Bug business: the era of the millenniumaire

Information Financial Review/January 4, 1999
By Emma Connors

Zoran Fistrovic is a 36-year-old computer industry veteran who realised two years ago that the year 2000 problem was going to be big business. Now he has helped sell 500,000 licences for software that checks personal computers at around $90 a pop. Welcome to the era of the millenniumaire.

Australian organisations are spending $10 billion to rid themselves of the millennium bug. For most, the inability of many computer systems and embedded chips to process four-digit dates is a corporate pain in the neck that is set to become more acute as this year wears on.

But for others, it is a business opportunity that begs to be milked for all it's worth. Those who stand to make money from the bug are an eclectic mix of software sellers, consultants, lawyers, risk-management experts, jewellers who have designed silver bugs that can hang around your neck, retailers such as the Myers-Grace Brothers chain which has begun to sell a line of merchandising stamped with 01-01-00, and even generator rental firms and diesel fuel providers.

Some have made a pointed bid for business they know is not going to come around again. Others are just beginning to realise they are likely to be in the right place at the right time.

Fistrovic, who holds the Asia Pacific franchise for PC software supplier Greenwich Mean Time, is an example of the former.

He was brought in to the bug business early on, courtesy of a friendship with Karl Feilder, the founder of GMT and member of a select band of year 2000 gurus who fly around the world, advising governments and taking care ofbusiness. "When I first talked to Karl back in 1996, I went away in amazement and disbelief to talk to some of my then customers. Only one organisation was aware of the problem. I thought either Karl is wrong or the industry is not aware. I decided Karl was right," Fistrovic says.

Greenwich Mean Time Pty Ltd was established in August 1996 with three employees, including Zoran and his wife, who are the only two shareholders cited on the company's Australian Securities and Investments Commission annual report.

Today there are 20 employees in Australia, another 18 around the region and a myriad of reselling, distributing and packaging agreements with computer industry heavyweights such as IBM and Hewlett Packard, training companies like Drake International and even an accountancy firm, William Buck.

Business comes from all over. Consumers can pick up a copy of the GMT software at Harvey Norman while Lend Lease has spent more than $300,000 distributing William Buck's year 2000 kit to its 330 financial planning agents.

GMT, which rolls out a 1954 Volkswagen bug called Millie at trade shows and freely distributes packets of M&Ms (think Roman numerals), considers itself placed on the high ground of the year 2000 software market. "We didn't create the problem but we are proud to be part of the solution," Fistrovic says. The role of industry super-hero could see another $50 million in regional revenue for GMT this year if the market lives up to expectations.

Software heavyweights such as Oracle and SAP who supply enterprise-wide applications have acknowledged for some time that the millennium bug has supplied a healthy boost for sales. But while Oracle has now released a version of its financial software that can be installed in just 60 days, the big players know they have just about consumed their share of this particular pie.

This year it is PC-related product that is going to be big. GMT estimates 10 per cent of the 8.1 million PCs in Australia have been checked to see if they are year 2000 ready. The publicity frenzy around the millennium bug this year is going to be considerably boosted by software that has the owners of the remaining seven million machines firmly in their sights.

Symantec, which supplies the well-known Norton Anti Virus software, expects to sell "tens of thousands" of year 2000 product this year. The corporate market has a relatively firm use by date which falls in around six months time, according to Symantec general manager, Australia and New Zealand, John Donovan.

"If a business has not yet got a desktop solution in place by the middle of this year, it will have a bigger problem than anyone can help with."

Symantec's consumer product, however, which is described as "competitively priced" at $79, is expected to sell well right through the year.

For those supplying legal advice and expertise, the year 2000 market is expected to yield fat returns way beyond December 31, particularly if the current trickle of related claims becomes a flood.

Last month, a developer in the US launched a suit against Microsoft which focuses on the FoxPro and Visual FoxPro database development tools. The suit alleges the software giant knowingly designed, manufactured and distributed products with latent defects in the date sensitive codes, rendering the product potentially incapable of accurately processing dates beyond December 31, 1999.

