Did IS Spend Too Much on Y2K?

Although IS managers are mainly receiving praise for the smooth way in which the year-2000 roll-over went, they are also receiving criticism from some quarters that they had overexaggerated the threat of the Y2K bug.

While criticisms may abound, most IT executives firmly believe that would-be disasters were averted because they had spent enough money. “There is no question that in the system code we looked at, there would have been failures if we had not taken action. I have no regrets about the money we spent,” says Frank Petersmark, vice-president of information technology at Amerisure, an insurance company in Southfield, Mich.

But some executives, at levels both below and above those who made the spending decisions, are now questioning why so much was needed given the toothless bite of the year-2000 bug worldwide.

One IT manager says that 18 months ago senior colleagues were buying heavily into the “Y2K hysteria”, influenced by a top consulting company. He advised them then that they had overspent on the project.

“I voiced my opinion and was promptly called on the carpet. I meekly went back to producing the required plans, contingency plans, and double-contingency plans ad nauseam. Now that it is over, I can say to them with great conviction, ‘I told you so,'” says the IT manger, who wished to remain anonymous.

Jim Porter, a partner with PricewaterhouseCoopers Operational Systems and Risk Management, whose clients include CIOs and upper-level IT managers, says a client called him in a panic days after the New Year. The client was about to walk into an executive meeting where he knew he was going to be asked if Y2K spending was overkill.

“What’s the opposite of overkill? Failure,” Porter says, adding that his client was ultimately able to persuade his colleagues of the benefits of spending the money.

Observers also pointed to other benefits of year-2000 remediation projects, including the fact that the image of many IT organizations is shinier in the eyes of senior executives, who are now placing more strategic importance on that group. Y2K remediation is also said to have helped organizations’ competitiveness by forcing them to streamline their IT infrastructures and replace outdated systems that would otherwise have remained in use.

“Many [companies] were able to eliminate and consolidate programs,” says Harris Miller, president of the Information Technology Associates of America, in Arlington, Va. “Also, companies learned how to strategically integrate IT into their business models.”

Some analysts are harsher about what they saw as overly generous spending, however. International Data Corp. (IDC) estimates that IS worldwide overspent by some US$70 billion.

“We spent too much on contingency, which takes in staffing and preplanning, as well as on actual remediation which I am calling the ‘hype tax,'” says John Gantz, chief research officer and team leader for IDC’s Project Magellan Y2K analysis. “Y2K took on a life of its own through politicians, the media, and consultants,” Gantz adds.