What's everybody's opinion of the following:

Assume that 50% of small (under 200 employees) businesses do nothing to address Year 2000 issues in their systems or equipment. In other words, they think they have no exposure to the problem, and therefore won't spend money or time on it. When answering this, keep in mind that experience has shown us that not everyone will have a problem as it concerns Y2K. Most will have at least a minor problem. (let's define minor as not having a major impact on cash flow) Our best estimates (based on our own work) appear to show that 25% to 35% will have what we call a major problem. (assume major problem means either a significant impact on cash flow, or an outright system failure) What's your opinion on the impact this lack of preparation by small business would have on the economy?(based on the assumption that 50% do nothing) Please be sure to list the reasons for your opinion. Thanks for the help.

-- Greg Sugg (gregsugg@bbnp.com), October 10, 1998

Answers

Greg,

Good point. It's probably the area about which I am most concerned. I am an optimist and believe that at least in most U.S. areas the electric power grid will stay up. Of course, if it doesn't, all these other discussions are pointless. I see many small businesses having problems relating to date arithmetic in such things as accounts receivable and payable agings, and job scheduling.

And I think that for most large manufacturing companies (autos, airplanes particularly), their suppliers are many of the smaller businesses you refer to, either directly or down the chain. Disruption at this level will ripple rapidly through the manufacturing economy because of the reliance on just-in-time inventory. However, there are other parts of the manufacturing industry (especially electronics) that are dependent on imported parts. Here there are many more interconnected systems required to get those parts from Asia to the U.S., and thus many more opportunities for a Y2k glitch to interrupt the supply chain. <<<<<>>>>>.....

-- Dan Hunt (dhunt@hostscorp.com), October 10, 1998.

You must take into account that the 'down line' suppliers are under a lot of pressure to prove compliance or loose their contracts. Auditors are beginning to check for Y2K compliance and plans. I think many of the smaller guys are just about to hit the wall and be forced to consider Y2K as a problem. If you were a bank or an insurer would you loan money or guarentee the business of someone who could not demonstrate compliance. The underwriters are also getting into the act. Awareness is just before taking a quantum leap, IMHO.

-- Paul Davis (davisp1953@yahoo.com), October 10, 1998.

Paul, I agree with you that an awareness explosion is about to take place. I've noticed in the past 8 to 12 weeks a huge increase in the number of people (business owners) that are not only aware, maybe just slightly concerned. You know, the kind that pull you to the side and whisper "What's the deal with this 2000 stuff?". Of course, I think the bulk of this is coming from 3 areas. We have seen an increase in media coverage. Many people are also hearing through the rumor grapevine that their bank may require them to prove compliance (or at least a good plan) before they'll be able to establish credit lines, loans, etc. And third, we've really noticed an impact from these guys getting requests from their largest customers as to whether they're compliant or not.(This one appears to have the largest effect.) They're starting to get worried that they may lose customers if they don't look into this.

So with that said, here's a follow-up to my earlier post. I do think this will help force small biz's to look into the problem. However, I'm afraid many of these people are going to check the BIOS on their PC network, and if it works, say they're complaint. This gets them off the hook with banks and customers, and keeps them from having to spend much time or money.

I actually got chewed out by a guy the other day because he thought I was lying to him when I said he needed to do more than just run the clock up to see if the date would display. Also, I had a client tell me that we were over priced on Y2K testing. His reasoning was brought on by the fact that a two person computer "store" told him they could get his whole network ready for the date change with 4 to 5 hours of labor. Personally, if they can, I'd like to hire them to work on all our customers' problems. I could make a killing just outsourcing a couple of production demons like that! By the way, when we go into a small business, we usually spend between 7 or 8 hours just talking with everyone to understand how they use their system, how the data flows, etc. I guess we're slow.

