Ed Yardeni has posted at his site a comprehensive survey of IT professionals. I think that everyone will find it very distressing.

http://www.yardeni.com/y2kreporter.html

-- Incredulous (ytt000@aol.com), April 12, 1999

Answers

Get ready to get beat over the head with polly's phrenology bat.

-- Puddintame (achillesg@hotmail.com), April 12, 1999.

Yardini

-- rb (x@y.now), April 13, 1999.

one more try....yarden i

-- rb (x@y.now), April 13, 1999.

try here

It's a PDF file, and I don't have Adobe installed on this computer. Could some kind soul with Acrobat, and time, possibly copy the text to this thread?

-- Wanda (lonevoice@mailexcite.com), April 13, 1999.

well, okay Wanda, but it's gonna mess up the formatting...here goes:

Dr. Edward Yardeni, Chief Economist April 12, 1999 & Global Investment Strategist #38 Phone: (212) 469-5715 Fax: (212) 469-5725 E-Mail: yardeni@yardeni.com THE Y2K REPORTER Survey Says I.T. Crowd Foresees Y2K Crisis 87% See Global Trouble Unvalidated Vendors From Just-In-Time To Just-In-Case? Mr. Smith Can't Go To Washington Two Different Samples Mission-Critical Dropouts The Challenge US Government Mostly Meets Deadline So What's The Story? Ready Or Not? Blackout In Berlin? SMEs Not Ready In UK Taiwan Is Tenuous Adrift In Korea? Bugged In Beijing Bank Of Japan Has A Y2K Stash Will It Be Safe To Fly? Yes, But Count On Delays And Cancellations FAA: Ready To Takeoff? And Land, Too? www.yardeni.com North America Research Equity Deutsche Bank Research

Page 2 / April 12, 1999 / Deutsche Bank Research The Y2K Reporter SURVEY SAYS I.T. CROWD FORESEES Y2K CRISIS 87% See Global Trouble. The Information Technology Association of America (ITAA) claims to be the only trade association representing the broad spectrum of the world leading US information technology (IT) industry. ITAA includes over 11,000 direct and affiliate members from Americas largest corporations to the entrepreneurs building the blockbuster IT companies of the future.1 On January 20, 1999, ITAA issued a press release describing the results of a Y2K poll conducted by the organization of its members during December 1998. 2 The press release put a rather positive spin on the findings. However, on closer inspection, there was plenty of material suggesting that a negative spin is more accurate. Even the upbeat press release noted Eighty-seven percent of survey respondents said the Year 2000 problem is a crisis for the nation and the world. Fifty-two percent think the Millennium bug will hurt their companies; only 29% disagree with this notion. Over one-third said the bug has already started to bite, triggering failures under actual operating conditions. Of those reporting specific failures, these included data exchange errors (34%), accounting errors (27%), errors in Y2K ready commercial software (28%), errors in tested software causing rework (25%), data base file corruption (21%), and computer crashes (18%). In test mode, 71% of respondents are finding failures. Again, ITAA issued a press release with this startling information. Why didn t the press report the story? This is a very credible organization. Why is there so much public optimism about Y2K, when the insiders are so pessimistic? I dont have the answers, just the questions. (The survey results are reprinted in Appendix I.) Unvalidated Vendors. The press release also observed that the survey seems to generate questions about how aggressively companies are pursuing the contingency-planning process. Although 44% said they would stop doing business with companies found to be non-compliant, only 33% said they would actually visit suppliers to ascertain their Y2K status. Never in human history have so many humans blindly trusted that so many other humans won't screw up. From Just-In-Time To Just-In-Case? In the December 1998 poll, only 3% of respondents said their firms have completed contingency planning, while 5% indicated that their organizations hadnt even started. Almost 25% of the sample had 10% or less of their plans complete. On the other hand, 66% of IT professionals said they plan manual procedures to override computer systems, if necessary. This might keep them operating, but certainly at a much-reduced output. A manual-mode scenario is consistent with my forecast that there is a 70% probability of a Y2K recession. When asked whether their organizations had started to stockpile critical materials and supplies in anticipation of Y2K shortages, 35% said yes, while 40% said no. Of course, 1 http://www.itaa.org/ 2 http://www.itaa.org/news/pr/pr19990120.htm

Deutsche Bank Research The Y2K Reporter / April 12, 1999 / Page 3 the poll was conducted a year before the Y2K dreadline, so I assume more will be stockpiling over the time remaining. This might give the economy a lift during the fourth quarter, but it is likely to be more than offset by a big drop in spending by more cautious consumers. Mr. Smith Cant Go To Washington. Now think about this one: Only 19% of the IT pros agreed that their local communities are taking adequate steps to prepare for Y2K contingencies. A plausible Y2K scenario is that most computer systems will be fixed, but many of us won't get to use them because of Y2K disruptions to local infrastructure systems. In the previous Y2K REPORTER, I reviewed the precarious Y2K situation of Washington, D.C., a.k.a., the District of Calamity. Below, I review some disturbing information about the readiness of Beijing in China and large cities in Germany. Two Different Samples. ITAAs Software Division survey in December 1998 sent electronic questionnaires to 6,200 readers of the associations weekly electronic newsletter dedicated to Y2K coverageYear 2000 Outlook. Almost 400 respondents (6%) drawn from 15 industries participated in the study. Fifty-one percent of companies in the survey have over 1,000 employees; 43% generated gross revenues in 1998 of $100 million or more. Only 3% of the respondents were Chief Information Officers (CIO). Interestingly, at the end of March 1999, CIO Magazine did poll 342 CIOs and business executives on the Year 2000 Problem.3 Despite the different samples and different survey questions, this poll found a fair amount of Y2K anxiety, too. Only 51% of executives said that the problem will be fixed in time. This is up from 37% in February, 29% in October 1998, and 17% in April 1998. But it is still a distressingly low percentage of confident responses at this late date. MISSION-CRITICAL DROPOUTS The Challenge. On March 10, 1999, I attended a conference at the Media Studies Center in New York City. The topic was Y2K: Press and Preventing Panic. The panelists were reporters, media executives, and two public officials. For a change, I was in the audience of mostly reporters. I couldnt resist, during the Q&A session, asking everyone in the room why the press hadnt investigated the remarkable decrease in the federal governments mission-critical systems. The Associated Press (AP) accepted the challenge in a March 30, 1999 story titled, Protecting Critical Systems From Y2K: Depends What You Mean by Critical. The table in Appendix II shows the number of mission-critical systems reported by the 24 federal government agencies every quarter since May 1997. The total number is down a whopping 25%, from 8,589 during November 1997 to 6,399 in the February 1999 progress report compiled by the Office of Management and Budget.4 3 http://www.cio.com/knowpulse/perspectives99/ 4 http://cio.gov/2000.htm

