by the Ohio Savings Bank. Viasoft Inc., Phoenix, AZ, has entered into a Y2K licensing agreement with Ford Motor Co. Reasoning, Inc., Mountain View, CA, has announced the release of Reasoning/2000 for Inspection, a toolset and process used to automate the inspection of Cobol applications. CACI International Inc., Arlington, VA, has been awarded a Y2K contract by Oxford Health Plans of Norwalk, Connecticut. ConSyGen, Inc., Phoenix, AZ, has entered into a Y2K contract with Motorola, Inc. CGI Group Inc., Montreal, Canada, has won Y2K contracts with First Heritage Savings, Sherwood Credit Union, the Ontario Ministry of Community and Social Services, Desjardins-Laurentian Life Group, and the Quebec government's Information Services' Division . MigraTEC Inc., Dallas, TX, has announced the availability of MigraTEC2000, a Y2K software tool for analysis and remediation of desktop and client/server applications written in C and C++ languages. C2I Solutions, Inc., San Diego, CA, and Replico Technologies Corp. have won Y2K contracts with California government agencies and organizations through the California Multiple Award Schedule (CMAS). Sponsor Advertising BDM International (TRW Systems and Information Technology Group) Do you need help juggling all your Year 2000 responsibilities? With BDM and our SMART/2000+SM solutions, you have a partner to help address your most critical business priorities and technical requirements – from risk assessment, program management, and conversion, to independent test and compliance validation. We deliver project tracking, configuration management, and control metrics that help ensure enterprise-wide integrity and minimize your risk from start to finish. We have a mature process, a dedicated team, and experience that demonstrate the strength of our solutions. Gain the upper hand now by calling BDM: (800) 794-6085 e-mail: year2000@bdm.com http://www.bdm.com. e-mail: year2000@bdm.com http://www.bdm.com. CACI International Inc. -- Restore 2000 CACI leverages 35 years of information technology experience and over 10 years of reengineering systems - solving the same problems Y2K poses - to offer a total solution to the Year 2000 challenge: Restore 2000SM. The Restore 2000 methodology applies a comprehensive three-phase process to your information systems: Assess, Plan, and Remediate. Furthermore, we give you the option of buying our methodology or our services - both backed by CACI experience and Y2K expe rts. The Restore 2000 methodology is ITAA*2000 certified. In addition, software development processes at CACI have been independently certified as being at Level 3 of the Software Engineering Institute (SEI) Capability Maturity Model. Achieving SEI Level 3 provides clients further assurance that CACI solutions successfully and effectively deliver Year 2000 compliance while allowing you to save money, reduce risk, and minimize systems disruption. With approximately 3700 employees worldwide and FY97 revenues in excess of $270 million, CACI provides a depth of experience and expertise you can rely on. We've performed Year 2000 conversions for many of America's biggest enterprises, including major he alth insurance providers, retail clothing manufactures, gas companies, airlines, and government agencies. Superior functionality backed by decades of experience - CACI's Restore 2000. Worldwide Headquarters 1100 North Glebe Rd. Arlington, VA 22201 http://www.caci.com e-mail:npeters@hq.caci.com DMR Consulting Group Inc. DMR Consulting Group Inc.(formerly DMR TRECOM), an Amdahl company, is a global consulting organization of over 7,000 employees providing a comprehensive range of information technology services. Our Year 2000 Practice comprises a comprehensive offering of consulting, assessment, remediation, testing, and implementation services utilizing a formal methodology (APM/2000), best-in-class software tools, and six global conversion centers. We have mul ti-disciplinary experience in most mainframe, mid-range, and client-server/desktop environments. APM/2000 includes: · Program Management · Enterprise-Wide Assessment · Impact Analysis · Conversion Delivery · Testing and Implementation Year 2000 Risk Management Consulting Services include: Program Review, Stakeholder Readiness Assessment, Risk Management and Vendor Compliance Research. Contact: Stephen Frycki Managing Director, Year 2000 Services - US Phone: 201-200-3923 Fax: 201-200-9046 Email: fryckis@dmr.com Websites: http://www.dmr.com IBS Conversions, Inc. IBS Conversions, Inc., founded in 1982, is the first service organization to receive ITAA*2000 Certification. IBS is a recognized leader in automated conversion/migration software and consulting having translated millions of lines of code for companies worldwide. IBS/Solution 2000 IBS/Solution 2000TM is a full suite of Year 2000 services and products: Full project Analysis, Pilot Project and Repair, staffing and management/methodology Scan/Repair Conversion Factories for Mainframe and AS/400 environments Project Methodology Qwik-Sizer Analysis Licensing Scan/Repair Tools for AS/400 Y2K Projects License Conversion Factories/Tools to other Consulting Firms http://www.ibs2000.com SOFTWORKS, Inc. HOT DATE 2000/SIMULATE Preparing for the new millennium isn't easy, especially in the data center. Ensuring an accurate conversion could be a daunting task. That's why SOFTWORKS has created HotDate 2000/SIMULATE. HotDate 2000/SIMULATE is a comprehensive identification, testing, and simulation utility created to locate the programming changes needed to prepare for the Year 2000. Using a simulated Year 2000 environment, HotDate 2000/SIMULATE locates and tests poten tial date problems the Year 2000 will cause to your individual programs, applications, and entire system. HotDate 2000/SIMULATE is transparent to your applications and supports all programming languages. For more information about HotDate 2000/SIMULATE, call SOFTWORKS at 800-727-4422. Http://www.softworkscc.com Y2Kplus, Inc. Y2Kplus provides a portfolio of "best of class" software products and outsourcing services that address Year 2000 issues. These offerings are available both to IT Solution Providers and IT organizations. Y2Kplus has offerings that address the following needs: Our offerings include: * Year 2000 risk assessment * Mainframe inventory verification & code remediation (COBOL, Natural, Assembler & PL/1) * Midrange COBOL remediation (DEC, HP, UNISYS, Wang, DG, NCR, Bull & Tandem) * AS/400 remediation (RPG & COBOL) * Networked PC Year 2000 Analysis tools Applications: Access, Excel, Foxpro, Lotus 1-2-3 Languages: Basic, Visual Basic, C, C++, dBase, Clipper, Paradox PC Hardware, BIOS & Operating Systems * Testing: Tools: Data Commander for future date testing, TCS (Test Control System), Services: Test management & execution, Facilitated Test Planning, Test strategy. For more information, please send email to info@y2kplus.com, visit our web site at www.y2kplus.com or call Dave Ehlke at 781-863-8111. Calendar http://www.itaa.org/y2kcal.htm ITAA's Year 2000 Outlook is published every Friday to help all organizations deal more effectively with the Year 2000 software conversion. If you would like to receive this free publication, please sign up on the web at https://www.itaa.org/transact/2kout looksub.htm. Copyright ITAA 1998. All rights reserved. The Information Technology Association of America, 1616 N. Fort Myer Drive, Suite 1300, Arlington, VA 22209. Internet: http:\\www.itaa.org