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TITLE: PHILADELPHIA-AREA FIRMS' Y2K COSTS TOTAL $1.46 BILLION

Story Filed: Thursday, April 27, 2000 3:52 AM EST

(The Philadelphia Inquirer/KRTBN)--Remember Y2K?

For most of us, the Year 2000 computer glitch was a nonevent. But in one respect -- cost -- it was all too real.

The 100 largest public companies in the Philadelphia area spent an estimated total of $1.46 billion on preventing Y2K computer problems, according to an Inquirer analysis of documents filed with the Securities and Exchange Commission.

Such problems stem from the inability of many computer programs to properly interpret the abbreviated date 00 as the year 2000, instead of 1900.

Nationally, the Y2K bill is estimated at $150 billion and $225 billion by the consulting firm Gartner Group Inc., of Stamford, Conn. The Commerce Department put the U.S. figure at $100 billion.

But the benefits of all that spending, many firms say, will be long-lasting -- well beyond merely avoiding glitches related to Y2K.

For one thing, Y2K forced them to upgrade their computers, a critical step in the move into e-business. Companies say they also became better organized. For example, many were forced for the first time to create inventories of the numerous computer systems upon which they depend.

"When Year 2000 started, one of the problems we saw all the time was people didn't know where their software programs were," said Jim Woodward, senior vice president of Cap Gemini Group, a French consulting firm.

Peco Energy Co. developed better ways of documenting changes to technology, said Mickey Garatola, the utility's Y2K project director. "A lot of our systems have been around a long time, and documentation has a way of getting lost."

At Cigna Corp., 2,000 servers, or central computers, had to be checked. So did 100 million lines of software coding. The Philadelphia insurance company also replaced 32,000 personal computers. Some were still running the DOS operating system, which was introduced in 1981. (An operating system is the basic software that runs a computer.)

Moving all the PCs to the newer Windows 95 allowed the company to start an intranet, an internal online system.

Cigna's team uncovered software programs that were being used only by certain departments. Now, some are being adapted for broad use.

"A lot of these types of applications came out of the woodwork," said Jack Rader, vice president of Cigna Systems. "It became known how dependent some departments were on them."

Contingency planning was one of the biggest benefits of Y2K. Companies say they were forced to consider how to operate if, for example, the phones didn't work, the electricity failed or the computers crashed.

"Since we were anticipating gloom and doom, as the rest of the world was, we did a lot of work to ensure that our business-continuity processes were in place in the event of a disaster on Y2K. That's something that will live forever," said Rader at Cigna.

"We had an actual, live event as opposed to the proverbial 747 falling on the building or a fire in the building that wipes you out. We had a real, live event facing us that really threatened our business."

Trudy Jackson, assistant vice president of Cigna Group Insurance, took on a larger role in the company as a result of her work on Y2K. She now helps identify the "best practices" used by various technology departments within the company so that they can be adopted broadly.

Jackson had one of the toughest Y2K assignments at Cigna: getting a 28-year-old software program that was written in the old language COBOL ready for the Y2K. "It took us literally, in order to complete that, three full years with a staff of about 10 people," she said.

The local spending figure of $1.46 billion is an estimate; it excludes 20 of the 100 largest companies that did not specify Y2K costs, either because they considered them immaterial or had not kept track. Also, companies reported Y2K spending in various ways. For example, some included internal staff costs, while others did not.

The main benefit of all that spending may be the fact that nothing happened.

"Was it worth it? The lights were on," said Galatola at Peco, which spent $61 million on Y2K.

"There was no danger to the public or anything like that. We had no real vulnerability to safety, but we had to verify that," she said. Without the work, customers could have had billing, payment and service-response problems, said Galatola. Y2K, she said, "was very real."

Cigna spent more than $135 million over five years. Without it, said Rader, "it would have been chaos.

"I would say we would not be providing ... any services to our customers."

Jackson and Rader both gave up their New Year's Eve to keep watch over Y2K issues. She was on call and had to stay home; he was on duty at a Cigna command center.

"I remember saying to myself, what I would have given to be able to go out. I mean, the biggest New Year's celebration in your lifetime, and you have to be home kind of watching what's going on," Jackson mused.

She said that although she gained much from the Y2K experience, "I wouldn't want to do it again tomorrow."

Leslie J. Nicholson's e-mail address is lnicholson@phillynews.com

Inquirer editorial assistant John Tierno did statistical research for

this article.

By Leslie J. Nicholson

(c) 2000, The Philadelphia Inquirer. Distributed by Knight Ridder/Tribune Business News.

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