Re: Economic Impact of Y2K
by Rob Jones
Posted to the CPSR-Y2K Mailing List, 1997-08-12

These opinions are those of the author and do not represent GE or any affiliate.

It seems to me that to make any reasonable estimate of the economic impact of Y2K would require some prerequisite estimates.

Accurate estimates of how much there is to repair (globally).
Accurate estimates of effort to repair software.
Accurate estimates of which software on which systems will fail on Y2K after conversion efforts. ... and to what extent is triage possible.
Accurate estimates of which additional software and systems will fail because of interactions with failed systems.
Financial Impact Estimates (begin)

The trouble I see is that each layer of estimation assumes the previous to be good. But to truly estimate impacts would require many specific examples and interaction details... Essentially, what will likely happen on 1/1/2000. I think the possible outcomes still cover a very broad range.

If we collectively had the knowledge to answer all the above now, I wouldn't be writing this.

The root cause of the Y2K problem, in my opinion, is not the high cost of memory in the beginning of the computing era. Indeed, it is the infancy of the technology itself. What tools and practices were available 30 years ago, 20 , even 10 ? Standards are still emerging for methods to develop software.

We take for granted that the things that once only a blacksmith could do are highly automated by machines in the industrial age. But the computing era is still somewhere in/near this "blacksmith" stage.

The point of this tangent is that the capabilities of the methods available to designers, and coders, and managers of software is reflected by the current [in]ability to make some of the above estimates accurately, particularly the effort.

To complicate matters, the ability to respond to Y2K is related to current economic conditions. I think our best chance at avoiding a Y2K economic problem, requires a strong economy that can support spending money to retire, repair, or replace software.

Side note: Often overlooked/not stated is the option of running certain systems in the past. Many systems are unaware of the year, or insensitive to it. (I'm in product development not IT.)

Often times I read that Y2K could cause economic havoc, but couldn't an economic downturn (prior) cause Y2K havoc by making the cost of repairing and staying in business out of reach to many ?

If a financial institute fails at conversion, it will be a new type of failure. Usually a bank would fail because of bad loans it has made or other balance sheet problems. In Y2K we have the situation where a bank with good assets, but bad software and/or hardware could have difficulties. Is it not also quite possible, that instead of having banks fail in 2000, that their problem becomes clear before then. In this case, I think, that what might occur is that other banks would acquire the banks that are in good shape, except for their soon to fail technologies. An upgrade of the bank's software/hardware which is available to them, might make this a very good buy. Or simply transfer the accounts to their already compliant computers.

Some companies do make money at turning around banks after they have failed the "old-fashioned" way... But with a predictable problem like Y2K, I think its feasible for "turn-arounds" to occur via acquisitions and mergers before any failure occurs.

On a different train of thought....

My personal belief is that if organizations stay focused by asking themselves, "What happens if we are the only non-compliant organization in 1/1/2000?", they will have a better chance of success. I'm not saying that discussion of global impact is not important, but many of these global problems are showing up in meeting rooms where people are being asked to fix the problem.

The difficulty with presenting the global disaster scenarios to those who are trying to work on the problem (and I mean everyone from the programmers to the CEOs) is that it becomes too overwhelming for most people to comprehend. And, if they accept it, they have given up hope, and a self-fulfilling prophecy could occur.

It is far easier to get focus and acceptance and communication across an organiztion when put into terms it can comprehend. When a business is threatened with a global diasater it may collectively throw up its arms not knowing what it can do. As hard as a single organization might work to prevent a disaster, how can they be sure that all others are doing the same? They simply cannot.

But another likely outcome of Y2K is truly market survival. And this a business knows how to focus on. Failure to convert means loss of market share, sales, profit, etc... For this, businesses know how to rally and get organized. This is how many problems will be avoided.

How to rally a government ? I don't know. I'm just an engineer.

-- Rob Jones

These opinions are still those of the author and still do not represent GE or any affiliate.

Index Home Page