You're done. You've found and fixed the date fields, installed the \n\nnew software and filed compliance letters from your suppliers. You've \n\nput contingency plans in place, documented all remediation efforts and \n\nheld meetings with the company lawyers. But, still, are you ready? And \n\nif you are ready, are the other companies on which you depend ready? \n\nAnd will your customers act rationally?\n\nOn an individual company basis, the answers depend on myriad issues, \n\nincluding the age of the software code base, the diligence with which \n\nthe Y2K problem has been attacked, the skills and methods of those \n\naddressing the problem, and, yes, probably a little luck. But on an \n\naggregate basis, U.S. businesses look well prepared. What's more, that \n\npreparation will pay off.\n\nThese are the key findings of a research project currently underway at \n\nInternational Data Corp., a market researcher based in Framingham, \n\nMass., and a sister company to CIO Communications Inc. Known as \n\nProject Magellan, the effort captures years of IDC research surveying \n\nIT professionals and CIOs on their Y2K remediation efforts. In the \n\nproject, IDC uses its global research data to forecast the impact that \n\nthe millennium bug will have on the economies of more than 50 \n\ncountries, countries where most multinational companies do business. \n\nThe outlook is not pretty. \n\nBut first, the good news. In the United States, we are well prepared. \n\nIn the last five years, U.S. businesses have spent $109 billion to fix \n\nthe Y2K problem. And this includes only spending on staff, software, \n\nhardware and services targeted specifically to Y2K. It excludes normal \n\nproduct upgrades or enhancements, unless they were rushed into place \n\nmore than six months early.\n\nAs a result of that spending, 85 percent of the more than 1,000 \n\ncompanies responding to a recent IDC survey said they had completed \n\nY2K remediation by Sept. 30; less than 3 percent expected to miss the \n\ndeadline. Even better news: Large companies with complex environments \n\nwere even further along and had conducted more extensive testing. You \n\nhave done your homework. Good job.\n\nNow the Bad News\nThat might be the end of it if many of us didn't work for \n\ninternational or global organizations. Here the story is a little \n\ndifferent. While countries outside the United States have spent some \n\n$149 billion to fix the Y2K problem, as a percentage of their overall \n\nspending on information technology, they have spent considerably less \n\nthan our country has spent. We compared the relative spending in 1999 \n\non fixing Y2K bugs in seven major regions of the world and found that \n\nthe United States spent more last year to fix Y2K problems than it did \n\nthis year and spent the same amount in 1997 as it did in 1999. Not so \n\nin other regions.\n\n\nIn Western Europe, for instance, corporations have spent only 60 \n\npercent as much as their U.S. counterparts on fixing the problem when \n\nmeasured relative to IT budgets. Even lower on the charts were \n\ndeveloping regions like Latin America (18 percent), Eastern Europe (16 \n\npercent), the Mideast and Africa (26 percent combined). Asia-Pacific's \n\nfigure (62 percent) would look worse, except that that number \n\nrepresents only 1999 spending, and the region, particularly Japan, has \n\nbeen playing catch-up.\n\nParticularly worrisome, as other studies and government advisories \n\nhave pointed out, are activities in developing countries. In a global \n\nsurvey of 15,000 businesses around the world early in 1999, the \n\nProject Magellan team found that over 90 percent of the companies \n\nsurveyed in the developed world expected to be done with Y2K \n\nremediation by the new year. In the developing countries, that \n\npercentage was just less than 20 percent. In addition, more than 25 \n\npercent said they didn't think they had a Y2K problem to begin with. \n\nIf you are running a multinational with remote offices, you already \n\nknow the rest of the world is not as prepared as the United States.\n\nWhat no one has done until now, however, is quantify what this means. \n\nWe know how much work we've done to fix Y2K. Will that work pay off? \n\nWhat will be the impact of Y2K? Will, for instance, Deutsche Bank \n\neconomist Ed Yardeni's prediction that there is a 70 percent chance \n\nthat Y2K will cause a global recession come true? Or will Y2K blow \n\nover as calmly as did Sept. 9, 1999, the global positioning system \n\n20-year date rollover and the U.S. government's new fiscal year?\n\nThe Metrics of Pain\nHow much pain will the Y2K bug inflict? The researchers and economists \n\non Project Magellan puzzled first on how to measure its impact on the \n\neconomy. When all was said and done, the simplest way seemed to be in \n\nrevenues lost as a result of downtime. These would have to be revenues \n\nthat weren't just shifted from one company to another, or from a week \n\nin January to one in February, and so on. But they could be, and will \n\nbe, revenues lost throughout the year, not just in the first days of \n\nthe year 2000.