YOU'RE DONE. YOU'VE FOUND and fixed the date fields, installed the new software\nand filed compliance letters from your suppliers. You've put contingency plans\nin place, documented all remediation efforts and held meetings with the company\nlawyers. But, still, are you ready? And if you are ready, are the other\ncompanies on which you depend ready? And will your customers act rationally?\n\nOn an individual company basis, the answers depend on myriad issues, including\nthe age of the software code base, the diligence with which the Y2K problem has\nbeen attacked, the skills and methods of those addressing the problem, and,\nyes, probably a little luck. But on an aggregate basis, U.S. businesses look\nwell prepared. What's more, that preparation will pay off.These are the key findings of a research project currently underway at\nInternational Data Corp., a market researcher based in Framingham, Mass., and a\nsister company to CIO Communications Inc. Known as Project Magellan, the effort\ncaptures years of IDC research surveying IT professionals and CIOs on their Y2K\nremediation efforts. In the project, IDC uses its global research data to\nforecast the impact that the millennium bug will have on the economies of more\nthan 50 countries, countries where most multinational companies do business.\nThe outlook is not pretty. (For more information, see "Globetrotting with\nProject Magellan".)But first, the good news. In the United States, we are well prepared. In the\nlast five years, U.S. businesses have spent $109 billion to fix the Y2K\nproblem. And this includes only spending on staff, software, hardware and\nservices targeted specifically to Y2K. It excludes normal product upgrades or\nenhancements, unless they were rushed into place more than six months early.As a result of that spending, 85 percent of the more than 1,000 companies\nresponding to a recent IDC survey said they had completed Y2K remediation by\nSept. 30; less than 3 percent expected to miss the deadline. Even better news:\n\nLarge companies with complex environments were even further along and had\nconducted more extensive testing. You have done your homework. Good job.Now the Bad NewsThat might be the end of it if many of us didn't work for international or\nglobal organizations. Here the story is a little different. While countries\noutside the United States have spent some $149 billion to fix the Y2K problem,\nas a percentage of their overall spending on information technology, they have\nspent considerably less than our country has spent. We compared the relative\nspending in 1999 on fixing Y2K bugs in seven major regions of the world and\nfound that the United States spent more last year to fix Y2K problems than it\ndid this year and spent the same amount in 1997 as it did in 1999. Not so in\nother regions.In Western Europe, for instance, corporations have spent only 60 percent as\nmuch as their U.S. counterparts on fixing the problem when measured relative to\nIT budgets. Even lower on the charts were developing regions like Latin America\n(18 percent), Eastern Europe (16 percent), the Mideast and Africa (26 percent\ncombined). Asia-Pacific's figure (62 percent) would look worse, except that\nthat number represents only 1999 spending, and the region, particularly Japan,\nhas been playing catch-up.Particularly worrisome, as other studies and government advisories have pointed\nout, are activities in developing countries. In a global survey of 15,000\nbusinesses around the world early in 1999, the Project Magellan team found that\nover 90 percent of the companies surveyed in the developed world expected to be\ndone with Y2K remediation by the new year. In the developing countries, that\npercentage was just less than 20 percent. In addition, more than 25 percent\nsaid they didn't think they had a Y2K problem to begin with. If you are running\na multinational with remote offices, you already know the rest of the world is\nnot as prepared as the United States.What no one has done until now, however, is quantify what this means. We know\nhow much work we've done to fix Y2K. Will that work pay off? What will be the\nimpact of Y2K? Will, for instance, Deutsche Bank economist Ed Yardeni's\nprediction that there is a 70 percent chance that Y2K will cause a global\nrecession come true? Or will Y2K blow over as calmly as did Sept. 9, 1999, the\nglobal positioning system 20-year date rollover and the U.S. government's new\nfiscal year?The Metrics of PainHow much pain will the Y2K bug inflict? The researchers and economists on\nProject Magellan puzzled first on how to measure its impact on the economy.