Page 4 / April 12, 1999 / Deutsche Bank Research The Y2K Reporter Interestingly, 14 of the 24 agencies reported declines in their number of mission-critical systems. This raises the suspicion that federal Y2K managers might have reclassified systems to meet the March 31, 1999 government-wide deadline. Especially troublesome are the big dropouts in key agencies like Agriculture (-74%), Health and Human Services (-41%), and Defense (-27%). It isnt clear who made these decisions and whether they were independently authorized. US Government Mostly Meets Deadline. Partly as a result of these puzzling redefinitions, officials of the Clinton administration were able to brag that 92% of the governments mission-critical computer systems have been fixed, undergone an initial round of Year 2000 tests, and put back on line, complying with the March 31 deadline set 16 months previously. Thirteen of the 24 agencies reported that 100% of their critical systems have been deemed compliant for operation in 2000. Now the tough part: The next phase, called end-to-end testing, would be difficult, consume huge chunks of time, and add to agency costs. In such tests, agencies are trying to determine if their systems can reliably exchange data with other systems after Year 2000 changes have been made to pieces of hardware or lines of code. Experience shows that when systems undergo multiple changes, as with Y2K, programmers inadvertently make errors that require still more debugging. So Whats The Story? The AP story observes that in mid-February 1999, the government would have been only 55.6% compliant rather than 79%, as reported, had 3,323 systems not been dropped or redefined. The story did not really shed much light on the reclassification process. The Defense Department classified the details. Requests to Housing and Urban Development for an explanation were not answered. The Agriculture Department, which dropped 886 systems, explained only two in the AP story. READY OR NOT? Blackout In Berlin? The Sunday, March 28, 1999 edition of Germanys respected FOCUS Magazine included a Y2K cover story on the readiness of the nations major cities. The results were shocking, according to the leading German newsweekly. Together with the German Conference of Cities, FOCUS surveyed all German communities with more than 100,000 inhabitants. Three-quarters of the 83 communities were unprepared for the century date change: 1) One in four cities was unable to clearly outline their program for electrical service. 2) Half of all communities had not tested hospital systems. 3) One-third failed to complete procedures for their local transportation system. Guenther Ennen, a Y2K official of the German Federal government said, Anyone who fails to complete the change procedures soon should break off all tests and concentrate on contingency planning for emergencies and blackouts. SMEs Not Ready In UK. Two recent surveys of the business community in the UK reveal insufficient progress in dealing with the Millennium Bug. Midland Bank and Action 2000 organized 20 seminars across the country to raise awareness and show firms how to tackle the threat to their systems. Of the 3,500 business customers who attended, more than 60% have yet to start Year 2000 contingency planning.

Deutsche Bank Research The Y2K Reporter / April 12, 1999 / Page 5 Gwynneth Flower, Action 2000s managing director, said: Firms that fail to carry out their Millennium Bug program are adopting a high-risk strategy. In its fourth State of the Nation survey, Action 2000 also warns that the current rate of progress is too slow, and that 40% of small- and medium-sized enterprises will not have done enough for a trouble-free New Year. Although the majority of businesses can identify the systems, suppliers, and customers essential to their survival, most have no other plans in place should any of them fail.5 Taiwan Is Tenuous. In early April, Lee Nien-tsu, a partner of Lee and Li Attorneys-at-Law, stated at a Taiwan Electrical and Electronic Manufacturers Association seminar that Taiwan should be prepared to face a possible economic loss of $3 billion dollars. This represents a 15% decrease in the gross domestic product and shutdowns of more than 10% of the islands enterprises. Lee said that the Y2K bug would affect 33% of local firms. Lee based his predictions on a Data Systems Consulting survey that indicated that 32.9% of local companies are still evaluating the problem, 29.5% recognize the problem but have not carried out any actions to counteract the bug, and 10% are unaware of the Y2K bug. In the February 8, 1999 issue of the Y2K REPORTER, I reported that Scott McNealy, the CEO of Sun Microsystems, warned that his company might not get the components needed to assemble computers in 2000 because Asian vendors are one to three years behind in their Y2K programs. The news from Taiwan, a major supplier of electronic components, certainly confirms Mr. McNealys fears. Adrift In Korea? According to a February 1999 survey conducted by Koreas Ministry of Information and Communication, the marine transportation system is among the least-prepared for the century date change, with a progress rate of only 23.3%.6 The good news is that the average for the 12 core sectors was 76.3%, based on an extensive survey of 5,102 public and private organizations. At the top of the list was the banks ranked at 99.0%. This is astonishing, given the turmoil of the past few years. Very few banks, in the United States would have claimed such progress so early in 1999. Other impressive Korean sectors were railroads (95.6%), air transport (70.0%), military (90.2%), and electricity (85.1%). Nuclear power and telecommunications were lagging behind a bit at 64.0% and 63.3%, respectively. If these findings can be believed, then Korea will produce electronic components in 2000, but might have some difficulty shipping them. According to the January 20, 1999 Miami Herald, South Korea asked Russia to help avert potential North Korean missile launches caused by Y2K glitches, since most of their missile technology comes from Russia. Bugged In Beijing. On April 1, 1999, CNN reported In Chinas capital, a city of more than 10 million people, the Beijing government has invested less than $500,000 in a special office to tackle the problem, a tiny 5 http://business.bug2000.co.uk/ 6 http://y2000nca.or.kr/english/frame.html

