News 24

30/01/2001 15:20 - (SA)

Software glitches cost companies billions

Companies worldwide last year lost about R500 billion in turnover, productivity and brand-name abuse because of defective software, international software risk management group Cigital Inc said.

The group warned that companies will jeopardise their growth potential, profitability and even sustainability if risks associated with the software packages essential to its core activities are not properly managed.

Any problems experienced with such software packages have the potential of cutting the flow of income within minutes, resulting in major crises.

Small hitches cause major problems

Cigital cited several cases where the activities of companies caused them major embarrassments and resulted in huge financial losses.

The problems experienced by Nasa with its Mars Lander resulted from software giving the craft its landing instructions too early.

This caused the craft to crash and resulted in a total collapse of the $360 million project.

Nasa said the problem could have been rectified with "a single line of coding".

H&R Block suffered a major set-back when faulty software gave Internet users access to some its clients' tax returns.

On-line music retailer CDUniverse received a serious blow when a hacker stole about 300 000 credit card numbers.

The company refused to pay the $100 000 demanded in blackmail and the hacker published the numbers on the Internet. The group is still fighting damages claims in court.

A systems problem put Internet auctioneers eBay out of action for 22 hours, loosing the group $4 million in income and $5,7 billion in market capitalisation.

FoxMeyer sued SAP and Andersen Consulting for $500 million each after SAP's solution to the company's human resource management problems brought the company's activities to a total standstill.

The group was liquidated shortly afterwards.

"The increasing number of cases arising from software glitches and the latest series of incidents involving hackers causing chaos on corporate networks have resulted in losses of $500 billion.

"This should serve as a clear indication to companies to manage the risks of defective software," said Citigal chairman and executive chief Jeffery Payne.

Software more than a tool

"Companies depend on software to conclude transactions, to communicate with clients, to integrate products and to solve problems. Software can not longer be regarded as solely and instrument to do business with - it forms an integral part of a company and it cannot operate without it.

"If problems crop up with software, they should be managed as any other crisis is managed.

"If software does not function properly, the company in turn will not function properly," he said.

Serious problems

Defective software can cause serious problems for companies:

Turnover could fall by millions if e-transactions are not completed and money vanishes.

The company's brand-name could be tarnished causing consumers to lose confidence in the product.

Productivity is lost when software is defective.

The company could be held responsible if clients are harmed by the problem.

Payne added that it is becoming evident that software increases a company's risks.

"That is why strategies should be devised not only to ensure that software is always operating effectively, but also that contingency plans are in place if something goes wrong.

"Special emphasis should be on the design of software to ensure that it works 100% before being installed."

Cigital is one of the first companies to offer risk management services for software.

Payne claims the industry will expand worldwide soon as management starts realising the benefits of the service.

-- Rachel Gibson (rgibson@hotmail.com), January 30, 2001