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IT'S 2000. DO YOU KNOW WHERE YOUR DELIVERIES ARE?

The millennium bug threatens everyone's computers. Here's how to immunize

On Jan. 3, 2000, Don Houseman hopes he'll be back at his eight-person sheet-metal-stamping company in Watsonville, Calif., doing business as usual. But first, he says with a touch of gallows humour, he'll have to find out whether ''we're still in business'' at all.

There's nothing mystical about Houseman's concerns. What worries him is his suppliers' ability to address a monstrous computer problem: the so-called millennium bug, which is expected to wreak havoc in computer systems around the world when the clock strikes midnight on Dec. 31. ''We order materials on a daily basis, and getting them on time is real important to us,'' he says. ''If their computers go down, we don't get our steel.'' For other businesses, the problem might lie within their own machines rather than with outsiders.' But wherever the bug may lurk, fear of it is well-founded.

MEGACRASH? Simply put, the bug refers to the inability of many software applications to perform calculations correctly beyond the year 1999, thanks to a practice set in place at the dawn of the computer revolution. To save on disk space, early programmers chose to leave the ''19" off yearly dates, never dreaming their programs would be around in 20 years. On New Year's Day, 2000, a lot of computers and software will think it's 1900. That could cause them to lock up, fail altogether, or produce wildly unpredictable results such as notices that payments are 99 years overdue or interest calculations that run a century.

Big business has gotten most of the media attention on the issue, but ''small companies in particular are at risk'' for bug-born grief, says Ken Orr, a Topeka (Kan.) specialist in the subject. ''Either their suppliers have problems, or they hired their brother-in-law to build a database and have been running it forever, happy as clams. They're just going to wake up one morning and find that their computers won't run.''

Most experts believe that, left uncorrected, the bug could affect 90% of all computer applications, regardless of a company's size. Companies selling widgets on the Web could find customers turned away when told their credit cards are invalid. A tape backup of the most recent computer files made on Jan. 3, 2000, could look for files dated 1900, missing files created that day. Because the bug also lives in certain devices containing embedded chips, elevators and bank vaults could lock up. Even farmers aren't exempt: Certain tractors with computerized electronics won't turn on after 2000 if the problem is left uncorrected. How serious an effect could there be on various devices? Peter de Jager, a leading year 2000 expert who has testified before Congress on the bug issue says, ''It could be in 1% of embedded chips or 99% of them. We still don't know.'' According to Gartner Group, a computer-industry research firm in Stamford, Conn., as many as 30% of all bread-and-butter computer applications could fail, causing 10% of all businesses to go belly up due to lost business, stalled production, or lawsuits from angry customers.

The risks of this bug are spread unevenly, however, and some business owners feel confident their operations are not endangered. John Van Sickle, who runs a 20-employee company selling cheesecakes through the World Wide Web, is nonchalant. ''Most of the dates in our customer database already have the 19s in front,'' he says. ''Even if we did run into a problem we could probably recover quickly. I mean, we're not General Motors.''

But Van Sickle has more faith in his vendors than folks like Houseman, who worries that his suppliers will go down, leaving him stranded. ''The only thing I can do is to have inventory on hand,'' he says.

Companies that rely on new versions of packaged software are likely to face fewer problems. Nordic Needle, a 21-employee knitwear company in Fargo, N.D., keeps critical information about its 50,000 customers in an off-the-shelf accounting-software package that handles dates beyond 2000. ''We're pretty confident that we're going to get off scot-free,'' says manager Janet Berg. But companies running older programs are liable to have more problems. How old is old? Unfortunately, that depends on the specific program, making it impossible to generalize. In most cases, an upgrade will take care of glitches, provided the vendor has one to supply. But if a company neglects to upgrade its 1989 copy of Quicken 1.5 and it goes ka-thunk in 2000, it's not clear who will be liable for the consequences, says de Jager. ''That will be decided in the courts.''

LOST IN THE MAZE. The far greater risk lies with older, custom-built database programs, which have informational jewels buried in historical data, such as dates of birth, hiring, eligibility, and expiration. At Liberty Bank, a community bank in Boulder Creek, Calif., all the records are time-stamped and run on a mainframe operated by a third party. Unless the software vendor successfully combs out the millions of lines of computer code, Liberty will be in trouble. ''We won't be able to do business, we'll be buried in complaints, and we'll have the federal regulators on us in no time,'' says chief information officer Tony Ho. ''There would be no way to measure the damage.''

Fixing database programs written in old code won't be cheap. The going rate for consultants is now $1 per line of code, and that price is rising 20% to 50% per year, according to Gartner Group. Jennifer McNeill, president of Cipher Systems, of Calgary, Alberta, one of the few North American companies willing to help small businesses with their bug problems, offers the example of a small manufacturer with a 10-year-old database containing 700,000 lines of COBOL code running on a midsize computer built in the 1980s. ''I told them it would cost $700,000 to keep their systems running just the way they do now. They looked at me like I'm crazy,'' says McNeill. ''They never imagined spending that much on a computer system. Ever.''

So what can companies do to make sure they're not bitten by the bug? Start now. Because they have fewer computer systems to worry about, small companies have a better chance of finding, fixing, and testing everything if the work is begun now. The longer you wait, the more it will cost.

Assess the risk. Companies that run old computers and software or deal with a lot of numbers and projections--in finance and insurance, for instance--are apt to find the problem more pervasive than those in, say, retail clothing sales or graphic design. But regardless of the size or the kind of business, consultants are recommending that companies set priorities. Life-or-death systems--software that handles product delivery or cuts checks for employees and suppliers--should be fixed first, lest a company find itself facing legal or operational problems. Less critical systems can wait.

Check everywhere. How? Simply enter a year date, say 2021, into a program like Excel or Quicken and see what happens. If it comes back with ''invalid date,'' you have a problem. You can do the same with your vendors and contractors. Place an order for March, 2002. Did it go through? The millennium bug can affect every computer built before mid-1996, from 486 PCs to larger IBM or Digital computers, as well as all kinds of other devices. On a pre-1996 model PC, you'll still need to fix the computer's BIOS (binary input/output) chip--used to control computers' basic functions--by loading Windows 97, manually resetting the date in the Windows control panel, or asking the computer's manufacturer for a software patch. If one isn't available, or the company has stopped manufacturing the system, you'll probably have to replace the computer. None of this is an issue for owners of Apple computers.

While it's impossible to identify every problem computer or program, consultants do offer a few guidelines. If your PC is a Pentium, it is likely to handle the turn of the century without a hitch. Macintosh computers can handle dates up to 2019, but not every Mac software program is immune. Up-to-date software is likely to be fine; Microsoft Excel 95 handles dates to 2078; Excel 97 and ClarisWorks 4.0 can handle dates up to 9999. Software that the vendor is no longer shipping should definitely be tested, but even with software still being marketed, it's best to check with the vendor to be sure it's bug-free.

Strong-arm vendors. You should get in touch with suppliers to find out when their products will be year-2000 ready--and to make sure their fixes will work. If a supplier can't assure a fix, small businesses may take the hit. To avoid that eventuality, make vendors and suppliers sign warranty extensions to their contracts stating that their systems can handle the year-2000 problem.

Hedge your bets. There is no way to guarantee that every bug will be found and fixed by the deadline. So smart companies should seek legal advice and ask their insurance broker if a rider is available to cover potential losses and liabilities. Protecting yourself from the bug won't be easy. Failing to could be fatal.

By Bronwyn Fryer in Santa Cruz, Calif., with Elaine L. Appleton in Newburyport, Mass.



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