Numbers Add Up to a Bigger Year 2000 Disaster
by Paul Strassmann
Uploaded to the CPSR-Y2K Mailing List, 1997-08-09

Economist Paul Strassmann is a leading student of the impact of technology on productivity in business. His view on the economic impact of Y2k is from Computerworld.

The year 2000 disaster is worse than claimed. The frequently quoted $600 billion estimate for fixing the problem worldwide, far more than the combined costs of three of this decade's natural disasters, the Kobe and Los Angeles earthquakes and Hurricane Andrew, doesn't go far enough. The actual cost will likely be much larger.

The reason for the shortfall: Most estimates leave out work that will have to be done and the cost of doing it. I have examined internal estimates by large corporations and government agencies and reports from the most widely quoted IT advisory services. All woefully misstate the work required to fix the problem and the financial consequences.


Here's where companies and consultancies go wrong in making their year 2000 calculations:


Are there any credible sources of year 2000 costs? So far, I have found only one: Capers Jones, the president of Software Productivity Research, a consultancy in Burlington, Mass. He fully discloses the assumptions on which he bases his projections. Following are my conclusions, which are based on his latest report:

  1. All year 2000 estimates so far exclude the home-brewed code that has been placed into workstations and local servers by casual programmers. That now accounts for almost 25% of all U.S. function points. With about 40 million function points in this category that may need fixing, and a cost of something like $600 to fix a function point, that adds up to $24 billion in the U.S.

  2. The total U.S. inventory of professionally managed code that requires fixing is about 100 million function points. That would consume about 6 million person-months of effort. The cost of identifying, fixing and testing that software by the year 2000 deadline comes to more than $70 billion. Add to that as much as $60 billion for database authentication and repairs, $10 billion for test library development and repairs and $10 billion for post-year 2000 remedial work to correct errors from hastily executed patches.

  3. Chalk up another $20 billion for hardware, either to be bought for testing and parallel running of applications or to be upgraded to make poorly repaired applications run faster.

  4. Litigation over negligence is the largest unknown expense for the year 2000 disaster. Capers Jones estimates the cost at $100 billion but cautions that the figure could be much larger. Altogether, this amounts to $294 billion to fix year 2000 problems in the U.S. alone. That's nearly half of the $600 billion worldwide figure. Because the estimated U.S.-based code makes up only 16% of all function points on the planet, it's safe to say that the widely quoted worldwide estimate of $600 billion is low: Fixing the other 84% of the world's function points will cost far more than another $300 billion.

Count on it.

Paul Strassmann ( has just published The Squandered Computer, which outlines how to remedy executives' disappointment with the trustworthiness of their information managers.

Copyright 1997 by Computerworld, Inc. All rights reserved.
@Computerworld is a service mark of International Data Group, Inc.

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