Page 6 / April 12, 1999 / Deutsche Bank Research The Y2K Reporter fraction of what major cities in the United States pay. The Beijing Y2K office offers free advice to any who call, but the man in charge is worried. We need to guarantee our water, electricity, coal, gas, traffic systems, medical services, sanitation, fire and safety. These big public services are a big problem. Weve done a lot of work, but Im still extremely nervous, Chen Xinxiang says. Chinas banks, stock markets and other financial institutions began first and probably will weather the millennium storm in relatively good shape. Nonetheless, hundreds of millions of dollars are needed to complete reprogramming in key industries, reports the Beijing Morning Post. Officials doubt that important government ministriesas well as many smaller agencies that receive little supportcan meet an October deadline for fixing their systems. Bank Of Japan Has A Y2K Stash. The Bank of Japan (BOJ) is ready for trouble at the start of the new millennium. On April 6, 1999, the BOJ said it will set aside $331.3 billion (40 trillion yen) in cash at its head office and branches to cope with Y2K emergencies, including any sudden increase in money demand by consumers and businesses. On January 2, 2000, the central bank plans to test all its connections with private financial institutions. Bank officials will then decide whether to switch to manual processing by the end of January 3. WILL IT BE SAFE TO FLY? Yes, But Count On Delays And Cancellations. Planes are not going to fall out of the sky in January 2000. Im not sure where this grim notion originated. I can only blame a few reporters for even raising this unattributed concern, though they usually dismissed it. On the other hand, 59% of Chief Information Officers surveyed by CIO Magazine in late March 1999 said they wont fly at the turn of the century. I presume that they are concerned about delays and cancellations rather than safety. Continental Airlines, the fifth-largest US airline, said it successfully completed a test flight to measure its Year 2000 computer readiness in March. It was the first experiment of its kind for a commercial carrier. Continental flew a Boeing 737 for one hour as its computer date changed to January 1, 2000. The airline said its aircraft communications systems, including the flight-management computer, worked properly. The Federal Aviation Administration (FAA) plans to provide status information on the readiness of foreign air traffic control systems and airports to the State Department to help develop travel advisories for at-risk countries. Sometime after July 1, the State Department is expected to issue these advisories to airlines and travelers. FAA: Ready To Takeoff? And Land, Too? What about air travel in the US? The FAA seemed hopelessly behind in its Y2K effort in early 1998. But in recent months, thanks to a much-improved project management structure, tremendous progress was made. So much so that the agency claimed that 88% of its systems were fixed and tested by the end of March. FAA officials said they expect to have all of the agencys equipment ready by the end of June.

Deutsche Bank Research The Y2K Reporter / April 12, 1999 / Page 7 Joel Willemssen, the director of Civil Agencies Information Systems at the US General Accounting Office (GAO) has been monitoring the FAAs progress for Congress. In Congressional testimony on March 15, 1999, he updated his assessment of the FAAs Y2K project.7 He seemed quite impressed with the dramatic turnaround. However, most of his testimony focused on the huge task that remained ahead. Indeed, Mr. Willemssen noted that FAAs Year 2000 program manager acknowledged that schedules are tight and there is no room for any schedule delays. The FAA has to complete roughly 4,500 events by June 30, 1999each one entailing the activation of a single system in a single site. There are 654 air traffic control facilities in the FAA system. The man from the GAO was especially concerned about ARTS-IIIA: The Automated Radar Terminal System (ARTS)-IIIA is the critical data processing system used in about 55 terminal radar approach control facilities. These systems provide essential aircraft position and flight plan information to controllers. The ARTS-IIIA system continues to rely on a 1960s-vintage computer (a UNIVAC 8303 Input Output Processor), which was originally produced by UNIVAC but is now supported by the Lockheed Martin Corporation. Home computers available today have 250 times the memory of this archaic processor. In 1989 and 1990 we reported on the flight safety risks associated with this system, and recommended that FAA assess other alternatives for meeting air traffic requirements. However, FAA did not act on our recommendation, stating that it had a planwhich included continuing with the old processors. Ten years later, these processors are still in operation. Wow, the FAA is using a machine that should be in a computer museum! Mr. Willemssen was worried that the FAAs analysis may not have found all date processing code in the Ultra assembly language programs that run in the UNIVAC processor. He wasnt convinced that the FAA tested the critical functionality of tracking real radar data. Incredibly, the FAA relied on the assurances of one engineer who had worked on the UNIVAC processor since the 1960sthat there were no Y2K issues associated with the processor. Finally, the Congressional auditor observed that, based on survey data, only one-third of the nations airports reported that they would complete their Y2K preparations by June 30, 1999. The remainder either planned on a later date or failed to estimate any completion date, and half of these airports had no contingency plan for any of 14 core airport functions. Most of the laggards are smaller airports, but 26 are among the nations largest 50 airports! Have a nice flight. * * * 7 http://www.house.gov/reform/gmit/hearings/testimony/990315jw.htm

