How Much Will the Y2K Act Cost You? CIO Magazine

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For educational use This is from July 20 in the CIO Magazine which is one of or is the IT magazine to rely on for sound news in the industry (IMHO). This article doesn't seem to like the new "Y2K Act" and it is worth a good read. Not only that, at the bottom of the page are comments on the Act by CIO peers. I have not read that yet but it looks very informitive. As it seems to be a slow Sunday on the forum this might be well worth checking out.
 
 

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How Much Will the Y2K Act Cost You?
 
 

July 20, 1999 -- Chalk up another victory for the high-tech lobby on Capitol Hill. On July 21, President Clinton signed into law the Y2K Act, which in limiting legal liability for Year 2000 computer problems, lets irresponsible software vendors off the hook.
   Big business concerns, like the U.S. Chamber of Commerce and the National Association of Manufacturers, laud the cap on frivolous lawsuits that might drain resources from the high-tech sector, an important engine of growth in this robust economy. Consumer groups worry that limitations will provide little recourse to consumers stuck with products that are not fit for work after this year. And CIOs? Their fate depends on how prepared for Y2K they are.
   One provision in the Act mandates a ninety day cooling off period during which a company charged with Y2K negligence can work on the problem before being hauled in to court. Three months is a generous grace period for a supplier with delivery problems, but a life-sentence for a CIO with stalled operations.
   Another provision states that plaintiffs may not recover damages for economic loss "unless such losses result directly from damage done to tangible personal or real property caused by Y2K failure." Since U.S. courts have traditionally viewed electronic data as intangible, some experts predict that IS directors will have a hard time suing for losses caused by corrupted hard drives -a boon for a software vendor but a straight-jacket for the CIO who has just lost a business-critical database.
   Companies lax in their Y2K remediation efforts will enjoy protection from costly legal action, while they hang their business partners out to dry. CIOs who have been diligently readying their systems will have little hope for compensation-except for that required by preexisting contractual agreements that cover Y2K-- when their vendors and suppliers let them down.
   And there are other ramifications to the Y2K Act that are even deeper than costs to the bottom-line.
   For years, CIOs have complained about a software industry that favors time-to-market over careful design. Vendors have known about Y2K for years, and yet, according to Lou Marcoccio, Y2K research director at the Gartner Group, "70% per cent of currently shipping versions of all commercial software is not Y2K ready." The software industry, which feeds off problems of its own doing, has been in a position to make millions on Y2K upgrades. Now, thanks to the Y2K Act, it will do so with impunity. "Software companies now have no motivation to fix their Y2K problems, says Leon Kappelman, Associate Professor, Business Computer Information Systems at the University of North Texas and Y2K expert, "They have no downside risk."
   But software companies are not the only beneficiaries of this legislation. Any company-software or otherwise--that has failed to assess its Y2K readiness will find some protection under this law. And those companies that have invested big money in remediation efforts are more the fools for having done due diligence.
   Our free market practice is supposed to weed out those companies that do not plan ahead, do not think strategically, and habitually let down their customers. Yet just as the weaker companies are forced to meet their proverbial maker, along comes the government to reward shoddy business practices with protection from legal action. John McCain, the Act's most vocal sponsor, argues that with Y2K litigation threatening to stall our vibrant economy, "the future of American business rides on this legislation." And in a sense, he is correct. By permitting corporate negligence, the Y2K Act puts just another nail in the coffin of good business.
   Call your lawyers, make sure that your contracts cover Y2K liability, and secure your contingency plans. The system you thought would provide you with legal defense against negligence has been sold out by an Administration that is more frightened of the accusation that they spoiled the party, than concerned about the integrity of American business.
   How much will the Y2K Act Cost you? Plenty.

-- Brian (imager@home.com), August 15, 1999


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