And finally, my own answer to my original question. I feel that while lots of these small biz's will experience problems, most of these problems will not shut them down by themselves. But when you look at the "big picture" with many of these problems going on at one time, it will produce a much larger cumulative effect. As you know, many of our small businesses can't stand much in the way of cash flow strain. So when a guy goes in and finds out his accounting database has been lost, deleted, or scrambled, it's going to be tough on him to take a week to two months to either get the problem fixed or rebuild it by hand. And if the guy thinks he'll be able to call a local computer person to fix it, he's dreaming. We can spend one day on sales now and book four weeks worth of work. It's going to be really backed up in and around 2000. Of course, that's assuming I can find someone to hold the flashlight so I can see inside the computer! (Sorry, couldn't resist that one!)

I apologize for rambling, my wife says that's the way I think, so I guess I'm forced to write that way.

-- Greg Sugg (gregsugg@bbnp.comq), October 10, 1998.

I really like this part Greg:

It's going to be really backed up in and around 2000. Of course, that's assuming I can find someone to hold the flashlight so I can see inside the computer! (Sorry, couldn't resist that one!)

My mantra for the fix on failure folks is: (repeat after me...)NO ELECTRICITY, NO COMPUTERS!

-- Donna Barthuley (moment@pacbell.net), October 10, 1998.

Greg:

You're probably right about small businesses. A couple of quick checks, and they'll think they've got it licked. We only have a few critical PC based applications, but if they aren't handled correctly, they will give us big headaches. Many small business owners aren't going to take the time to look into the details of each application to see what might happen. And when things start to get messed up, will they know where to start looking for answers? I doubt it. (BTW, critical or not, every application will be checked in our office.)

-- Mike (gartner@execpc.com), October 10, 1998.

The key think here, both for the small businesses and for interpreting the statistics, is to what extent the smal business's computers are mission-critical.

I suspect that in a lot of small businesses the computer is simply a mark two typewriter/calculator/ledger book. If it fails the business will carry on with someone slaving away with paper, pencil and calculator; or they'll "fix on fail", which may be quite realistic if doing the whole computerisation again from scratch would take at most a couple of days.

You'll still find plenty of small businesses that don't have a computer. I suspect that these skew the statistics: someone sends them a Y2K survey that hasn't got a "We don't use a computer" box. It either gets binned or filled out misleadingly, when in fact a noncomputerised business is fully internally compliant!

Best advice to a small business that's unsure if it's fully prepared; keep paper copies of everything! I suspect most do anyway.

-- Nigel Arnot (nra@maxwell.ph.kcl.ac.uk), October 12, 1998.

Nigel,

I spoke with my best friend who owns two small comapnies (one with a retail front, one which is just mail order). One day I walked in his office and looked at the stacks of papers, and the filing cabinet that looked bound to explode and said:

Me:Have you not heard of the "paperless" office? Him:(well how do I describe the look that made me burst into flames?)

I have gone to him alot about Y2K because of all the talk about small businesses being ready. In his opinion from all the small companies he is friends with, they simply do not see computers as "mission critical".

He took me into his mail order wharehouse and showed me his sophisticated inventory system. There were rows and rows of boxes. On the front of each box was a piece of paper with the names of what was in it. Next to each name were numbers, as they sold one, they scratched it out and wrote in the new number. He looked at me with a grin and said "You know, I have checked and checked and checked and by golly I can't find where this is going to fail come December 31st".

He admitted he kept somethings on his computer, but due to his general distrust of them (I think I taught him that) he prints out a hard copy once a week of his really important stuff. As for invoices of what he has sent out, he said by law he is required to keep a hard copy of each one and he showed me the drawer with a folder for each month and all the invoices filed in order of date.

So I said, "Well, can you operate the store with no power?" he whipped out his solar caculator that I can't remember ever seeing him without and he said "What do you think Rick? And if that fails I did learns me somethun in that there skool"

Smartass

Rick

-- Rick Tansun (ricktansun@hotmail.com), October 14, 1998.