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THE BUSINESS JOURNAL Title: Y2K Lives on in Company Expenses
The Year 2000 bug never did cause the global computer collapse that many had predicted. But companies around the world still had to pay a lot to make sure, and Triad firms were no exception.
As it happened, the largest publicly traded companies in the Triad ended up shelling out about what they anticipated they would for Y2K fixes.
And it was no insignificant sum. The total among the region's top 10 spenders was $239.9 million; the median, $18.95 million.
Wachovia Corp. had the most costly remediation program, predicting in fiscal 1998 a $80 million price tag, but ending up with at least $85 million expensed and an anticipated additional $3 million looming.
Among the other Triad Y2K spending leaders: R.J. Reynolds with $39 million in information technology rehab; BB&T at $29.4 million; VF Corp. at $26 million and Jefferson-Pilot at $20.6 million.
To a company, they all reported in recent public filings that no Y2K glitches were experienced. Which raises the question -- was it overkill? Most analysts, even those that were skeptics of Y2K chaos, think it was worth the effort and expense.
"Nothing major happened, but maybe that was a sign that the right steps were taken," said Craig Buszko, vice president/technology director with Stratapult Studios, a Web-development firm in Winston-Salem.
Buszko's endorsement of corporate Y2K readiness is not a given; he kept a Web site last year dedicated to dispelling the worst Y2K fears, believing that there was too much paranoia.
"On my site, I was pushing against the idea that things would go bad. But what happened (nothing) was a combination of the efforts made by business just as much as the general public not overreacting," Buszko said. "I think what was spent was worth it."
It may also be important to remember the fear-mongering climate leading up to Jan. 1, 2000.
Congressional committees were formed, Web sites spread doomsday scenarios, and even a respected Wall Street economist, Edward Yardeni, predicted a 70 percent chance that the Y2K bug would trigger a global recession.
The U.S. government spent $50 million setting up a Y2K command center in Washington, and now is trying to figure out how to dispose of some $9 million in equipment from it.
Wachovia was among the local firms that set up Y2K command posts. The Winston-Salem bank established a special Y2K team, consisting at its peak of some 200 contractors, 35 consultants and 22 staff members.
The whole team was moved into a separate office building. In the end, Wachovia got a little more from the project than many executives initially assumed.
"We complained about it because it was a lot of money, but what you learn is a heck of a lot about your organization," said Bob McCoy, Wachovia chief financial officer.
"We had to review every single darn system we had, anything with a chip in it. This was a major project. I wouldn't want to spend $85 million again, but not all of that was throwaway."
Some spent little
Some firms got off virtually scot-free. Mortgage insurer Triad Guaranty of Winston-Salem said in its regulatory filings that its computer systems were purchased already Y2K-compliant, so the costs were only in testing them again and not material.
A lot of companies used the Y2K problem as an occasion for upgrading their information technology systems. The costs may have been expensed as Y2K issues, but the upshot also was that firms got better, faster and more streamlined computers.
Take BB&T Corp. It operated not one but two Y2K command centers and assembled a large team to deal with the problem.
But the company gained more than just compliant computers. Ashley Hooks, who managed the BB&T Y2K program and today is the information technology business services manager in Wilson, said the firm ended up with what it calls "Lessons Learned from the Y2K Project."
Among the lessons: BB&T now has "the best, most comprehensive (Information Technology) inventory that we've ever had," Hooks said.
There also is improved vendor management, more effective testing strategies now in place, improved computer contingency plans, stronger internal controls.
"And this whole process gave us the opportunity to better communicate with the public sector by keeping them abreast of all this," Hooks said.
Doug Campbell can be reached at 725-1093 or firstname.lastname@example.org.
-- (Dee360Degree@aol.com), April 24, 2000