from http://www.y2knewswire.com/19990523.htm

Shattered! Compliance hype crumbles as new data reveal the truth

 

This week, public perception shifted suddenly and forcefully, demolishing the illusion of compliance that has successfully stopped nearly all preparedness for the last seven weeks. While we haven't identified the core reason for this recent reversal, its existence is undeniable: sales are up sharply at food storage companies, subscriptions are way up at Y2KNEWSWIRE.COM and major media are once again picking up the story.

HOW SPIN SHUT DOWN THE Y2K INDUSTRY
On April 1 of this year, sales of Y2K-related information, food and other products plummeted. As one supplier told Y2KNEWSWIRE in mid-April, "It was as if someone just turned off the spigot. We haven't sold a single food package in ten days now..." Cited as the most likely reasons for the shut-down were:

• Burnout: people were getting sick of hearing about Y2K. Even though they knew it was important, they just didn't want to hear any more.
• No failures on April 1st: the 4/1/99 date didn't bring disaster. Therefore, some people figured, 1/1/2000 wouldn't either.
• Everybody says they're compliant: with the government claiming 92% compliance and nearly every industry and private firm claiming 90%+ compliance, people thought Y2K was solved.

But now, just seven weeks later, here's what has actually unfolded:

• As reported in the New York Times, new research results from Cap Gemini show some frightening facts: only about half of the companies that expected to have 50% or more of their code renovated by January 1 of 1999 actually met that goal. The percentage of firms expecting to have more than 3/4ths of their code "completely tested and compliant by December 31, 1999" has actually dropped from 88% to 78%. Nearly 10% of the systems submitted to Cap Gemini for review -- claimed to be fully compliant -- were found to be non-compliant. Twenty-two percent of companies don't expect to make the 1/1/2000 deadline at all, 92% are behind schedule and 88% said that would have to -- yet again -- increase spending estimates.
• An analysis of Fortune 100 firms by Weiss Ratings showed that eight had only spent from 25% - 30% of their total Y2K budgets by the end of 1998, and thirty-one more of the Fortune 100 were rated as "below average" on Y2K compliance status.
• The public found out how the North American Electric Reliability Council (NERC) allowed power companies to claim Y2K-compliance simply by listing non-compliant systems on an "exceptions list." This sham was immediately recognized as yet another compliance gimmick designed to hide the truth from the people.
• A new report from Triaxsys Research, another independent research firm, shows that nearly 20% of Fortune 1000 firms have spent only around 40% of their total Y2K budgets. Another 30% have only spent from 40% to 60%. The study shows that budgets continue to grow, and the vice president of Triaxsys indicates she's only confident 231 companies will actually make it.
• A Canadian study of large companies reveals that while 15% stated they were Y2K-compliant last year, only 18% said they were this year: an improvement of only 3%. Furthermore, while most companies said last year they would be compliant by December 31, 1998, the story changes this year: most say they'll be compliant by the Summer of 1999.
• A statement by Italy's equivalent of John Koskinen shocked the world. In this Times report, he's quoted as saying, "Italy is going to crash, and we are going to be crucified. We are supposed to make things go so smoothly that nobody would realise there was ever a problem. Instead we will be the scapegoats."
• Another Fortune 1000 research project, conducted by Weiss Ratings, revealed yet more startling figures: 34% of Fortune 1000 firms continue refusing to release data, utilities and telecommunications industries show a surprisingly-poor status (no telecommunications firms received a "high" rating, for example), companies have still only spent half their Y2K budgets, and America's two largest corporations -- General Motors and Ford -- received a "below average" rating.
• The game of musical deadline chairs continues: companies that were screaming, "December 31, 1998!" are now whispering, "June, 1999." But even that doesn't give them enough time: June deadlines are already slipping into September, October and even December. No deadline is real, it seems, and the public is no longer buying it.
• The stunning lack of compliance announcements has spooked everyone. Only a handful of companies have actually achieved anything near compliance, and when they do, they shout it loudly and clearly. For example, look at the compliance statement from Compass Bank. Even then, it's a qualified compliance, covering only "mission-critical" systems.

There's more, too. Everywhere we turn, new evidence points to a worsening compliance situation, not the rosy, "we made it" dream world spun by Y2K-deniers over the last six months.

THE DENIERS ARE LOOKING SILLY
Denial of the Y2K problem is fast becoming the quickest way to look silly in front of the whole world. So-called "experts" and economists are looking at plain-Jane data, right under their noses, and reaching fantastic conclusions. For example, in this David Eddy essay on the Westergaard site, we see how Canada's chief statistician, Dr. Fellegi, looks at data showing only 18% of large organizations expect to be finished by April, 1999, even though 40% once claimed they would be finished by December of 1998. Faced with this backslide in progress, Fellegi proclaims, "We seem to be in basically good shape if the plans are realistic."

Many economists are still predicting, in fact, the myth of a "Y2K economic boom." They claim the Year 2000 disruptions will actually help the economy and boost the stock market.