Page 8 / April 12, 1999 / Deutsche Bank Research The Y2K Reporter Appendix I: ITAA Survey, January 1999 1. I believe the Year 2000 problem is a crisis for the nation and the world. Strongly Agree 44% Agree 43 Neutral 6 Disagree 7 Strongly Disagree 0

2. I believe the Year 2000 is a serious issue which will hurt my company. Strongly Agree 17% Agree 35 Neutral 19 Disagree 24 Strongly Disagree 5

3. My company has already experienced Year 2000 related system failures under actual operating conditions. Strongly Agree 9% Agree 25 Neutral 9 Disagree 32 Strongly Disagree 25

4. These failures have been felt in the following ways: (Choose all that apply) Computer crashes 18% Data exchange errors 34 Database file corruption 21 False System Alarms 7 Intelligent device malfunctions 7 Accounting errors 27 Manufacturing/production errors 7 Finance errors 15 Errors in tested/certified systems requiring rework 25 Incorrect bridging between systems 10 Incompatible windowing formats 10 Overflow from test to production systems 7 Errors in commercial software advertised as "Y2K ready" 28 Other, please specify... 23

5. My company has experienced Year 2000 system failures under simulated or test conditions. Strongly Agree 26% Agree 45 Neutral 9 Disagree 12 Strongly Disagree 7

6. My organization defines Y2K contingency planning to include the following: (Choose all that apply:) Contingency checklists 75% Disaster recovery 71 Risk management 71 Business continuity 77 Litigation 34 Backup business procedures 69 Supply chain management 55 Other, please specify... 10

7. My organization is performing contingency planning: (Choose the highest level only) In key business units 12% In select divisions or departments 7 Across the enterprise 35 Across the enterprise and with key suppliers 32 Across the enterprise and with all suppliers 11 Other, please specify... 2 Don't Know/Not Applicable

8. My organization is performing contingency planning as a top corporate priority: Strongly Agree 28% Agree 43 Neutral 15 Disagree 10 Strongly Disagree 4

Deutsche Bank Research The Y2K Reporter / April 12, 1999 / Page 9 Appendix I: (continued) 9. My organization has completed the following percentage of contingency planning for the Year 2000 situation: 0% 5% 1-10% 18 11-25% 19 26-50% 16 51-75% 16 76-99% 23 100% 3

10. My organization is performing contingency planning with the direct involvement and support of the CEO: Strongly Agree 38% Agree 33 Neutral 13 Disagree 11 Strongly Disagree 5

11. My organization performs contingency planning from its central Y2K Program Office, primarily using IT managers and professionals: Strongly Agree 21% Agree 36 Neutral 10 Disagree 24 Strongly Disagree 9

12. My organization has appointed a business executive, strategic planner or other "big picture" business manager to conduct our contingency planning operations: Yes, with full-time responsibility for Y2K contingency 18% Yes, with part time responsibility for Y2K contingency 42 No 39

13. My organization conducts contingency planning as a normal and routine part of business operations so that Y2K is nothing new in this regard: Strongly Agree 9% Agree 33 Neutral 20 Disagree 24 Strongly Disagree 15

14. My organization will stop doing business with suppliers not considered Y2K compliant: Strongly Agree 12% Agree 32 Neutral 29 Disagree 22 Strongly Disagree 5

15. My organization will supply financial or technical resources to help critical suppliers not considered Y2K compliant: Strongly Agree 6% Agree 16 Neutral 23 Disagree 37 Strongly Disagree 19

16. My organization will visit supplier sites to ascertain their state of Y2K readiness: Strongly Agree 8% Agree 25 Neutral 16 Disagree 31 Strongly Disagree 19

17. My organization is stockpiling critical materials and supplies in anticipation of Y2K shortages. Strongly Agree 8% Agree 27 Neutral 24 Disagree 29 Strongly Disagree 11

18. My organization is planning manual procedures to override computer systems in critical application areas. Strongly Agree 18% Agree 48 Neutral 14 Disagree 13 Strongly Disagree 6

Page 10 / April 12, 1999 / Deutsche Bank Research The Y2K Reporter Appendix I: (continued) 19. My organization is entering into preferred customer relationships with key suppliers to assure uninterrupted product and service flows in anticipation of shortages and outages. Strongly Agree 5% Agree 24 Neutral 34 Disagree 28 Strongly Disagree 9

20. My organization has been contacted by its customers or business partners to provide preferential treatment in the event of Y2 induced shortages or outages. Strongly Agree 8% Agree 18 Neutral 23 Disagree 37 Strongly Disagree 13

21. My organization is communicating its contingency plan activity to employees. Strongly Agree 21% Agree 41 Neutral 13 Disagree 17 Strongly Disagree 7

22. My organization is communicating its contingency planning activity via: (Choose all that apply) Staff meetings 56% Memos and email 56 Intranet 31 Company newsletter 27 Video 3 Training exercises 14 Other, please specify... 8

23. I believe my organization is doing a good job of contingency planning for the Y2K situation. Strongly Agree 19% Agree 36 Neutral 26 Disagree 13 Strongly Disagree 6

24. I believe my local community is taking adequate steps to prepare for Y2K contingencies. Strongly Agree 3% Agree 16 Neutral 23 Disagree 36 Strongly Disagree 23

Deutsche Bank Research The Y2K Reporter / April 12, 1999 / Page 11 Appendix I: (continued) Demographics Responses in this section enable ITAA to describe the survey population and to perform more in-depth analysis of results. Please check the answers that most accurately fit your enterprise. If your organization is a division or subsidiary of a larger parent corporation, respond in terms of the division or subsidiary. Where exact information is not readily available, please approximate.

