TRANSCRIPT: OFFICIAL SAYS SMALL BUSINESSES PREPARING FOR Y2K (Digital video conference with Taipei, Taiwan) (3730)

Washington -- Mission-critical systems of the federal government will make a smooth transition into the year 2000. But a top official working on the Y2K computer and technology problems says that many small businesses in the nation's private sector may be less prepared.

Daniel O. Hill, the assistant administrator for technology at the U.S. Small Business Administration (SBA), made his remarks March 22 in a USIA digital video conference with public and private sector representatives gathered in Taipei, Taiwan.

The Y2K problem could cause many computers to malfunction when the year advances to 2000, as they mistake the date for 1900. The Clinton administration has launched a concerted effort to prevent the problem, under the leadership of the President's Council on Y2K Conversion. Hill is a member of that council.

Hill told the Taiwanese audience the council's mission is threefold: ensuring that government systems can make the transition to year 2000; supporting the efforts of private sector and state and local governments to fix their systems; and informing the public on Y2K efforts.

At the SBA, Hill says the agency initially made a serious miscalculation about the readiness of small businesses across the country to confront the Y2K problem. An early assessment gave little reason for concern, but then, the official says, recognition grew about the many different ways the technological problem could affect small business.

As a result, Hill says the SBA launched a campaign to increase small business preparedness under the slogan, "Are you Y2K okay?" In one information campaign last October, Hill says two to three million small businesses received training and advice on how to address their problems.

Now, in each of the 50 U.S. states, Hill says the SBA has set up teams to provide further assistance in Y2K remediation to small businesses. In the next few months, Hill says the SBA will be working to promote the message that the nation's infrastructure -- utilities, transportation and communication -- will function. He adds, "Our message this summer is to build a voice of calm in the storm."

Hill says information on the Y2K problem can be found at two government sites on the World Wide Web: and .

Following are excerpts from the transcript of Hill's digital video conference with Taiwanese officials and business people:

(Begin excerpts)

My name is Daniel Hill. I am the Assistant Administrator for Technology at the United States Small Business Administration here in Washington, D.C. I also serve on the President's Council on Y2K Conversion advising the President's assistant, John Koskinen, on small business issues as they relate to the Y2K bug issue.

Let me just start by saying here in the United States the year 2000 and the new millennium pose many challenges. The Y2K computer problem is but one of them, but it has been very clear from the beginning and very important to all of our efforts here, that the United States Government and both President Clinton and Vice President Gore have made it very clear that addressing the year 2000 or the Y2K computer problem is a top priority for the federal government and the nation.

Accordingly, our federal agencies across the country, here in Washington and around the world, are focused on ensuring, number one, that the mission-critical federal systems for which they are responsible can make the transition to the year 2000. And I'm happy to tell you tonight, the U.S. Government will be ready for the year 2000.

Number two, supporting the efforts of private sector and state and local governments to fix their systems. And, number three, providing information to the public on the status of public and private sector Y2K efforts.

Let me tell you how we approached the problem at the Small Business Administration and what we have been doing. Back about three or four years ago, our Director of Computer Systems at the Small Business Administration, began looking at the Y2K issue as it would affect the SBA's internal computer operations -- those systems that we depend upon in order to do our job year after year after year. And he became very concerned early on and started work about three years ago in replacing most of our systems so that we would be Y2K compliant at the SBA and would not miss a heartbeat in our operations.

About a year and a half ago, we began studying the issue how would the Y2K problem effect the nation's 24 million small businesses. At first, we were not that concerned. We thought most small businesses are using state of the art personal computers, buying new computers and software off the shelf at computer stores around the country. And we felt very strongly that most of that was probably going to be Y2K compliant; hence, most small businesses would be Y2K okay. As it turned out, we were very wrong -- very, very wrong -- in that initial assessment.

