ITAA's Year 2000 Outlook March 12, 1999 Volume 4, No. 10 Published by the Information Technology Association of America, Arlington, VA Bob Cohen, Editor bcohen@itaa.org Read in over 80 countries around the world ITAA's Year 2000 Outlook is published every Friday to help all organizations deal more effectively with the Year 2000 software conversion. To create a subscription to this free publication, please visit ITAA on the web at https://www.itaa.org/transact/2ko utlooksub.htm. To cancel an existing subscription, visit https://www.itaa.org/transact/2kremove.htm. ITAA's Year 2000 Outlook is sponsored in part by CACI International Inc. and Y2Kplus. In this issue: · Group Finds Y2K Lessons in Euro Debut · SIA Reports Early Thumbs Up on Testing · House Mulls Small Business Y2K Loan Bill · House Bill Seeks to Close Y2K Gap on Welfare Systems · Retailers Called to Court on Y2K · Lucent Technologies and AT&T Draw Lawsuit · Business to Business · ITAA Y2K Information Center · Sponsor Advertising Group Finds Y2K Lessons in Euro Debut The Euro conversion may have some bankable lessons for Y2K planners. At least that's the contention of the Global 2000 Co-ordinating Group, the Zurich-based organization of banks, securities firms and insurance companies working to head off Y2K problems in the global financial community. Global 2000 recently released a set of lessons learned which extrapolates from the Euro experience to the century rollover. Widely reported a success and essentially a "non-event," the Euro conversion on closer inspec tion may tell a different story. According to Global 2000, market participants reported "significant problems, each of which leads to an important lesson for the Year 2000 problem ahead." The lessons learned look out should be of interest to bankers and non-bankers alike. Global 2000 reports Euro problems related to the availability of liquidity and credit management to offset payment and funding dislocations. Global 2000 Secretariat Bill Mundt says these problems centered around the large value payment systems used in foreign exchange business. Some institutions failed to follow payment instructions, resulting in fund transfers to the wrong accounts, the inability of funds to recycle, a nd liquidity shortages. Mundt says that while such errors are easily corrected under normal circumstances, under the heightened level of anxiety associated with the Year 2000, "normal errors may be misinterpreted." Anticipating that things may go wrong, people could over react, he suggests. Global 2000 recommends that the payment and credit communities should review the Euro experience and establish management techniques for addressing broader problems. Euro info also fell short, with a lack of information across borders emerging as a significant issue. The group notes that Central Bank and regulatory information was slow to emerge and that firms were unwilling to share bad news until the last minute. Rumors flew as formal information-sharing networks set up well in advance went under utilized. Ironically, according to Mundt, as the Euro introduction occurred, this formal network was effectively replaced with a more ad-hoc group of operations people f rom 60 banks and clearing institutions. Global 2000 recommends establishing such networking groups at different layers in the business and at different levels within the industry. Global 2000 says that Euro conversion project offices focused on data gathering and reporting and used SWAT teams to resolve operating problems. Sorting out just how to accomplish this work could be a little touch and go, the report suggests, with increa sed resources required and priorities established. Data gathers should have quantifiable metrics and SWAT teams need business unit knowledge. Other lessons learned involve testing, business volume reduction, contingency planning and industry-wide instructions. While point-to-point Euro testing produced good results, problems popped up in terms of message content, formats and other downstream l ogic-problems which may have been flagged with end-to-end testing. The report notes that the Euro may have profited from relatively low business volumes during the conversion period, although such lulls were not purposely orchestrated. Global 2000 recommends not to count on such business slow downs for the Year 2000, wh ich it calls a "full-blown, all-market retail event." On contingency planning, the report finds that the need "is greater and more complex than for the Euro. This is critical because contingency planning for the Euro demonstrated how difficult, time-consuming and costly true contingency planning can be," th e report notes. Industry-wide instructions-or the lack thereof-underscore the need to communicate. "Market participants noted that specifications for Euro conversion were confusing, late and complicated, for example Swift had released new instructions as late as mid-Dec ember 1998," Global 2000 notes. The report suggests that industry-wide organizations and regulators minimize systems and reporting changes for the remainder of the year. SIA Reports Early Thumbs Up on Testing The Securities Industry Association (SIA) reports smooth sailing on its first weekend of industrywide Y2K testing. Over 400 firms participated in the test, which rolled forward computer dates to December 29, 1999 and processed a series of hypothetical tr ansactions with settlement dates on January 3, 