ITAA's Year 2000 Outlook June 14, 1999 Volume 4, No. 22 Published by the Information Technology Association of America, Arlington, VA Bob Cohen, Editor a 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., DMR Consulting Group Inc and Y2Kplus. In this Issue: · As Kosovo Cools, NATO Plays Y2K Catch-Up · Economist Says Statistics Net Out Bug · Oklahoma Oks Y2K Liability Bill · Class Certified in Sage Lawsuit · Y2K Bill Goes to Senate Floor · Business to Business · ITAA Y2K Information Center As Kosovo Cools, NATO Plays Y2K Catch-Up Configuration management a problem? Y2K competing with other top priorities? Try fighting a war while performing the date conversion. Then coordinate the repair activity with 19 nations. Above all, make sure that systems which must work continue work ing into the Year 2000 and beyond. That's the NATO mission. With a Kosovo peace accord at hand, NATO headquarters in Brussels last week appeared more cool and efficient than joyous or festive. The only bow to the current political season seems to be the barbed wire barricades decorating the front gate. The war h as taken its toll on more than Serbia, however. "Our involvement in Bosnia and Kosovo made us slower to focus on Y2K operational issues than what might otherwise have been," says Norman Ray, NATO Assistant Secretary General for Defense Support. "That having been said, now we are focused and have a cle ar idea of what our most important systems are to correct." Ray says these will be delivered to the military either fully compliant or with a satisfactory contingency plan. "There will be no significant degradation to our military posture," says the for mer Navy vice admiral. Just for drill, remember that NATO is an alliance and that its member states are responsible for developing, implementing and maintaining their own defense systems. As with Kosovo, NATO draws on these systems whenever "consultations" among the states pro duces mutual agreement on a military action. The NATO IT inventory is more limited than its member states, consisting of systems such as planning and logistics; command, control and consultation; air defense; AWACS aircraft; and intelligence. NATO is al so something of a petroleum company, running its own oil pipeline. While the organization does not have the thousands of information systems of the U.S. military establishment, the job of getting ready for the millennium while defending the western world is by no means trivial. And it started a year late. According to Ray, NATO's organization made establishing top Y2K responsibility and defining an organizational approach difficult. Short of the NATO Council, no entity within the alliance had sway over the represented military authorities and agencies fo r generating a Y2K response. Rather, with 19 sovereign nations involved, the response had to be decentralized. Member states were deemed responsible for correcting their respective systems; NATO headquarters took on coordination and oversight functions ; and the executive role-to the extent that it exists--defaulted to the council. Ray heads the integrated project team for generating command status information and generating "the big picture." The picture gets clouded when not all players share a common view of the problem. "[Y2K] Awareness has not been uniform among nations," Ray says. Some NATO member countries have been "extraordinary," he says, "while others take the matter far less serio usly." That leaves the one-time NATO deputy chairman seeking to coordinate a readiness program among competing viewpoints, levels of national IT reliance, and, as a result, differing degrees of urgency. Countries controlling systems on which NATO relies must be coaxed, not ordered toward compliance. Ray's integrated project team meetings can be used to apply a certain amount of peer pressure, but the group lacks the authority to go in and independently audit system readiness. Ray allows that some member states are better than others about participating in the group, but only the U.S. and the U.K. are engaged on a consistent basis. Meanwhile, interface management is also a significant challenge. "Some nations extensively interface with NATO C3I systems; others fundamentally do not," Ray says. Take the example of the organization's air defense backbone network. NATO owns and operates the backbone, but member states own and operate many of the nodes and sensors. Without adequate interface management, incoming information from locally controll ed nodes could contaminate the network. Interfaces aren't the only management hurdle to overcome. Like most organizations, NATO's first systems inventory generated a huge number of information systems. "Unmanageable," Ray says. He says the management issue began to solve itself when the orga nization looked at its IS holdings from an operational rather than technical perspective. "Once we were able to focus on operational criticality it was much easier to manage with confidence… Now we have a clear vision." Ray says the NATO Y2K challenge is simpler than the problem facing its larger members. He stresses that the organization does not control military weapons or a nuclear arsenal. Consultations with Russia on military matters have been on hold as a result of the Kosovo conflict, but Ray says NATO has nothing under its command and control that could threaten Russian territory, even under "the worst Y2K scenario." An end note: as NATO works to make up for lost time, Ray leaves the organization this month after seven years to become president of Raytheon International. Economist Says Statistics Net Out Bug Economies are a little like balloons. Poke them here and they expand there. They may change shape in the short term but, over the long haul, they return to form nicely. So even a good swift kick delivered by the Year 2000 should have little effect for Europe if viewed in truly macro economic terms. At least according to Nicholas Vanston, who heads the Resource Allocation Division, Economics Department, at the Organization for Economic Co-operation and Development (OECD) in Paris. Whether or not Y2K will have much kick is, of course, the question of the moment. Vanston's view is hedged: "There will a lot of minor inconveniences late in 1999 and early in 2000. There will probably be serious inconveniences in Western and Eastern Europe. I think it is unlikely that there will be major catastrophes. " Vanston suggests that catastrophes will be avoided because much of the computing equipment in European countries is relatively new and, therefore, stands to be that much more immune to the Millennium bug. The affluent economies in northern Europe have ag gressively gone after the problem; the less affluent economies to the south have been less aggressive but have a far smaller installed base of circa 1970s and 1980s equipment. The OECD economist also says Y2K awareness in Europe is generally on the rise: "There are more references to the Y2K bug-and not just in the English language press." Two years ago, Vanston says, the story was essentially for English language readers only. Now the French have likewise gotten into the Y2K reporting