Internet & Technology Tuesday, December 12, 2000

A Year Later, Y2K Consultants Rely On E-Business By J. Bonasia

Investor's Business Daily

One year ago, the world feared that a Year 2000 meltdown of computer systems would grind civilization to a halt. Those fears ended. Precautions turned a potential catastrophe into a digital hiccup.

But some suffered as a result of Y2K – the very software and computer service providers that had geared up to solve the problem.

Once the glitch was solved, many of these companies had to hunt for new sources of revenue.

And some of these companies have failed, says Gartner Group Inc. analyst Dale Vecchio.

"I saw the entire Y2K life cycle," Vecchio said. "I saw when people ignored it, and then when they panicked. Back in 1995, when you talked about the Y2K problem, people looked at you as if you were crazy.

Preparation Produced Dud "The whole thing may have been a dud, but that's because people spent a lot of time and money to make it a dud."

Tech companies that lived off Y2K now in large part have moved – or tried to move – to the next big thing, Vecchio says. And that is helping companies move operations onto the Internet.

"The new Y2K is called e-business," Vecchio said.

Moving from Y2K to e-business, though, has seldom been smooth.

Vecchio calls Viasoft Inc. of Phoenix the "poster child" for Y2K casualties. It got deeply involved in the New Year's frenzy, developing applications to help mainframes fix the problem and offering its OnMark 2000 software for desktop computers.

"Viasoft made a lot of money from Y2K, but now they don't even exist anymore," Vecchio said. "Y2K was the best thing that ever happened to them. On the other hand, it was also the worst thing."

Viasoft Acquired On Sept. 1, privately held Allen Systems Group Inc. of Naples, Fla., bought Viasoft.

Viasoft's first-quarter 2000 sales fell to $11.2 million from $25.8 million in the first quarter of 1999. This includes a drop in software sales to $2.3 million from $10.7 million.

The company blamed its fall on lagging Y2K sales and an impending buyout by Compuware Corp. that Compuware called off in January.

Simply enough, you have to be careful about putting too many eggs in one basket, says Ian Rowlands, an Allen Systems product management director who came over in the Viasoft purchase.

That situation, he says, shouldn't happen with "date limited" products – as in the case of Y2K.

"It's legitimate to ask just how much revenue you want to come from that one source," he said.

Part of Viasoft's downfall stemmed from its success in building its brand name through Y2K products, adds Allen Systems Marketing Director Eric Sommerton.

Compuware Sales Slow Viasoft wasn't alone. Would-be suitor Compuware, a software and services provider based in Farmington Hills, Mich., sold Y2K testing products. It also watched sales plummet after Jan. 1.

Its first-quarter sales fell 52% from first-quarter 1999 to $582.1 million. Second-quarter sales fell 63% and the third quarter's dived 79%.

From a 52-week high of 40 late last December, Compuware shares are trading near 7.

Compuware saw the impending end of Y2K sales and shifted toward e-business distribution software, says Beth Chappell, a Compuware executive vice president.

"As abruptly as Y2K stopped, e-commerce business picked up," she said.

The company, Chappell says, entered the Y2K market in part simply to assist regular clients who required computer fixes.

"It wasn't that we didn't see this (sales drop) coming," she said. "We had . . . to be there for them (existing customers)."

Seec Inc. of Pittsburgh sold software to fix Y2K problems on mainframes. Now it helps companies update their existing software systems to work on the Web.

PinPoint Became ClickNet The shift hasn't been easy. For the first nine months this year, Seec's sales fell more than half from the year-earlier period, to $2.9 million. It blames the end of the Y2K boom.

Some companies developed other strategies to cope with sharp sales declines after Y2K.

One was privately held PinPoint Software Corp. of San Jose, Calif. It remade itself into ClickNet Security Technologies, a provider of anti-hacking software.

But is the issue over, since officially the new millennium begins on Jan. 1, 2001?

Yes, analysts say.

Though historians and mathematicians know 2001 is the start of the millennium, for computers the only issue was the move from the 1900s to the 2000s. Many computers hadn't been programmed to take the change into account, thus causing potential problems.

"Everything works again," Vecchio said.

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-- Martin Thompson (mthom1927@aol.com), December 12, 2000