The Waiting Game: Small Business & Y2K

Sometimes I wonder when is it too late to get it? -- Diane

The waiting game
By Victoria Colliver
OF THE EXAMINER STAFF
Wednesday, March 10, 1999
)1999 San Francisco Examiner

http://www.sfgate.com/cgi-bin/article.cgi?file=/examiner/hotnews/stories/10/By2k.dtl

Small businesses are last in line to address Y2K problems

Three years, three upgrades, $250,000 and numerous glitches later, Michael King says he's al most got his small business' Year 2000 problems licked.

"It was as tough as I feared," said the relieved King, chief financial officer and the main systems guy at Peking Handicrafts Inc., a South San Francisco company that sells bedding and linens to major retailers.

"No matter how much you plan and prepare and test, things happen that you don't expect."

King, who still has a few bugs to work out before he can close the Y2K chapter of his company's life, is glad he started early. "If you don't have the money to address this problem, and you haven't started working on it by now, for a lot of companies it may be too late," he said.

Small businesses tend to have less money, information and time than large corporations to tackle their Y2K problems. Now, though, with less than 10 months to go, efforts have increased on both national and local levels to make sure the country's estimated 12 million small firms are up to speed when the clock strikes midnight Dec. 31.

The City of San Francisco Monday approved $25,000 for an educational outreach campaign starting in April aimed at The City's approximately 78,000 small businesses.

Wednesday, the House of Rep resentatives' Small Business Committee was to review a Senate-approved bill that would guarantee $500 million in loans to cover compliance costs for small businesses.

And from March 29 to April 1, the U.S. Small Business Administration will conduct a Y2K awareness campaign with events around the country.

"For the longest time, many people did not understand Y2K and what it means," said Maurice Campbell of San Francisco, who started working in the computer industry in 1969. "Most small business owners are worried about running their businesses. ..... It's the old 'if it ain't broke, don't fix it' scenario. They can't understand why you have to fix something that still works."

Campbell became so concerned about the Y2K problem that he produced a "Countdown Year 2000" 1999 calendar, which has checklists for everything from preparing for a bank catastrophe to making sure your family and pets have enough food and water. He gave the calendar to Mayor Willie Brown and some city agencies and has plans to distribute it to local merchants.

The Y2K problem centers on computer systems that may not be able to recognize the year 2000, confusing it with 1900 and causing numerous errors or system crashes.

According to a National Federation of Independent Business report conducted with San Francisco-based Wells Fargo Bank, 4.5 million small employers use computer equipment. The survey found that 40 percent had addressed the issue, and another 19 percent had plans to do so but hadn't started yet.

That still means a third had no plans to deal with the problem. The survey warned that 750,000 businesses risk being crippled or forced to shut down if they didn't correct the problem in time.

In contrast, a Gartner Group survey reported 83 percent of large companies (more than 20,000 employees) had begun Y2K readiness testing by the fourth quarter of 1998.

"There are a lot of (small) businesses that feel this is a lot of hype," said Scott Hauge, head of the Small Business Network, a coalition of The City's 21 small business groups. "A lot of small businesses don't have the resources, don't have the time, and they're just hoping this will all go away."

Many experts say small businesses have been slower than large corporations to recognize the problem.

"What bothers me about small- and medium-sized businesses is that many of them don't seem to take the PC problem seriously," said Jon Huntress, writer-researcher for a Y2K site sponsored by Tenagra Corp., a Houston-based Internet marketing and consulting group. "They think if they have recent PCs, they won't have a problem."

Huntress argues that until last year, many computers still weren't compliant on the hardware level, so a relatively new system might not offer complete protection. "Even the word 'compliance' hasn't been defined," he said. "It means different things to different companies."

The Year 2000 Readiness Act, the bill approved by the Senate, has been well received by small business trade groups, but it is not considered a cure-all for small companies that have not upgraded for financial reasons. The bill relies on existing funds rather than making any new money available.

The bill, sponsored by Sen. Christopher Bond, R-Mo., would allow the SBA to guarantee a higher percentage of loans avail able to fix the problem and would grant limited deferments on principal payments. Other Y2K bills are under consideration, but none has had the widespread support of Bond's measure.

"It just makes it easier for small business to get money from private lenders," said Kristy Simms, manager of legislative affairs for the National Federation of Independent Business. "It's really just a safety net. It's helpful to a degree."

Several experts said small businesses might be more at risk from the Y2K problems of the large companies they work with, such as suppliers and distributors.

According to the NFIB, 46 percent of the small businesses already taking action expect to pay less than $1,000 to upgrade their systems. About 7 percent plan to spend more than $25,000, and a few report costs of up to $120,000.

Companies using relatively new, prepackaged computer systems rather than ones that are highly customized or produced in-house are expected to have less expensive upgrades.

King, at Peking Handicrafts, said his company's system was considerably expensive because of its sophistication. At $50 million in sales with 120 employees, Peking is a growing company that needs to keep up with major clients like J.C. Penney Co., Sears, Roebuck and Co. and Federated Department Stores Inc.

King said he had chosen to up grade the systems in a series of smaller steps rather than one big leap to reduce the risk of a system collapse or major failures. "If we didn't have the money to pay for the upgrade ..... it would be devastating," he said. "Fortunately, we made enough money in prior years and got to this size where we could take the hit and then take a deep sigh. By the time you're done, you're better than you were before."

-- Diane J. Squire (sacredspaces@yahoo.com), March 10, 1999

Answers

Diane --Good catch and so true. I own and operate a home care business with a gross of 700K, 65 employees and a private lock on every other run of Excedrin. We needed to change software to become more compliant with state reporting anyway so I decided that this would be a good time to also become y2k compatible. (This was last October). The computer techs ran a check on our computer and said it would not be compliant. Replaced the main computer ($4500) and installed the new software.

I wouldn't let the tech leave until he ran a y2k test with the clocks even though the company said IN PRINT that they were y2k compatible. Result: computer shut down, tech was there for three days. End result in money (including lost time for my billing people, my time kibitzing, lost time by my scheduling people, etc.) was about 14,000. I can certainly sympathize with Mr.King. One thing -- we are one of the top 15 businesses in the upstate when the list of growth percentages were released by the state of SC. Yet, no one has ever asked me about our intentions regarding y2k. No survey, no phone calls, no letters. How accurate can the state statistics be?

-- Lobo (Hidng@woods.com), March 10, 1999.