25. Your company is: Public 51% Private 49%

26. Please indicate the approximate size of your company (gross revenues projected for 1998): Less than $1 million 12% $1 million - $10 million 13 $10 million - $50 million 11 $50 million - $100 million 6 $100 million - $1 billion 17 $1 billion - $5 billion 12 $5 billion - $10 billion 5 Over $10 billion 9 Not available 14

27. Please indicate the approximate number of employees with your company (consider wholly-owned subsidiaries in this total): 1-9 10% 10-49 9 50-99 6 100-249 7 250-499 6 500-999 7 1000-2499 11 2500-4999 9 5000-9999 7 10,000 or more 24 Not available 2

28. Your Job Title is: Chairman/CEO/President 10% CFO 1 CTO 1 CIO 3 Vice President of 7 Director of 12 Manager of 20 Engineer/Programmer 12 Attorney 3 Other, please specify... 31

29. What percentage of your company's IT budget is spent on Y2K? Less than 10% 55% 10-25% 29 25-50% 11 50-75% 3 75-100% 2

30. My company belongs to one or more of the following industries: (Choose all that apply) Information Technology 27% Government 20 Legal 4 Banking 7 Insurance 5 Aerospace 3 Manufacturing 11 Retail 7 Wholesale 2 Health/Medical/Pharmaceuticals 9 Education 8 Utilities 4 Entertainment 1 Telecommunications 7 Energy 4

Apendix II: US Federal Departments and Agencies' Number of Mission- Critical Systems Agency May- 97 Aug- 97 Nov- 97 Feb- 98 May- 98 Aug- 98 Nov- 98 Feb- 99 Feb- 99/ Nov- 97 AID 64 64 65 7 7 7 7 7 -89% Agriculture 684 1,239 1,341 1,319 1,080 647 362 353 -74% HUD 206 231 195 63 63 62 62 56 -71% NASA 453 457 459 158 158 158 157 157 -66% Health and Human Services 566 434 487 491 289 298 300 289 -41% Defense 3, 962 3,695 3,143 2,915 2,803 2,965 2,581 2,306 -27% Education 24 24 19 14 14 14 14 14 -26% State 58 72 69 78 64 59 59 59 -14% Personnel 94 124 124 124 118 111 109 109 -12% Energy 261 399 468 370 411 411 420 420 -10% Commerce 484 503 513 470 472 455 458 474 -8% EPA 61 61 61 61 61 58 58 57 -7% FEMA 38 38 48 48 47 49 46 46 -4% Interior 85 89 92 95 91 91 92 90 -2% GSA 42 58 58 58 58 58 58 58 0% NRC N/ A 7 7 7 7 7 7 7 0% Labor 58 60 61 61 61 61 61 61 0% SSA 29,139 29,139 b 308 308 308 308 308 308 0% SBA 40 40 40 40 42 42 42 42 5% NSF 16 16 16 21 21 17 17 17 6% Treasury 86 320 296 327 323 323 323 321 8% Justice 190 190 192 187 197 207 223 221 15% Transportation 166 a 430 516 617 630 616 613 608 18% Veterans Affairs 11 11 11 11 11 319 c 319 319 N/ A Total 36,788 37,701 8,589 7,850 7,336 7,343 6,696 6,399 -25% Total Excluding SSA and VA 7, 638 8, 551 8, 270 7, 531 7, 017 6, 716 6, 069 5, 772 -30% % Y2K Compliant 21% 19% 27% 35% 40% 50% 61% 79% -- a. Does not include FAA. b. Reported and tracking modules (units of computer code that when compiled/ assembled and executed perform a specific business function) rather than systems. c. In the first quarterly report VA identified 11 mission- critical areas. For government- wide consistency in the tracking process, VA has aggregated these areas into 319 separate applications that support these mission- critical areas. Source: US Office of Management and Budget, http:// cio. gov/ 2000.htm

-- Arlin H. Adams (ahadams@ix.netcom.com), April 13, 1999.

oh argh! sorry about that last chart...

-- Arlin H. Adams (ahadams@ix.netcom.com), April 13, 1999.