What we did is we called in to Washington leading hardware and leading software manufacturers and conducted a number of focus groups to develop our message. And we had a very clear message communicated to us from these industry experts. Industry experts from Microsoft, Lotus, IBM, Digital Equipment, Dell Computers, all of the big name computer and software houses, Intuit, were there in our focus groups. And they basically said, look, every small business will be affected by the Y2K problem. It may not be directly in their business, but it may be their suppliers are affected, or maybe their customers are affected. If you lose any of that in a business sense, then you will have problems in the Y2K.

The second thing they told us is it is not only computers. It is also equipment with embedded chips. We had focused on small businesses, thinking that most of the small businesses were operating with personal computers and desktop machines. Well, it turns out that the embedded chip issue is a far bigger worry, even for our small businesses, in items such as security systems, elevators, et cetera -- many, many examples -- where small businesses were going to be affected.

Based on that information that we had gathered from the industry experts, we set out with a campaign that we started about a year and a half ago to reach every one of the nation's small businesses. And the theme of our campaign was ?Are you Y2K okay?? Really a simple phrase, but it makes you think as a small businessperson, are you Y2K okay? We did not approach this in our outreach efforts as trying to describe this to the nation's small businesses as a technical issue. We described it as a management issue. It is a key management issue that every small business must face.

I'm sure it is the same in your country as it is here in the United States. Small businesses are very entrepreneurial. They are very successful in solving problems that come up quickly, finding the answers quickly, and moving on to the next phase of their operations. Our small businesses are exactly like that. What we need to do is get them focused on the Y2K issue, and our campaign went through that phase of awareness where we started by saying you must be aware of the Y2K issue.

When we started studies here in the United States -- and this was a key component of our campaign was to try and establish a baseline -- we found through studies that were made available to us that most small businesses had not heard of the Y2K issue. This was a year and a half ago. So our initial campaign was to make them aware of the problem and to ask them to take action.

Last fall, we conducted what we called our National Y2K Action Week. This was a week where we involved every state, all of our field structure, other federal government agencies, state and local governments, trade associations such as the United States Chamber of Commerce, the National Federation of Independent Business, and other associations here in the United States so that during one week in October we had a focus point on Y2K for small business.

We carried a full-page ad in all the nation's newspapers. Over 750 newspapers had an ad having our National Y2K Take Action Week. There were major periodicals here, like the Washington Post, the USA Today, the Wall Street Journal -- and the point of that week was to get small businesses to go to specific training conferences and seminars where they could learn about the Y2K problem, how they could do an assessment, how they could fix and remediate their problems, how they could conduct contingency plans.

It was an overwhelming success. We feel that we probably reached somewhere in the neighborhood of ... two to three million small businesses during that week alone. And our effort again was awareness and show people what to do.

We have now moved our campaign down the road, and we are now looking at ?It is time to take action.? ?If you haven't started, it is probably going to be too late to finish? is our message. We are trying to get small businesses to take action now and our efforts now are focused on how do we get our small businesses the assistance they need? One of the things we did is we formed a partnership with the U.S. Department of Commerce. We made a (inaudible) extension partnership, which is a technical arm of the U.S. Government, along with our foreign -- our agricultural extension service and the SBA's Small Business Development Centers.

And what we did is in each of the 50 states of the United States, we have set up core teams for Y2K remediation so that in each and every state and city there is local assistance available to aid and assist these small businesses. We're now going to move into the next phase this summer where we are going to go out and start meeting with small businesses across the nation, and our point is to assure them that their electricity will work, their water will work. Airlines will fly. The delivery companies will work. We have seen all that. There is more than ample information out there.

What we want to do is make sure that no one panics, no one really stocks up for five years of water and portable generators and things like that, because it is really not going to be that bad unless everyone goes out and buys a portable generator and stocks up. Then there will be shortages. Our message this summer is to build a voice of calm in the storm.

And then this fall the last thing we're going to do is what we call contingency planning at the Small Business Administration. And, again, what we're going to do is be prepared for all the small businesses who may come in at the last minute, very late, and decide that they have a problem and they need help in fixing it. We're going to be there. We're going to try and get the technical assistance for them.