\nWhen all was said and done, the simplest way seemed to be in revenues lost as a\nresult of downtime. These would have to be revenues that weren't just shifted\nfrom one company to another, or from a week in January to one in February, and\nso on. But they could be, and will be, revenues lost throughout the year, not\njust in the first days of the year 2000.Using the results of several major research studies, ongoing information on\nautomation levels and IT budgets in different countries, the Project Magellan\nteam developed a model for the impact of Y2K. Out of this model came three\nscenarios that varied based on how Y2K problems are likely to travel through\nthe economy. In the Ho-Hum Scenario, problems are relatively well contained and\nthe effects are isolated to individual companies. In the Cascade Scenario, lost\nrevenues cascade through the economy similar to the way value-add is developed\nin the economy. One company's lost dollar is another company's lost 70 cents.\nProblems diminish as they propagate from company to company. In the Cascading\nCascade Scenario, lost revenues filter through the economy twice as far as they\ndid in the previous scenario. But problems' effects ultimately dwindle. One\ncompany's Y2K problems\u2014especially in billing and supply chain systems\u2014affect\nseven other companies before petering out.A fourth scenario not computed in the model might best be termed the\n"civilization ends as we know it" scenario. This is the one where problems\npropagate through the economy and get worse as they go along\u2014one company's\ndollar of lost revenue is another's lost $10 and so on. The Project Magellan\nteam considers the probability of this to be so remote that it's not even worth\ncalculating. In this scenario, CIOs would have been better off spending their\nY2K remediation dollars on lottery tickets.Was It Worth It?Based on our research, IDC believes the Cascade Scenario will prevail. If so,\nthe world economy will lose $19.2 billion to Y2K bugs in the year 2000, a\npittance compared with the money spent fixing the bugs and on the overall world\neconomy, which is measured in the tens of trillions of dollars. (The more\ndrastic Cascading Cascade Scenario would take more than $60 billion out of the\nworld economy, still a small amount on a global scale.) Losses by region\nfluctuate. Despite the work done to date, the United States has such an\nautomated economy that what few problems are left will have more impact than\nproblems in less automated economies (total: $4.9 billion). Latin America's Y2K\nlosses will outstrip its share of total IT spending by a large margin ($1.2\nbillion).An older software base and fairly automated economies in Japan and Australia\ndrive the Y2K losses in Asia-Pacific ($7.4 billion) past those of the United\nStates, accentuated by the prevalence of pirated software in the lesser\ndeveloped Asia-Pacific countries. Y2K problems in Eastern Europe ($1.1\nbillion), especially Russia, which are expected to be widespread, will be\noffset by the fact that most of the local economies are not dependent on\ncomputers.The 10 countries of the 50 largest that will be the most affected by Y2K as\nmeasured as a percentage of their economies include Bulgaria, Hong Kong, Japan,\nKorea, the People's Republic of China, Portugal, Romania, Russia, Taiwan and\nVietnam. Note, however, that even in the countries hardest hit, losses will be\nless than 0.1 percent of the year 2000 economy.If the Project Magellan forecast comes to pass, you'll soon be breathing a sigh\nof relief. Staff will be taking comp time, and vendors will be beating down\nyour door to discuss new projects. The Y2K problem will fade, no worse a memory\nthan a major operating system upgrade from the IBM System 360 to the System 370\nwas in the old days. In fact, more than likely there will be questions on\nwhether the whole Y2K "scare" was justified. That's the irony of it. The more\nsmoothly we enter the next millennium, the more that management, pundits and\nthe public will second-guess whether the last five years of remediation were\nworth it.Once the final impact is tallied, the Project Magellan team will turn to its\nY2K impact model to run ROI calculations. In a first pass, the team determined\nthat if the scenarios don't change\u2014just the number of bugs and the time to fix\nthem\u2014then all the money spent to fix Y2K will be matched by revenues that could\nhave been lost but weren't. Fixing Y2K bugs then was an insurance policy, with\nsome side benefits triggered by the system upgrades required.But quite likely, if no Y2K efforts had been undertaken, then we would be\nfavoring a different scenario, one where problems compound one another in\naccelerating fashion. In that case, we wouldn't just be looking for jobs after\nY2K. We might be looking for food, gasoline and batteries.John Gantz is chief research officer for IDC in Framingham, Mass. He can be\nreached at firstname.lastname@example.org.