Execs back Y2K spending all the way

Top brass, CIOs defend results of biggest IT mobilization ever, reject overspending charges

January 10, 2000
By Thomas Hoffman and Julia King

Wall Street spent roughly $5 billion to tame the year 2000 problem, more than the gross domestic product of nations like Burundi. Yet even those who spent next to nothing, like Russia, rang in the new year almost seamlessly.

So: Did U.S. companies overspend?

The answer: A resounding "no," according to a dozen board-level executives and information technology professionals interviewed by Computerworld last week.

"I don't think anybody (in corporate America) is embarrassed by the money they spent" on Y2K, said Edward Goldberg, executive vice president at Merrill Lynch& Co. in New York. That's because the top brass who understand the nature of the problem appreciate the potential disasters that were averted, Goldberg and others added. Respondents to a Computerworld online poll agreed.

But market research firm International Data Corp. in Framingham, Mass., estimates that the U.S. overspent by as much as $41 billion on Y2K, compared with the spending of and impact in other countries.

That includes some $2.7 billion doled out to employees who sat idly in Y2K command centers over what turned out to be a boring weekend.

Y2K expert Leon A. Kappelman dismissed those figures as representing less than the normal percentage of waste for any IT project. About 25% of all IT projects "fail to deliver anything," Kappelman wrote in an e-mail newsletter. And 25% of IDC's overall global Y2K spending estimate would be almost $71 billion. So, "even if the $41 billion (in Y2K waste) figure is accurate, that is still a smaller percentage than normal IT project waste," wrote Kappelman, who is an associate professor at the University of North Texas in Denton.

Few senior managers seem to think any portion of their Y2K budgets was wasted. Y2K "was first and foremost a risk-control project to protect us against a risk we couldn't afford to take given the nature of the service we provide," said Paul Pender, vice president of finance at Northern States Power Co. (NSP), a Minneapolis utility with 1.5 million customers in five states.

As the date rolled over, NSP didn't experience any significant glitches, which made the $24 million project worthwhile, said Pender. If the utility had suffered any problems, he said, restoring public confidence would have been an uphill struggle.

"You can't put a precise dollar amount on public image, but the value of our public image is a lot more than" $24 million, he added.

Internationally, technological comparisons are practically moot. For instance, factories in China that handled the date change as smoothly as General Motors Corp. in Detroit have considerably less automation. "Obviously, some countries aren't as technologically dependent (as the U.S.)," said Johanna Brudvig, Y2K communications coordinator at Crestar Bank in Washington.

Old-fashioned technology can also be found in the U.S., of course. For example, New York Presbyterian Hospital checked more than 57,000 biomedical devices for Y2K readiness and discarded many of them, said Louis Reuter, executive vice president at the hospital, which owns 26 hospitals and 89 other clinical-care facilities.

For many organizations, Y2K projects provided other long-term benefits, including improved asset management, strengthened contingency plans and improved communication among disparate business units.

Medtronic Inc. developed a Web site last March that will continue to allow hospital customers such as Nashville-based Columbia/HCA Healthcare Corp. and patients to gather information about all the medical devices it sells. Had Minneapolis-based Medtronic not spent $26 million on Y2K, said IT director Susan A. Frank, "we wouldn't be taking orders or shipping products."

Adds Lyn McDirmid, CIO at Virginia Electric& Power Co. in Richmond, Va., which spent $25 million to become Y2K-ready, "Our job is to keep the lights on. To do that, we do an awful lot of preventive maintenance, and (Y2K) was another one of those exercises."

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