This closely mirrors the President's vision for Y2K efforts here in the United States. Under John Koskinen's leadership at the White House first, every agency was required to fix their internal systems, then they were required, number two, to identify those segments of the United States population that might be affected by Y2K, and then develop -- after they have gone across and within their own organizations and within their own sphere of influence -- then to go down to the actual customers who will be touched by their program and get the message out on Y2K....

Here in the States, our manufacturers are being much more forthcoming and are being very, very helpful -- in most cases, at no cost or very low fee -- to fix the equipment. Many of them have set up toll-free telephone lines and web sites. They are passing our information. And I encourage your people to contact through the distribution chain those manufacturers and seek that help.

Because here in the States, our Congress passed recently a Y2K bill that allows for information sharing. That limits your liability if you make an honest effort to share information on how you are trying to become Y2K compliant. It does not waive any of the consumer liability protections that are so important to small business, but it does allow businesses to share information and protects them in that sharing....

I would like to tell you a little bit about our statistics on small businesses. According to the National Federation of Independent Business Studies which came out in January of this year, if you look at the small business community in the United States, you divide it into three parts. The first part, or the first third, have addressed the Y2K issue and are now fully compliant. The second third is a group that says we have looked at this Y2K issue. We know about it, but we're just too smart to have to worry about it now. We'll wait until something comes up.

And it is that group that really bothers us, but it is also that group that we feel we won't be able to do much with. They feel that as a small business if they have to go out and buy all new computers, that will be okay. And what we have told them is that is only part of the problem. You need to also be thinking about your customers. You also need to be thinking about your suppliers. If you lose either one of them, you're going to have more than a hangover after January 1st, the year 2000.

The third group, the last third, is the interesting group for us. That group is again divided in half, and about half of that group has said they will do Y2K remediation, but they haven't got to it yet. Now we think they will, because in the first group when they told us last fall that they were going to do Y2K remediation, they, in fact, actually did. And this was supported by other studies. The Gartner Group that worked with IBM and the SBA also supported this as well.

And then the last half of that last third group -- there are six -- these are small businesses that do not have computers in their operations. It may be a dry cleaning. It may be a grocery store. And they are the ones we're really focusing on now. They feel, for example, if I run a grocery store, I don't have a computer. I'm not using a PC. And then you ask them how does your cash register work? And then all of a sudden you can see the light start going on. Oh, that might have a computer in it. How do you do your credit cards? Do you call up someone? Who do you think you're calling up? It is a computer that you're calling up. Are you sure that computer that you're calling up is Y2K compliant?

The very first lawsuit here in the United States occurred when a grocery store ran a credit card through and the expiration date was past the year 2000, and the computer didn't recognize it and it shut down all of the terminals in the store and put them out of business for four days. Now they're suing their manufacturer. We would like not to have that many lawsuits. In fact, we think there will be too much litigation and lawsuits over the Y2K. So we're focusing on this last group and trying to insist upon them they need to also look at their suppliers. Look at their customers. They need to check their alarm systems. A lot of the alarm systems will not work if they are not fixed....

We definitely need to look at our trading partners. This is a global economy, and we all need to work together on this. And the end-to-end testing, you and I couldn't preach enough about this. This is so very important in every sector and in every industry....

In the United States, there is no across-the-board mandatory policy that businesses or other entities must disclose whether they are Y2K compliant or not. However, in various industries, there are requirements. For example, our Federal Aviation Administration that controls and monitors our air transportation system, the airlines, the radar systems, things like that, they do require that the airlines certify that they are within compliance.

Our banks in some instances are being required to certify to our federal regulators that they are Y2K compliant. So it varies industry by industry. We have no mandatory requirements for small businesses. We're encouraging small businesses to share information. We tell them that by informing their customers and their suppliers that they are Y2K compliant, that in turn will make them more competitive than the next small business who won't disclose the information. But for small businesses, there is no such requirement....

There is no standard checklist, and I am hesitant to say there is one. There are different examples on our web site. At the SBA, we've got a very extensive and elaborate Y2K web site, as does the Taiwanese. We have a number of examples on that web site of different layers of compliance. We, through a decision early on, did not to come up with a government letter that everyone could pass around and say this is what you need to fill out to show everyone that you are Y2K compliant. Rather, we said in the course of your normal business relations, how you work with your customers, how you work with your suppliers, your vendors, your employees, that is how you should use your judgment in determining what that letter should be.

