Massive Y2K tests begin: Win3.1 first casualty

As federal regulatory bodies start to more aggressively develop and enforce year-2000 compliance guidelines, the days of Windows 3.1 systems may be numbered. In the US, trading companies and banks are being visited by regulators from agencies such as the Federal Deposit Insurance Corp. (FDIC) and the Securities and Exchange Commission (SEC) for onsite assessment of year-2000 compliance plans. Although these agencies are not issuing specific directives, the visits are spurring many IT managers to be more aggressive about replacing Windows 3.1 systems.

As federal regulatory bodies start to more aggressively develop and enforce year-2000 compliance guidelines, the days of Windows 3.1 systems may be numbered.

In the US, trading companies and banks are being visited by regulators from agencies such as the Federal Deposit Insurance Corp. (FDIC) and the Securities and Exchange Commission (SEC) for onsite assessment of year-2000 compliance plans. Although these agencies are not issuing specific directives concerning a specific product, the visits are spurring many IT managers to be more aggressive about replacing Windows 3.1 systems.

"As far as the government is concerned, there is no such thing as Windows 3.1," says an IT manager at Salomon Smith Barney in New York, where the company has 35,000 desktop PCs.

The Salomon IT manager says that as a result of the recent regulatory visits, the company will purchase 2,500 PCs to replace noncompliant BIOS chips within and noncompliant applications being powered by these older PCs.

The SEC denies telling securities firms what platform or products to use to achieve compliance.

"We would not attempt to engage any firm in that kind of activity," says John Walsh, chief counsel at the SEC.

But the SEC's message to securities firms is that without year-2000 compliance, they will have compliance and regulatory problems. To avoid this, Walsh said, the SEC is recommending companies gain compliance by the end of this year, to allow for one full year of testing.

To put teeth in these guidelines, the SEC on July 2 enacted Rule 17a-5, which requires securities firms to submit compliance assessment reports, as of July 15, to the agency by August 31.

"We're definitely telling them they should perform proper diligence," Walsh says.

According to analysts, although the SEC might not be dictating products, a regulatory agency's assessment can be tantamount to an order to upgrade hardware and software, which in some ways may help push more business Microsoft's way.

"If the SEC is saying we need you to be compliant in these core areas, and that Windows 3[.x] doesn't live up to it, this should do Microsoft a big favor," says Chris LeTocq, an analyst at DataQuest, in San Jose, California.

Though finance and banking regulators are forcing IT managers to act sooner rather than later, some analysts see a wave of upgrades occurring during the next two years.

"There's a grey zone from the end of [19]98 when people really panic about Y2K all the way through [19]99 and into the millennium. Expect a flurry of buying," said Roger Kay, senior analyst at IDC.

The U.S. Securities and Exchange Commission, in Washington, is at http://www.sec.gov.

(Ephraim Schwartz and Jon Cornetto contributed to this article.)

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