May 11,
1998
WILL THE Y2K BUG CRUSH SMALL BIZ?
The Year 2000 is less than 600 days away. Time to start planning that millennial bacchanalia, right? Not if you listen to the calamity counsel of Alan Simpson, a self-styled expert on the Year 2000 (Y2K) computer bug and recent witness on a U.S. Senate small-business committee examining the topic.
Simpson argues that small companies are especially vulnerable to the programming glitch because they have neither the money nor the talent to upgrade customized or embedded computer programs. In fact, small fry are already starting to feel the effects, says Simpson, because large corporate clients are growing wary of non-Y2K-compliant suppliers "The Year 2000 could destroy us if we're not careful," intones Simpson. And just how fun is a party with a death-knell floating overhead? To help find out, BW Enterprise's Dennis Berman recently spoke with Simpson from his Forked River (N.J.) headquarters.
BUSINESS WEEK: You speak a lot about the supply chain, or what you call the "food chain" of big and small businesses. Are small companies simply going to be left behind when it comes to Y2K preparedness?
SIMPSON: At the top of the food chain are the big financial companies, the banks, the Wall Street firms. They're sending out demands to all the medium and smaller companies that unless you're compliant, you won't get any contracts -- and there's probably 10 million to 15 million of those companies.
For a lot of them, that's the first time they've heard of the Year 2000 problem. And they don't take it seriously, because most of the organs of the mainstream media have discounted this as a joke.... But it's much more serious than any of us can ever imagine.
Q: What specific reports have you heard of large companies revoking contracts based on Y2K compliance?
A: Let's talk about automobiles. All the auto companies are sending out compliance letters to anyone who uses electronic funds transfer. The letters are saying to small suppliers: "Will we be able to send you a factory order as we do now? Will you be able to guarantee us that?" And a lot of companies are saying, "Yes, certainly," and they're not even checking on it.
The lawyers are going to have a field day. Lots of contracts will fall apart, especially in companies that use robots, computer-controlled lates, anything with an embedded computer system. The problem is that the big banks have the money, the staff, and the infrastructure to find these problems and fix them. Further down the chain, they don't know about it.
Q: What can a small business do to fight the problem?
A: The first thing a small company needs to do is to find out what it's got: What software have you got on the PC? Most companies don't really know. You need to know whether or not it's compliant (you can check on the Web) or [how to] replace or update it. In a lot of cases, they've got to go out and buy new hardware and software. And they're going to say, "Wait, I'm running hand-to-mouth here, and you're saying this system I bought in 1997 is useless?"
Also, are their suppliers compliant? And what if the power grid goes down for a day, two days, three days? What effect will that have on my business? What will happen if the telephone system is busy all the time? How much stuff do I need from Federal Express, or what happens if the air traffic control system loses 25% of service?
Q: So you're saying a small firm can't buy the help to fix the problem?
A: The talent that is available is being snatched up by the big boys -- everything has been sucked up into the Citibanks, the big Wall Street companies. There are even a lot of government entities desperate for people. And the new programmers don't want to touch old COBOL [a computer language] systems. In Britain, Tony Blair says the country is going to train 20,000 new programmers.
Q: What other deficiencies in computer design does the Y2K bug bring out?
A: Everything is so smooth and quick. We've gotten rid of people in the equation, and that's the problem. The computers do all the invoices and purchase orders. Sit down and take a white board. Draw a list of all the inputs and outputs that go into that small business, and find where it could fail -- traffic lights, electronic-data interchange, the telephone service, checks from the government and suppliers.
These aren't alarmist theories. For a small business, the problem is that you will not get the raw materials coming to you, and you will not be producing products out to the next stage. But you will still be liable for all the overhead you owe. Can you do that?
We have a case study from Auckland, New Zealnd. Two months ago, the main power cable failed. This is an ultramodern vibrant city, and it took them a month to get businesses back again. Small businesses were failing by the hour. Things like emergency generators only run for a short while before they run out. The big generators for telecommunications ran out. The pumps failed, the sewage failed, and they had to bring in martial law. This was totally ignored by everyone in the U.S. But it showed what can happen to small business where power failure is involved.
Q: How much can we look to government to help us solve the problem?
A: They haven't accepted it as a problem in the White House. The country is screaming about the problem, and Clinton doesn't have a clue.... No one in government is saying, as Roosevelt did, "There are war clouds approaching." Failure is not an option.