2000. A small number of firms missed the deadline for transmission. "It is unclear yet whether these delays can be attributed to Y2K systems issues or to problems in logistics," said SIA Executive Vice Pres ident Donald Kittell. The industrywide testing schedule calls for the date simulation to continue this weekend with computers set forward to December 30; March 27 testing will simulate December 31; and April 10 will simulate January 3, 2000. Product gro ups included in the testing are equities, options, unit investment trusts, mutual funds, corporate bonds, municipal bonds, mortgage-backed securities, governments, and money market funds. SIA will publish a full report on the testing program April 29. P reparation for the industrywide testing effort began three years ago. House Mulls Small Business Y2K Loan Bill A bill to provide guaranteed loans to small businesses drew support from industry this week but words of caution from the Small Business Administration (SBA). Appearing before the House Small Business Committee today, ITAA President Harris Miller and Tod d McCracken, President of National Small Business United, testified in favor of a measure which would establish a limited-term loan program to assist small businesses in correcting Y2K computer problems. The program's start-up phase would be expedited by making each lender that currently participates in the SBA's 7(a) business loan program eligible to participate in the Y2K loan program. "Small business is the springboard of the American dream. We cannot afford to sit by, waiting to see if the dream will be crushed by the Millennium date change. This bill will allow small businesses to take all the proactive steps necessary to avoid a Y 2K problem - from repairs and remediation to replacement of computer systems," Miller said. An SBA official appeared to cast doubt on the need for Y2K-specific small business lending legislation. Deputy Associate Deputy Administrator Jeanne Sclater testified that "there are existing loan programs that could be used by most small businesses to address [Y2K] needs." Sclater said the proposed legislation would decrease the underwriting standards used in the SBA guaranteed loans program, requiring the agency to establish a higher subsidy rate. She testified that a Y2K loan would increase the cost to taxpayers from $1. 39 for every $100 under the current 7(a) program to $4 for every $100. The difference, Sclater said, could increase the agency's costs by about $20 million. In a related matter, the SBA also slated March 29-April 2 as Small Business Y2K Action Week. SBA, along with the Departments of Commerce and Agriculture, will make free or low cost Y2K assistance available to small businesses during this period. The par tnership has established a core Y2K remediation team and help center. The help center hotline can be reached at 1-800-Y2K-7577. House Bill Seeks to Close Y2K Gap on Welfare Systems Rep. Diana DeGette (D-CO) has introduced H.R. 909, the Y2K State and Local GAP (Government Assistance Program) Act of 1999, a measure designed to make grants available to the states for the Y2K remediation of welfare related systems. If passed into law, the federal government would match states two-for-one on dollars spent in Y2K compliance programs. The program would be administered by the Secretary of Commerce. Retailers Called to Court on Y2K A group of retail chains are being sued for selling products claimed not to be Y2K compliant. Circuit City, Fry's Electronics Inc., The Good Guys Inc., CompUSA Inc., Office Depot Inc., Staples Inc. and OfficeMax Inc. are the defendants in a lawsuit filed by Bowles & Verna of Walnut Creek, CA. The suit alleges that the retailers violated California's Unfair Business Practices Act by remaining silent on the Y2K status of their products. Lucent Technologies and AT&T Draw Lawsuit Lucent Technologies and AT&T are the targets of a class action lawsuit filed by Beatie and Osborn LLP. The suit alleges that the firms violated consumer protection laws and breached warranties by marketing telecommunications products known to be non Y2K- compliant. Business to Business Greenwich Mean Time, Fareham, Hampshire, has introduced Check 2000 PC Deluxe, a single user version of their Check 2000 Client Server network software. Forecross Corporation, San Francisco, CA, has entered into a Y2K teaming agreement with Sterling Software's Information Management Division. SunGard Data Systems, Inc., Wayne, PA, has completed the acquisition of Tiger Systems Inc. Formal Systems America Inc., Cherry Hill, NJ, has entered into a software services distribution agreement with AverStar, Inc. ITAA Y2K Information Center Solution Providers Directory http://www.itaa.org/script/2000vend.cfm ITAA*2000 Certification Program http://www.itaa.org/2000cert.htm Outlook Archive http://www.itaa.org/script/get2klet.cfm Legislative and Litigation Table http://www.itaa.org/year2000/legis.htm Calendar http://www.itaa.org/y2kcal.htm Vendor/User Status Questionnaires http://www.itaa.org/questmain1.htm Alternate Dispute Resolution (ADR) http://www.itaa.org/year2000/adr.htm Statement of Intention to Use ADR http://www.itaa.org/year2000/soi.htm, Y2K Mediators Seminar http://www.technologymediation.com/Y2K_seminar.htm Copyright ITAA 1999. All rights reserved. The Information Technology Association of America, 1616 N. Fort Myer Drive, Suite 1300, Arlington, VA 22209. Internet: http:\\www.itaa.org