Start Y2K process with business analysis, says commission chief

Year 2000 planning shouldn't start with an inventory of your computer systems, but with an analysis of what your critical businesses processes are and how they may be affected, according to Y2K Readiness Commission chairman Sir Basil Logan. 'It's something we discovered fairly late in the piece,' says Logan.

Year 2000 planning shouldn't start with an inventory of your computer systems, but with an analysis of what your critical businesses processes are and how they may be affected, according to Y2K Readiness Commission chairman Sir Basil Logan.

"It's something we discovered fairly late in the piece," says Logan, who has led the government task force charged with assessing New Zealand's Y2K risks and developing a strategy for business and government to deal with them.

"When we started looking at the issue, we said the starting point was an inventory of all your devices, checking compliance and prioritising the fixes. But what we should have done was, say, look at your business as a whole, figure out what are your mission-critical business processes, and then look at what affects those processes and how can that be remedied.

"This is a problem with a technical source, but it's a business problem. It's about business continuity, priorities and resource allocation. Instead, though, it's seen as an IT problem and is being left to the IT people to fix."

The task force's interim report, which assesses attitudes and pro-gress toward Y2K readiness at a range of leading public and private sector organisations, makes for grim reading. While most companies and government departments declare themselves confident of managing the issue, their self-reported progress in Y2K projects fails to support that level of confidence.

"The report shows people are well aware of the problem — in fact, they're sick to death of the subject. But not enough understand the complexities of getting it right, and the consequences of not getting it right. They don't understand the huge inter-dependencies between different companies throughout supply chains, or between the private sector and government infrastructure."

That applies as much to the government as to other enterprises — an attitude revealed by ministerial unwillingness to actually implement much in the way of practical measures to help businesses cope.

"Our recommendation was that the government should take a leadership role, and should provide the mechanisms to see that the private sector, as well as the public sector, achieves compliance. The response, though, was 'why not leave it to the market, and if businesses aren't smart enough to deal with this and they go out of business as a result, that's too bad'. But they don't understand the impact if, for example, half the country's critical infrastructure businesses collapsed."

Treasury is only now starting to look at the macro-economic impact and begin scenario planning, Logan says.

He confesses that even though the task force members — which included Ralph Norris of the ASB Bank and Judith Speight of TUANZ — have a lot of experience in IT, they were surprised at the extent of exposure revealed in the report.

"The task force members all come from quite different backgrounds and started with diverse views. But there was initially a general feeling that it may be overhyped, and was being driven to an extent by the desire to use it to sell products.

"Ralph Norris, for example, came from the perspective that the banks have been dealing with this for a long time and he initially thought the problem would be basically under control except for in some smaller businesses. He now talks about his road to Damascus, where he has moved from one extreme a fair way toward the other."

Logan's own experience is that most companies — if they are even thinking about the problem — are probably seriously under-estimating the time and cost needed to fix it.

As chairman or director on a number of company boards, he's seen a range of responses. Australia's Prudential Corporation, for example, thought they could deal with Y2K during a planned rollout of new applications. The company's UK parent, though, soon convinced them the problem was a lot bigger than initially thought. The cost of fixing it rapidly went from "some few million dollars to $26 million, and then another $4 million for a property portfolio that wasn't originally considered. And the parent company's policy was that no new applications should be implemented until Y2K was dealt with".

"So I knew the problem could be severely underestimated. The finance sector generally has tackled Y2K earlier than most and has a more collective approach. But I have worked on other boards where the response from management has been that they've had the lawyers draft letters to their suppliers asking for a guarantee of Y2K compliance — and at the same time, the lawyers are telling them not to respond to such letters from their own customers. It's ludicrous. Getting management to step up to the wire is very difficult."

Prior to his present career as a business consultant and director, Logan headed IBM in New Zealand for many years and he ruefully admits to making his own contribution to the current situation.

"I was part of the problem. In the early days, I sold computers with 4000 alphabetic positions of storage. People were ingenious about programming — we used space so carefully.

"The computer industry grew up conserving space, and that habit stuck up until even a couple of years ago. We didn't see it coming. We had no inkling."

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