Page 2 / April 12, 1999 / Deutsche Bank Research The Y2K Reporter
SURVEY SAYS I.T. CROWD FORESEES Y2K CRISIS
87% See Global Trouble. The Information Technology Association of 
America (ITAA)
claims to be "the only trade association representing the broad 
spectrum of the world
leading US information technology (IT) industry." ITAA includes over 
11,000 direct and
affiliate members "from America's largest corporations to the 
entrepreneurs building the
blockbuster IT companies of the future."1
On January 20, 1999, ITAA issued a press release describing the 
results of a Y2K poll
conducted by the organization of its members during December 1998. 2 
The press release
put a rather positive spin on the findings. However, on closer 
inspection, there was plenty
of material suggesting that a negative spin is more accurate. Even the 
upbeat press release
noted
Eighty-seven percent of survey respondents said the Year 2000 problem 
is a
crisis for the nation and the world. Fifty-two percent think the 
Millennium bug
will hurt their companies; only 29% disagree with this notion. Over 
one-third
said the bug has already started to bite, triggering failures under 
actual operating
conditions. Of those reporting specific failures, these included data 
exchange
errors (34%), accounting errors (27%), errors in "Y2K ready" 
commercial
software (28%), errors in tested software causing rework (25%), data 
base file
corruption (21%), and computer crashes (18%). In test mode, 71% of 
respondents
are finding failures.
Again, ITAA issued a press release with this startling information. 
Why didn't the press
report the story? This is a very credible organization. Why is there 
so much public
optimism about Y2K, when the "insiders" are so pessimistic? I don't 
have the answers,
just the questions. (The survey results are reprinted in Appendix I.)
Unvalidated Vendors. The press release also observed that "the survey 
seems to
generate questions about how aggressively companies are pursuing the 
contingency-planning
process. Although 44% said they would stop doing business with 
companies
found to be non-compliant, only 33% said they would actually visit 
suppliers to ascertain
their Y2K status." Never in human history have so many humans blindly 
trusted that so
many other humans won't screw up.
From Just-In-Time To Just-In-Case? In the December 1998 poll, only 3% 
of
respondents said their firms have completed contingency planning, 
while 5% indicated
that their organizations hadn't even started. Almost 25% of the sample 
had 10% or less of
their plans complete. On the other hand, 66% of IT professionals said 
they plan manual
procedures to override computer systems, if necessary. This might keep 
them operating,
but certainly at a much-reduced output. A "manual-mode" scenario is 
consistent with my
forecast that there is a 70% probability of a Y2K recession.
When asked whether their organizations had started to stockpile 
critical materials and
supplies in anticipation of Y2K shortages, 35% said yes, while 40% 
said no. Of course,
1 http://www.itaa.org/
2 http://www.itaa.org/news/pr/pr19990120.htm



Deutsche Bank Research The Y2K Reporter / April 12, 1999 / Page 3
the poll was conducted a year before the Y2K dreadline, so I assume 
more will be
stockpiling over the time remaining. This might give the economy a 
lift during the fourth
quarter, but it is likely to be more than offset by a big drop in 
spending by more cautious
consumers.
Mr. Smith Can't Go To Washington. Now think about this one: Only 19% 
of the IT
pros agreed that their local communities are taking adequate steps to 
prepare for Y2K
contingencies. A plausible Y2K scenario is that most computer systems 
will be fixed, but
many of us won't get to use them because of Y2K disruptions to local 
infrastructure
systems. In the previous Y2K REPORTER, I reviewed the precarious Y2K 
situation of
Washington, D.C., a.k.a., the District of Calamity. Below, I review 
some disturbing
information about the readiness of Beijing in China and large cities 
in Germany.
Two Different Samples. ITAA's Software Division survey in December 
1998 sent
electronic questionnaires to 6,200 readers of the association's weekly 
electronic
newsletter dedicated to Y2K coverage-Year 2000 Outlook. Almost 400 
respondents
(6%) drawn from 15 industries participated in the study. Fifty-one 
percent of companies
in the survey have over 1,000 employees; 43% generated gross revenues 
in 1998 of $100
million or more.
Only 3% of the respondents were Chief Information Officers (CIO). 
Interestingly, at the
end of March 1999, CIO Magazine did poll 342 CIOs and business 
executives on the
Year 2000 Problem.3 Despite the different samples and different survey 
questions, this
poll found a fair amount of Y2K anxiety, too. Only 51% of executives 
said that the
problem will be fixed in time. This is up from 37% in February, 29% in 
October 1998,
and 17% in April 1998. But it is still a distressingly low percentage 
of confident
responses at this late date.
MISSION-CRITICAL DROPOUTS
The Challenge. On March 10, 1999, I attended a conference at the Media 
Studies Center
in New York City. The topic was "Y2K: Press and Preventing Panic." The 
panelists were
reporters, media executives, and two public officials. For a change, I 
was in the audience
of mostly reporters. I couldn't resist, during the Q&A session, asking 
everyone in the
room why the press hadn't investigated the remarkable decrease in the 
federal
government's mission-critical systems. The Associated Press (AP) 
accepted the challenge
in a March 30, 1999 story titled, "Protecting 'Critical' Systems From 
Y2K: Depends
What You Mean by 'Critical.'"
The table in Appendix II shows the number of mission-critical systems 
reported by the 24
federal government agencies every quarter since May 1997. The total 
number is down a
whopping 25%, from 8,589 during November 1997 to 6,399 in the February 
1999
progress report compiled by the Office of Management and Budget.4
3 http://www.cio.com/knowpulse/perspectives99/
4 http://cio.gov/2000.htm



