Warning of a new era

Advocates of `think big' system strategies for 2000 and EMU compliance would do well to recall the costly experience of decimalisation. By Mark Vernon
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Indy Lifestyle Online
Spring sunshine in the first quarter of 1997 is being met by a smile on the face of the IT industry. For this year is the one in which the full force of year 2000 and EMU compliance will be felt by IT directors, and the pressure is to spend.

There has not been such good news of, in effect, compulsory investment since the switch to a decimal currency. Software vendors and solution providers are already in the midst of the battle to win a share of the takings. For them it is a window of opportunity, even if for those in IT departments, the last three years of the millennium are more likely to be a window of anxiety.

The scare stories of computer collapse as mission-critical machines search in vain for the year "00" at midnight on 1 January 2000 have been well aired in both the trade and public press. The impact of the birth of the Euro is currently being assessed with a barrage of statistics demonstrating the severity of the stretch on resources EMU projects represent. Even the innocent home PC user has been given plenty of reason to worry about what is going to happen to their accounts application or operating system when they switch on for the first time after a night of millennial festivities.

The suggestion from the system providers is that the moment should be seized. No matter how daunting the necessity of finding a solution to these problems may be, it should be turned into a strategic opportunity to leverage business and refresh the IT systems that support it. For example, a recent report from Ovum demonstrates that this predicament is giving finance directors the long-sought justification to replace their ageing and perhaps wobbly financial systems. Alternatively, KPMG's Malcolm Stirling argues that a "quick-fix" approach will prove to be a false economy and the situation should be used "to drive massive strategic changes" within the organisation.

Such work comes at a price. Take the case of the Union Bank of Switzerland, which has one of the more advanced programs in the City. It reckons that EMU will require redevelopment in 60 per cent of its IT applications and that up to 90 per cent of its larger systems will have to be made compliant. Thus, one of the main hurdles it faces is simply how to cope. The bank estimates that EMU will cost pounds 12m over two years, or approximately 5 per cent of the IT budget.

And it is not just corporate money that will be in demand. Sean O'Reilly, managing director of Year 2000 Conference Europe, recently estimated that the UK taxpayer will have to foot a bill of pounds 750m to cover the requirements of government IT systems. No wonder the IT industry is smiling and urging decision-makers to "think big".

But they should beware too. For amidst the marketing noise of surveys and research results, warning bells are also being sounded. Whilst advancing their plans for providing technology to meet the problem, older and wiser members of the IT industry are recalling the experience of decimalisation. Such was the demand on resources and budgets then, that after the work had been done, there was literally no money left to spend on other investment and the IT industry went into a mini-recession. Even the coders, who 12 months earlier had been demanding massive pay rises comparable to those witnessed today, were made redundant. As consultant Dennis Keeling puts it, "There was an abyss over the software industry."

Some vendors are responding to this threat by purposefully holding back on the push to install immediately, with the logic that, when it comes to EMU, many organisations will be able to phase in compliance and not have to go for a big bang conversion. Others are developing partner programmes to meet the increase in business, so as to carry the risk of downsizing post-2000 away from their own employees.

But how well the IT industry can resist the temptations of its own hype has yet to stand the largest test. In the UK, the EMU debate has been stifled by the hesitancy of the politicians. But after the general election it will be contested with all guns blazing. IT vendors should beware of losing a game that has to date been played as a win/win situation n

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