And there are probably one hundred different types of letters that are on the web pages around federal agencies today on how to determine Y2K compliance....

We urge small businesses to go back to the manufacturers -- a first step -- go back to the manufacturers from whom they bought the product and ask them what they recommend for fixing. As a second step, there are a number of private firms and individuals who are consultants who will come in and help you fix your Y2K problems. And there is a number of software products out there that you can buy to run different tests for different systems....

The SBA web site, which is at www.sba.gov is -- then you would see a Y2K symbol that you would click on, is loaded with that very type of information. We have basic information from how do you do a self assessment, how do you begin the remediation process to -- we have a listing of manufacturing sites where help is available. We have links to many, many different sites around the country.

The President's Y2K web site [www.y2k.gov] as well is also an excellent resource. We are now opening up our site and developing a chat room, which we have not done yet, but we hope to have that up with the next 30 days; where small businesses can share their success stories, how they may be able to help each other....

Again, it gets back to my earlier point, however, you do need a place -- in the United States we've done a major campaign to point out if you're a small business, you want help from the government on Y2K, there is one central place to go and that's the SBA and we have been very active in our web site -- we've done brochures as you may have seen, "Are you Y2K okay?" And you need to have that focus point....

We will provide loans and other financial assistance packages if a US small business is looking for financial help in doing Y2K remediation. But there is no bonus or benefit for becoming Y2K compliant. There is, in our U.S. Congress, two or three pieces of legislation which will -- if they were to become law -- would allow our small businesses to index and use some of their Y2K remediation costs to lower their taxes. Frankly, the feeling here in the United States is that's probably not going to pass our Congress any time soon, and it's unlikely that there will be that kind of assistance available.

The Small Business Administration -- we're in support of that kind of relief from a tax point of view. But no, the United States does not have a benefit package....

What we recommend is that every small business appoint a person within their firm to be their Y2K person and that person goes through every system, whether it's the MIS, if they're manufacturing, as you were referencing, on a control machine, an NC (phonetic) machine, they need to look at that. They need to go back to the original manufacturer, ask them, is that system, that model, that particular year that it was made, is it now Y2K compliant?

And we urge, as part of the first steps in an assessment, to go through your company from the beginning to the end, top to bottom and look at all your systems. And don't forget, we also urge small businesses to not only look within their company but look on the outside as well. They may have a very critical supplier who tells them, I've tested my MIS system and everything is fine, but some other system may not work. So, we encourage them to go to their supplier as well as be very rigorous in their review of what their suppliers are doing; and the same with their customers.

You may have all your products, all your materials and you're ready to ship but if you don't have your customers after January 1st then you're going to have a problem as a small business....

As I believe one of your gentlemen said, this is a problem that does have an end to it. It is coming soon. We just all need to work together....

(end excerpts)

-- (Busy@the.Top), March 26, 1999

Answers

Re: You may have all your products, all your materials and you're ready to ship but if you don't have your customers after January 1st then you're going to have a problem as a small business....

And when those unprepared small businesses fail, they will take the SBA with them. How many billions of dollars in small business loans does the SBA guarantee, anyway? If the gummint survives, how many years in the future will (remaining) taxpayers be paying for the wave of red ink?

And this is assuming only about a 5 on the doom scale.

-- Margaret (janssm@aol.com), March 26, 1999.

Will the SBA survive?? Most vermin do.

(Hmmm. My business is elgible for a SBA remediation loan. Wonder how long it would take for them to press for repayment?)

-- Lobo (Hiding@woods.com), March 27, 1999.

"The President's Y2K web site [www.y2k.gov] as well is also an excellent resource. We are now opening up our site and developing a chat room, which we have not done yet, but we hope to have that up with the next 30 days..."

We could have some fun over there! Mischief or helpfullness, whichever mood you're in.

-- humpty (no.6@thevillage.com), March 27, 1999.