Page 4 / April 12, 1999 / Deutsche Bank Research The Y2K Reporter
Interestingly, 14 of the 24 agencies reported declines in their number 
of mission-critical
systems. This raises the suspicion that federal Y2K managers might 
have reclassified
systems to meet the March 31, 1999 government-wide deadline. 
Especially troublesome
are the big dropouts in key agencies like Agriculture (-74%), Health 
and Human Services
(-41%), and Defense (-27%). It isn't clear who made these decisions 
and whether they
were independently authorized.
US Government Mostly Meets Deadline. Partly as a result of these 
puzzling
redefinitions, officials of the Clinton administration were able to 
brag that 92% of the
government's mission-critical computer systems have been fixed, 
undergone an initial
round of Year 2000 tests, and put back on line, complying with the 
March 31 deadline set
16 months previously. Thirteen of the 24 agencies reported that 100% 
of their critical
systems have been deemed "compliant" for operation in 2000. Now the 
tough part: The
next phase, called "end-to-end testing," would be difficult, consume 
huge chunks of time,
and add to agency costs. In such tests, agencies are trying to 
determine if their systems
can reliably exchange data with other systems after Year 2000 changes 
have been made
to pieces of hardware or lines of code. Experience shows that when 
systems undergo
multiple changes, as with Y2K, programmers inadvertently make errors 
that require still
more debugging.
So What's The Story? The AP story observes that in mid-February 1999, 
the
government would have been only 55.6% compliant rather than 79%, as 
reported, had
3,323 systems not been dropped or redefined. The story did not really 
shed much light on
the reclassification process. The Defense Department classified the 
details. Requests to
Housing and Urban Development for an explanation were not answered. 
The Agriculture
Department, which dropped 886 systems, explained only two in the AP 
story.
READY OR NOT?
Blackout In Berlin? The Sunday, March 28, 1999 edition of Germany's 
respected
FOCUS Magazine included a Y2K cover story on the readiness of the 
nation's major
cities. "The results were shocking," according to the leading German 
newsweekly.
Together with the German Conference of Cities, FOCUS surveyed all 
German
communities with more than 100,000 inhabitants. Three-quarters of the 
83 communities
were unprepared for the century date change: 1) One in four cities was 
unable to clearly
outline their program for electrical service. 2) Half of all 
communities had not tested
hospital systems. 3) One-third failed to complete procedures for their 
local transportation
system. Guenther Ennen, a Y2K official of the German Federal 
government said,
"Anyone who fails to complete the change procedures soon should break 
off all tests and
concentrate on contingency planning for emergencies and blackouts."
SMEs Not Ready In UK. Two recent surveys of the business community in 
the UK
reveal insufficient progress in dealing with the Millennium Bug. 
Midland Bank and
Action 2000 organized 20 seminars across the country to raise 
awareness and show firms
how to tackle the threat to their systems. Of the 3,500 business 
customers who attended,
more than 60% have yet to start Year 2000 contingency planning.



Deutsche Bank Research The Y2K Reporter / April 12, 1999 / Page 5
Gwynneth Flower, Action 2000's managing director, said: "Firms that 
fail to carry out
their Millennium Bug program are adopting a high-risk strategy." In 
its fourth State of
the Nation survey, Action 2000 also warns that the current rate of 
progress is too slow,
and that 40% of small- and medium-sized enterprises will not have done 
enough for a
trouble-free New Year. Although the majority of businesses can 
identify the systems,
suppliers, and customers essential to their survival, most have no 
other plans in place
should any of them fail.5
Taiwan Is Tenuous. In early April, Lee Nien-tsu, a partner of Lee and 
Li Attorneys-at-Law,
stated at a Taiwan Electrical and Electronic Manufacturers Association 
seminar that
Taiwan should be prepared to face a possible economic loss of $3 
billion dollars. This
represents a 15% decrease in the gross domestic product and shutdowns 
of more than
10% of the island's enterprises. Lee said that the Y2K bug would 
affect 33% of local
firms. Lee based his predictions on a Data Systems Consulting survey 
that indicated that
32.9% of local companies are still evaluating the problem, 29.5% 
recognize the problem
but have not carried out any actions to counteract the bug, and 10% 
are unaware of the
Y2K bug.
In the February 8, 1999 issue of the Y2K REPORTER, I reported that 
Scott McNealy, the
CEO of Sun Microsystems, warned that his company might not get the 
components
needed to assemble computers in 2000 because Asian vendors are one to 
three years
behind in their Y2K programs. The news from Taiwan, a major supplier 
of electronic
components, certainly confirms Mr. McNealy's fears.
Adrift In Korea? According to a February 1999 survey conducted by 
Korea's Ministry
of Information and Communication, the marine transportation system is 
among the least-prepared
for the century date change, with a progress rate of only 23.3%.6 The 
good news
is that the average for the 12 core sectors was 76.3%, based on an 
extensive survey of
5,102 public and private organizations. At the top of the list was the 
banks ranked at
99.0%. This is astonishing, given the turmoil of the past few years. 
Very few banks, in
the United States would have claimed such progress so early in 1999. 
Other impressive
Korean sectors were railroads (95.6%), air transport (70.0%), military 
(90.2%), and
electricity (85.1%). Nuclear power and telecommunications were lagging 
behind a bit at
64.0% and 63.3%, respectively. If these findings can be believed, then 
Korea will
produce electronic components in 2000, but might have some difficulty 
shipping them.
According to the January 20, 1999 Miami Herald, South Korea asked 
Russia to help avert
potential North Korean missile launches caused by Y2K glitches, since 
most of their
missile technology comes from Russia.
Bugged In Beijing. On April 1, 1999, CNN reported
In China's capital, a city of more than 10 million people, the Beijing 
government
has invested less than $500,000 in a special office to tackle the 
problem, a tiny
5 http://business.bug2000.co.uk/
6 http://y2000nca.or.kr/english/frame.html