Even the heads of organizations are looking sillier than ever. We hardly need to mention Jane Garvey anymore -- the FAA administration who claimed 99% compliance last September, 100% last October, then winced as the agency revised everything and said it wouldn't really be ready until the Summer of 1999 (as they quietly pulled buggy air traffic control software from various airports, replacing them with the old, non-compliant versions).

Then HCFA got caught lying about compliance. As we reported in a previous story, Gene Dodaro, assistant comptroller general for the GAO, explains how HCFA (which administers Medicare) exaggerated compliance: "For example...none of HCFA's 54 external mission-critical systems reported by the Department of Health and Human Services as compliant as of December 31, 1998, were Year 2000 ready, based on serious qualifications identified by the independent verification and validation contractor."

(Amazingly, the HCFA responded, saying that the problems were minor and would be fixed by 2000.)

PEOPLE ARE WISING UP
The denials continue, but this time, something is different: they are no longer being swallowed by a gullible public. People are wising up. They're figuring this out: seven months left, yet another deadline about to be missed, no compliance claims being announced, industries caught lying about compliance, federal agencies dropping over 3,000 systems from the "mission-critical" lists and a triple-whammy from independent research firms that shatters the hype-based claims of compliance in corporate America.

It all adds up to one thing, and this is exactly what we've been saying all along: the compliance claim was a deception designed to blind you from the truth. The truth, it turns out, isn't a happy one. It's not end-of-the-world, but it's ugly. It means unemployment, an end to the happy-happy stock market ride, possibly a recession as predicted by Ed Yardeni or a "decade of Depression," as predicted by Ed Yourdon. It means the last great financial party of the millennium is just about over: people will no longer get "free 25% returns" on monkey-see, monkey-do stock picks. The magic-wand money creation engine that people now think of as "normal" is about to slide into reverse.

BUT THE DREAM WEAVERS AREN'T DONE YET
This battle of truth vs. fiction isn't over yet. The spin-masters are hard at work, coming up with new angles on all this. They're wondering how they can keep the public lulled into ignorance for a few more months. And maybe, just maybe, by that time, a software miracle will appear and they'll get it all fixed. Then nobody will be the wiser.

But what these people don't know -- because most of the dream weavers aren't programmers -- is that the programmers were overly-optimistic, as always. The managers and owners are in for a shock. One day, a gnarly-looking programmer wearing sandals and a T-shirt is going to walk into the board room and declare, "We need another year." Jaws will drop, of course, but that wide-eyed look will quickly fade to a squint-eyed planning session: "Ok, folks, we've got to figure out how to claim compliance anyway."

In the mean time, watch for more staged drills by various industries. The FAA may put another plane in the sky and roll its clocks to 1/1/2000. NERC might test all the walkie-talkies in the electric industry and claim, "Industry-wide compliance!" The NRC might hold a shut-down drill somewhere. In every case, the goal will be to imply compliance without rigorously testing it. After each test and subsequent press conference, there will be no proof offered: no documentation, no independent verification and no guarantee that anything will work on 1/1/2000. It will simply be another fuzzy cloud in the dream-world of Y2K compliance.

THE PRESS IS SUDDENLY WILLING TO LOOK AT Y2K
Perhaps the greatest influencing factor on this Y2K reversal is the mainstream press: they covered Y2K scams, Y2K people and Y2K companies to the point of overkill in 1998, then they dropped the ball. They bought into the compliance claims, almost never questioning anything. They didn't even have the guts to ask, "Can you prove it?" Even today, many stories blindly reprint compliance claims without a shred of evidence.

But in May, all that changed. They've finally started questioning these claims, asking tough questions, and demanding proof. After all, journalists were spoofed three times already. Every journalist and publication that printed the statement, "company {x} should be done by December 31, 1998," without inserting the word, "CLAIMS," should issue a public apology for misleading readers. Because, in fact, newspapers and magazines promoted the myth of compliance. They blindly printed and reprinted pie-in-the-sky target dates. They believed the fantastic claim that all companies would magically finish on precisely the same day: 12/31/1998. And they bought it again for the 3/31/1999 deadline, then once again for the June, 1999 deadline.

They're wising up, though. Now, "60 Minutes" is scheduled to air a shocker Y2K story this Sunday. The New York Times actually prints the Cap Gemini research results, and all around the country, newspapers are once again willing to approach this issue. Journalists are waking up and realizing, "Hey, we've been scammed. These companies claiming compliance were jilting us. These federal agencies are just making up these numbers."

From here on out, it's a whole new world: anything can happen. The battle of truth over fiction continues, of course, with the truth-promoters having nothing but facts and the fiction-promoters having nothing but money. Only the public at large can decide the outcome of this battle, and in doing so, they may decide whether a Y2K panic will ensue. If people prepare now, there will be no panic. If people wait until the last minute, or if they are denied the truth until the last minute, Y2K may be precisely the firestorm we've been trying to prevent.

As one Y2K business owner told Y2KNEWSWIRE, "Panic early. Get it over with."

-- a (a@a.a), May 24, 1999