This could be the first of an avalanche of such claims. In Australia, all year 2000-related actions have to date been settled before they have hit courts. But this does not mean the lawyers haven't been busy.

Rebecca Davies from Freehill, Hollingdale and Page claims year 2000-related activity consumes all her working hours. And she is not alone.

Large companies which boast internal counsel are increasingly outsourcing year 2000 work while smaller organisations routinely refer all correspondence on the subject to their legal representatives.

Every major legal firm has partners which specialise in year 2000 work. Hourly fees for such people are generally around the $400 mark. A week composed of five days of eight billable hours translates into fees of $16,000. That's $150,000 a month.

Similar calculations can be made about consultancy revenue. Mike Bridge from PricewaterhouseCoopers estimates the firm had around 50 people working in this area last year. Industry standard billing rates for such work range between $1,600 and $2,000 a day.

This year the big earners in year 2000-related consultancy activity are expected to focus on risk analysis, contingency planning and business continuity. Unisys Australia is currently restructuring its services to appeal to those businesses which have moved on from fixing software to contingency planning.

Last year the information technology company's year 2000 services division brought in around $40 million, up from just $500,000 in 1996.

IBM Australia does not break down its services revenue, which was up 44 per cent in 1997, however, the company's year 2000 executive for Australia and New Zealand, David Kinnear, confirms that the company will take a tailored business recovery service to market before the end of March.

"Business risk is a perennial issue but there are some specific year 2000 considerations that need to be factored in. What if, for example, there are no phone lines? How would firms communicate with staff? We need to drill down to allpossible points of failure to ensure all possible risks are minimised," Kinnear says.

And planning is already well underway. The Commonwealth Bank of Australia, for example, is considering alternative power supplies for some areas of its operations to ensure it can continue to operate should there be any interruption to the mains supply.

Aggreko Generator Rentals, one of the country's largest industrial suppliers, reports some companies have already inquired about the cost of having a generator on standby at year end. Some inquiries have moved to firm bookings.

Such peace of mind will cost around $2,500 a day for a generator large enough to power a medium-sized business. The diesel fuel required to run the machine will cost at least as much again.

Supplies, however, are likely to be limited. Emergency authorities are expected to reserve a hefty percentage of portable power generation facilities to ensure hospitals and other essential services are not left stranded.

Of course, no-one knows exactly what the effects will be. Possibly the most distinctive feature of this computer glitch -- which is fast approaching the status of an international crisis -- is the lack of certainity surrounding the whole event. There is no absolute authority. To a certain extent, every action is guesswork.

Such a nebulous problem is a golden opportunity for those who want to make a fast buck. There are plenty of legitimate suppliers who are likely to profit from the millennium bug. There are also many who just want to cash in.

"We call it the dollar in the eye virus," says Michael Carr, a director of MXF Research which has developed software to check and fix date problems.

The privately owned company is all too familiar with those on the scent of millennium riches.

"They hear about our product, realise it's going places and then they want to do a deal," Carr says.

There is increasing concern about unscrupulous suppliers of both products and services. Survive International, a membership-based user group which promotes best practice in business continuity and risk management, notes Australian industry lacks maturity in these areas. This lack of sophistication can make it difficult to discern which suppliers do offer value for money.

Meanwhile, the act of supplying products and services also carries its own risks. Many small consultancies will not go near millennium bug-related work after the underwriters of their professional indemnity clauses inserted exclusion clauses into policies, in some cases as long ago as 1996.

Larger firms are increasingly wary of possible legal ramifications that could follow year 2000 assignments. Andersen Consulting won't take on any new year 2000 business while others have imposed special conditions even on longstanding clients.

As one senior banker notes: "Even our regular auditors are playing games now. They won't sign off on the year 2000 project until they have inserted a clause that states 'According to what we have seen, we are satisfied . . .', which of course sounds like we are hiding a whole pile of documents away somewhere."

In the legal community there is concern the year 2000 bonanza could come back to haunt those involved. Just about all deliberations are speculative. If they are proved wrong, the damage to credibility could be considerable.

But such considerations are unlikely to put the brakes on the majority of year 2000-related activities. Or dim the ambitions of the millenniumaires.

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