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Tuesday, 5 October 1999

Small U.S. businesses will not be ready for Y2K

By Tres English

At least in the United States, power generally stays on, phone calls go through and water flows from the tap. Except for possible temporary panics, the stores have food stocks, the gas stations have fuel and the ATMs have money.

February headlines - ``Oops . . . Never mind.''

On Jan. 1, I expect there will be a collective sigh of relief in this country as millions of people uncross their fingers and declare: ``I was never really worried, you know.''

Jan. 2 will begin weeks of competing headlines of ``World doesn't end'' and reports of dozens of high-profile failures from around the globe, as major cities experience one or another spectacular, but mostly only annoying, Y2K failures.

Worldwide, infrastructure failures (with a few notable exceptions) will be expensive to fix, but fixable on a nearly-normal time scale. It really will appear that we weathered a three-day blizzard.

Then the real problems begin.

I have a personal sense of what Y2K is likely to mean. I wasn't paid for six weeks because an early Y2K problem forced the property management company I work for to get a new accounting program (and a new computer to put it in).

The result was your typical unplanned, unscheduled, unbudgeted computer, operating system and application upgrade and data conversion, with all the dropped balls, extra work and re-work that entails - a nightmare.

The last Y2K problem I experienced (two months later) was a tenant who wanted to know why there was no water - we hadn't paid the utility bills for two months.

How will Y2K affect us?

For more than a year, the Y2K Business Coalition, which I headed, worked to get Tucson's small companies to prepare for Y2K. We sent out thousands of letters, organized business forums, spoke to dozens of groups, presented at trade shows and created Pima College courses on Y2K.

While other factors were more influential, a clear majority of local businesses will suffer few or no Y2K problems of their own making.

Nevertheless, many factors convince me Y2K is a real problem, one that is totally different from what we are expecting:

* 90 percent of all Y2K failures will happen any time but midnight on Dec. 31, according to a survey of 15,000 companies worldwide.

* About 1.4 million small and medium enterprises with vulnerable technologies are choosing do to nothing about Y2K, the National Federation of Independent Businesses said. This means about 4,000 Tucson employers are at serious risk of Y2K problems, yet plan no action.

* At least 75 percent of all Fortune 500 companies have already had Y2K problems, a survey of 144 Fortune 500 companies found.

* ``The global community is likely to experience varying degrees of Y2K-related failures in every sector, in every region, and at every economic level,'' the Inspector General said in July.

While these factors may or may not be individually important, they will add up to a lot more than we expect: In 1973, the United States experienced an oil embargo that cut oil supplies 10 to 15 percent for two to three weeks (about 5 percent of the total U.S. energy supply).

The shortages and panic (remember gas lines?) that resulted caused effects that lasted about five years and included inflation around 13 percent, prime interest rates about 22 percent and a doubling of unemployment.

Y2K will probably create at least this level of problems for a few weeks or months in all fields of modern technology. Small and medium enterprises worldwide are one of the worst-prepared sectors for Y2K - millions of U.S. small businesses have done nothing to prepare for Y2K. Yet many of these laggards are fairly well run. Why?

The global economy requires such a broad range of competencies that many smaller firms simply can't do it all. Y2K will just accelerate the trend to mega-corporations that is already under way.

With or without Y2K, this is a grave threat to the independence of every community on the planet. Y2K will hit us with high inflation (possibly followed by deflation) and high unemployment, and the economies (and communities) that emerge will be mere satellites of major corporations. Tucson will lose control of its destiny.

There are three things Tucson should do:

* Develop contingency budgets for city and county that anticipate likely Y2K disruptions, such as several years of high inflation, steep reduction in trade with Asia and Eastern Europe and a need for technical and financial assistance for businesses.

* Create a Tucson Recovery Network to help local businesses recover rapidly. This partnership of business, academic and government groups should help: repair value chains (suppliers and customers), in part by creating a trade mission for local business to Tucson; repair internal disruptions from non-compliant computers and software and develop alternatives to lawsuits between local businesses.

* Refocus our economic development to capture local and regional markets and emphasize businesses that serve us. The key is to develop a sustainable technologies industries cluster that specializes in technologies we need. We can create good local jobs, develop the resources to solve our own problems (water, energy, construction, solid waste, etc.) and develop export industries in which we are the world leader, not an ``also-ran.''

The Y2K Business Coalition has now folded, more for lack of support than for lack of need.

Tres English was director of the now-disbanded Y2K Business Coalition. He is in property management and a consultant in industrial ecology.

-- Homer Beanfang (Bats@inbellfry.com), October 05, 1999

Answers

I was totally amazed to see this in the morning paper. Yesterday they (Arizona Daily Star) had a front page article on prepping for y2k. Is it truly possible that this arm of Gannett has turned GI in hopes of prepping the sheeple? Well...it is October...

Not that I am a skeptic, but better late than never!

-- Big D (ddac82@yahoo.com), October 06, 1999.