act. Vanston estimates Europe's Y2K problem at $100 billion in repair and replacement costs. That figure is far lower than the $300 billion some estimate for similar work in the U.S., in part because Vanston says Europe is less computer intensive and in part because some countries will essentially instigate fewer repairs. Regardless of absolute amounts involved, Vanston says the Year 2000 could actually help the European economy by "accelerating the renewal of replacements." New investment in IT equipment, high employment in well paid Y2K repair jobs, new attention paid to IT strategies overall leading to still more investments--all of those things show up favorably in economic statistics. It's the high tech equivalent of driving a car into a brick wall. To economists, the net result of the crash is positive, yielding industrial output, employment, consumer demand and a new car sale. To really appreciate the situation, go a step deeper in the economic logic. The statistics of capital equipment is a bit like the actuarial tables of insurance companies, packed with assumptions about how long things will last and the odds that they will blow up, burn down or meet some other untimely end. Vanston says economists essentially assume that a certain amount of equipment will hit the brick wall in any given year, and they factor these losses into their models and forecasts. At the same time, because of rapid advances in the price/performance of the technology itself, Vanston indicates that economists have likewise worked a certain percentage of IT replacement costs into their statistics. As a result, from an economic point of view, Y2K may have already happened. Or it may be a non-event all together. In macro economic terms, one country's loss to Y2K disruptions may be another country's gain. "If a ship cannot unload its cargo in Marseilles, it can unload in Hamburg," Vanston predicts. "I personally don't thin k even major [Y2K] catastrophes will have an impact at the macro level," he says. "These [disruptions] may be things that people talk about for the rest of their lives and [losses] will still not exceed 1 percent of GDP for Europe. To prove his point, Vanston says industrial production in Germany during World War II didn't begin to fall until the end of 1944-only after years of allied bombing. Even under less dramatic circumstances, the economist says its surprising how quickly soc ieties can adapt to change. He notes that when a strike shut down Irish banks for several weeks, people began using endorsed checks as a form of currency. The checks couldn't be cashed, but they were accepted anyway. "Society didn't collapse without th e banks," he said. Similarly, when the coal miners' strike in the UK forced energy rationing back in the winter of 1974, people adjusted to scheduled outages of heat and light. "It was massively inconvenient," Vanston said, "Industrial output fell by a fair percent. But for Europe as a whole, it was hardly visible." Oklahoma Oks Y2K Liability Bill Oklahoma recently became the eighth state to pass a business-focused liability limiting Y2K bill this year. The bill, HB 1325, passed by the state legislature on May 26, and signed in to law by Governor Frank Keating, encourages the use of alternative di spute resolution for Y2K claims. The bill prohibits class action lawsuits against those businesses that engage in reasonable Y2K testing, remediation and contingency planning, and also prohibits punitive damages awards. The bill also provides qualified immunity for directors and officers, preserves written contractual terms, and reclaims sovereign immunity. Bodily injury and pollution cases are exempted from the bill. The bill does not apply to public companies and exempts the state from liability ove r Y2K disputes. Over 280 Y2K-related bills have been introduced at the state level nationwide this year. Thirty-one states have now passed state sovereign liability laws. Class Certified in Sage Lawsuit A national class of users of Sage Software Inc.'s M*A*S 90 software program was certified on May 27 by the Orange County, California, Superior Court. The decision, which reflects the judge's opinion that plaintiffs had enough of a connection for the suit to move forward as a class, represents the first Y2K class action deemed by a judge as worthy of certification. The class consists of users who purchased Sage's M*A*S 90 software package from 1990 through February of 1998, an estimated size of over 40, 000 users nationwide. The software package is an accounting system used to plan budgets, track inventory, and manage accounts payable and receivable. The Y2K lawsuit was filed against Sage Software in the Orange County Superior Court in September, 1998 by Sherman, Silverstein, Kohl, Rose & Podolsky and Bernstein, Litowitz, Berger and Grossman LLP law firms. Both firms have set up Y2K-related practices . The case alleges that Sage violated the California Business and Professions Code, and breached certain express warranties when the company marketed versions of the software, without disclosing that the software was unable to process dates after Decembe r 31, 1999. The complaint alleges that Sage sold non-Year 2000 compliant software programs and should have known that the software would not be prepared to handle the Y2K date change. Since the filing of the Complaint, Sage filed a Demurrer to the Complaint, which w as overruled by the trial judge. This indicates that the judge found sufficient issues to warrant further consideration by the Court. Harris Pogust, trial attorney for the plaintiffs, said the suit was based on marketing claims. "In marketing M*A*S 90, Sage touted its software as being able to 'handle the needs of your business through the 90s and beyond.' The product, however, was una ble to live up to those representations." Y2K Bill Goes to Senate Floor The full Senate is expected to vote tomorrow on the Y2K Act, legislation that would limit business liability for Y2K disruptions under certain circumstances. The House of Representatives passed its own Y2K liability bill last month. Despite the momentu m achieved and a sudden move by Sen. Fritz Hollings to drop his procedural objections to the bill, process and the Paris Air Show were enough to put the Senate legislation on hold last week. This delay gave the White House the opportunity necessary to pr essure wavering Democrats to oppose the bill, bringing the vote count down. This could be significant in terms of a quick conference and whether the Republicans will work with the White House in meeting some concerns and averting a veto of the bill. Business to Business HCL James Martin, Inc., Fairfax, VA, has entered into a business development partnership with CCD Online Systems, Inc. Symantec Corporation, Cupertino, CA, has won a Y2K contract with Kaiser Permanente. ATEC Group, Inc.'s subsidiary, LOGIX Solutions, Inc., Hauppauge, NY, has been awarded the second phase of their Y2K embedded systems contract by the Metropolitan Transportation Authority for the Long Island Rail Road. 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. 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