\n\n\nUsing the results of several major research studies, ongoing \n\ninformation on automation levels and IT budgets in different \n\ncountries, the Project Magellan team developed a model for the impact \n\nof Y2K. Out of this model came three scenarios that varied based on \n\nhow Y2K problems are likely to travel through the economy. In the \n\nHo-Hum Scenario, problems are relatively well contained and the \n\neffects are isolated to individual companies. In the Cascade Scenario, \n\nlost revenues cascade through the economy similar to the way value-add \n\nis developed in the economy. One company's lost dollar is another \n\ncompany's lost 70 cents. Problems diminish as they propagate from \n\ncompany to company. In the Cascading Cascade Scenario, lost revenues \n\nfilter through the economy twice as far as they did in the previous \n\nscenario. But problems' effects ultimately dwindle. One company's Y2K \n\nproblems\u2014especially in billing and supply chain \n\nsystems\u2014affect seven other companies before petering out.\n\nA fourth scenario not computed in the model might best be termed the \n\n"civilization ends as we know it" scenario. This is the one where \n\nproblems propagate through the economy and get worse as they go \n\nalong\u2014one company's dollar of lost revenue is another's lost $10 \n\nand so on. The Project Magellan team considers the probability of this \n\nto be so remote that it's not even worth calculating. In this \n\nscenario, CIOs would have been better off spending their Y2K \n\nremediation dollars on lottery tickets.\n\nWas It Worth It?\nBased on our research, IDC believes the Cascade Scenario will prevail. \n\nIf so, the world economy will lose $19.2 billion to Y2K bugs in the \n\nyear 2000, a pittance compared with the money spent fixing the bugs \n\nand on the overall world economy, which is measured in the tens of \n\ntrillions of dollars. (The more drastic Cascading Cascade Scenario \n\nwould take more than $60 billion out of the world economy, still a \n\nsmall amount on a global scale.) Losses by region fluctuate. Despite \n\nthe work done to date, the United States has such an automated economy \n\nthat what few problems are left will have more impact than problems in \n\nless automated economies (total: $4.9 billion). Latin America's Y2K \n\nlosses will outstrip its share of total IT spending by a large margin \n\n($1.2 billion).\n\n\nAn older software base and fairly automated economies in Japan and \n\nAustralia drive the Y2K losses in Asia-Pacific ($7.4 billion) past \n\nthose of the United States, accentuated by the prevalence of pirated \n\nsoftware in the lesser developed Asia-Pacific countries. Y2K problems \n\nin Eastern Europe ($1.1 billion), especially Russia, which are \n\nexpected to be widespread, will be offset by the fact that most of the \n\nlocal economies are not dependent on computers.\n\nThe 10 countries of the 50 largest that will be the most affected by \n\nY2K as measured as a percentage of their economies include Bulgaria, \n\nHong Kong, Japan, Korea, the People's Republic of China, Portugal, \n\nRomania, Russia, Taiwan and Vietnam. Note, however, that even in the \n\ncountries hardest hit, losses will be less than 0.1 percent of the \n\nyear 2000 economy.\n\nIf the Project Magellan forecast comes to pass, you'll soon be \n\nbreathing a sigh of relief. Staff will be taking comp time, and \n\nvendors will be beating down your door to discuss new projects. The \n\nY2K problem will fade, no worse a memory than a major operating system \n\nupgrade from the IBM System 360 to the System 370 was in the old days. \n\nIn fact, more than likely there will be questions on whether the whole \n\nY2K "scare" was justified. That's the irony of it. The more smoothly \n\nwe enter the next millennium, the more that management, pundits and \n\nthe public will second-guess whether the last five years of \n\nremediation were worth it.\n\nOnce the final impact is tallied, the Project Magellan team will turn \n\nto its Y2K impact model to run ROI calculations. In a first pass, the \n\nteam determined that if the scenarios don't change\u2014just the \n\nnumber of bugs and the time to fix them\u2014then all the money spent \n\nto fix Y2K will be matched by revenues that could have been lost but \n\nweren't. Fixing Y2K bugs then was an insurance policy, with some side \n\nbenefits triggered by the system upgrades required.\n\nBut quite likely, if no Y2K efforts had been undertaken, then we would \n\nbe favoring a different scenario, one where problems compound one \n\nanother in accelerating fashion. In that case, we wouldn't just be \n\nlooking for jobs after Y2K. We might be looking for food, gasoline and \n\nbatteries.