Page 6 / April 12, 1999 / Deutsche Bank Research The Y2K Reporter
fraction of what major cities in the United States pay. The Beijing 
Y2K office
offers free advice to any who call, but the man in charge is worried.
"We need to guarantee our water, electricity, coal, gas, traffic 
systems, medical
services, sanitation, fire and safety. These big public services are a 
big problem.
We've done a lot of work, but I'm still extremely nervous," Chen 
Xinxiang says.
China's banks, stock markets and other financial institutions began 
first and
probably will weather the millennium storm in relatively good shape.
Nonetheless, hundreds of millions of dollars are needed to complete
reprogramming in key industries, reports the Beijing Morning Post. 
Officials
doubt that important government ministries-as well as many smaller 
agencies
that receive little support-can meet an October deadline for fixing 
their systems.
Bank Of Japan Has A Y2K Stash. The Bank of Japan (BOJ) is ready for 
trouble at the
start of the new millennium. On April 6, 1999, the BOJ said it will 
set aside $331.3
billion (40 trillion yen) in cash at its head office and branches to 
cope with Y2K
emergencies, including any sudden increase in money demand by 
consumers and
businesses. On January 2, 2000, the central bank plans to test all its 
connections with
private financial institutions. Bank officials will then decide 
whether to switch to manual
processing by the end of January 3.
WILL IT BE SAFE TO FLY?
Yes, But Count On Delays And Cancellations. Planes are not going to 
fall out of the
sky in January 2000. I'm not sure where this grim notion originated. I 
can only blame a
few reporters for even raising this unattributed concern, though they 
usually dismissed it.
On the other hand, 59% of Chief Information Officers surveyed by CIO 
Magazine in late
March 1999 said they won't fly at the turn of the century. I presume 
that they are
concerned about delays and cancellations rather than safety.
Continental Airlines, the fifth-largest US airline, said it 
successfully completed a test
flight to measure its Year 2000 computer readiness in March. It was 
the first experiment
of its kind for a commercial carrier. Continental flew a Boeing 737 
for one hour as its
computer date changed to January 1, 2000. The airline said its 
aircraft communications
systems, including the flight-management computer, worked properly.
The Federal Aviation Administration (FAA) plans to provide status 
information on the
readiness of foreign air traffic control systems and airports to the 
State Department to
help develop travel advisories for at-risk countries. Sometime after 
July 1, the State
Department is expected to issue these advisories to airlines and 
travelers.
FAA: Ready To Takeoff? And Land, Too? What about air travel in the US? 
The FAA
seemed hopelessly behind in its Y2K effort in early 1998. But in 
recent months, thanks to
a much-improved project management structure, tremendous progress was 
made. So
much so that the agency claimed that 88% of its systems were fixed and 
tested by the end
of March. FAA officials said they expect to have all of the agency's 
equipment ready by
the end of June.



Deutsche Bank Research The Y2K Reporter / April 12, 1999 / Page 7
Joel Willemssen, the director of Civil Agencies Information Systems at 
the US General
Accounting Office (GAO) has been monitoring the FAA's progress for 
Congress. In
Congressional testimony on March 15, 1999, he updated his assessment 
of the FAA's
Y2K project.7 He seemed quite impressed with the dramatic turnaround. 
However, most
of his testimony focused on the huge task that remained ahead. Indeed, 
Mr. Willemssen
noted that "FAA's Year 2000 program manager acknowledged that 
schedules are tight
and there is no room for any schedule delays." The FAA has to complete 
roughly 4,500
"events" by June 30, 1999-each one entailing the activation of a 
single system in a
single site. There are 654 air traffic control facilities in the FAA 
system. The man from
the GAO was especially concerned about ARTS-IIIA:
The Automated Radar Terminal System (ARTS)-IIIA is the critical data
processing system used in about 55 terminal radar approach control 
facilities.
These systems provide essential aircraft position and flight plan 
information to
controllers. The ARTS-IIIA system continues to rely on a 1960s-vintage
computer (a UNIVAC 8303 Input Output Processor), which was originally
produced by UNIVAC but is now supported by the Lockheed Martin
Corporation. Home computers available today have 250 times the memory 
of this
archaic processor. In 1989 and 1990 we reported on the flight safety 
risks
associated with this system, and recommended that FAA assess other 
alternatives
for meeting air traffic requirements. However, FAA did not act on our
recommendation, stating that it had a plan-which included continuing 
with the
old processors. Ten years later, these processors are still in 
operation.
Wow, the FAA is using a machine that should be in a computer museum! 
Mr.
Willemssen was worried that the FAA's analysis "may not have found all 
date processing
code in the Ultra assembly language programs that run in the UNIVAC 
processor." He
wasn't convinced that the FAA tested the "critical functionality of 
tracking real radar
data." Incredibly, the FAA relied on the assurances of one 
engineer-who had worked on
the UNIVAC processor since the 1960s-that there were no Y2K issues 
associated with
the processor.
Finally, the Congressional auditor observed that, based on survey 
data, only one-third of
the nation's airports reported that they would complete their Y2K 
preparations by June
30, 1999. The remainder either planned on a later date or failed to 
estimate any
completion date, and half of these airports had no contingency plan 
for any of 14 core
airport functions. Most of the laggards are smaller airports, but 26 
are among the nation's
largest 50 airports! Have a nice flight.
* * *
7 http://www.house.gov/reform/gmit/hearings/testimony/990315jw.htm

-- a (a@a.a), April 13, 1999.

After reading this one, something tells me Y2K Pro is gonna take tomorrow off.

-- a (a@a.a), April 13, 1999.

It IS a hard hitting 12 page report!

ITTA web-site ...

http://www.itaa.org/

ITTA Press Release ...

http:// www.itaa.org/news/pr/pr19990120.htm

BTW, Wanda,

For future reference, send an e-mail to the Adobe Acrobat text converter at pdf2txt@adobe.com and in the body of the message ONLY list the following pdf code ...

http:// www.yardeni.com/public/y_19990412.pdf

You can do this with any PDF file.

Diane

-- Diane J. Squire (sacredspaces@yahoo.com), April 13, 1999.

Ah, ask and ye shall receive. Arlin, a, and Diane, thank you all. This forum is, indeed, blessed with kind souls. The survey results definitely look worth taking the time to study...printing it off now. Thanks again!

-- Wanda (lonevoice@mailexcite.com), April 13, 1999.

I think that Y2K Pro, and his friends, will simply pick out the parts that support his position and ignore the rest of it. Kind of like searching for a few good apples in a barrel of rotten ones, then saying "See, there's good apples in this barrel."

-- Whetherman (whetherman@storm.warning), April 13, 1999.