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April 16, 1998 (9:53 AM EDT)

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By Bruce Caldwell,

The temperature is rising on year 2000 problems. The number of failures related to the date change is skyrocketing, disputes with vendors are increasingly bitter, wages are soaring, new costs are being uncovered, and time has already run out for some companies.

Results of two surveys released last week show how the crisis is worsening. The proportion of companies reporting year 2000-related failures rose fivefold between December and March, soaring to 37 percent from 7 percent, according to a survey of 128 U.S. companies by IT services firm Cap Gemini America. Gartner Group, which surveyed 6,000 companies and government bodies worldwide, concludes that the percentage likely to experience failures of critical systems has surged to between 30 percent and 50 percent, up from 10 percent a year ago.

Because of such failures and related year 2000 costs, Gartner says there's a 70 percent chance of a global economic downturn. "There will be an economic effect," says Lou Marcoccio, the advisory firm's research director for application-development methods and management.

bar chart

Marcoccio revealed a number of worsening trends: Wages for year 2000 workers were up 20 percent last year and are expected to rise an additional 20 percent to 50 percent this year; 29 percent of software vendors now charge for year 2000 fixes for their products, up from 1 percent last year; and lawyers have been brought in on more than 200 year 2000 disputes -- 93 percent of them involving complaints against software vendors by their customers. Marcoccio wouldn't identify any of the companies involved.

"Some vendors have just given up on a plan to fix the problem -- they're telling us we need to buy new equipment," says the IT manager of a New England discount retailer who asked not to be identified, referring to retail equipment that has noncompliant embedded technology. "We're still hoping to work something out, but if they make us do that, they'll lose our business in the future."

Some users are getting more aggressive. "Most vendors are saying they are compliant now, but what do they mean by that?" asks Tony Del Duca, senior director of manufacturing and logistics systems at Nabisco Foods, in Parsippany, N.J. To find out, Del Duca has asked some critical-system vendors to let Nabisco's internal auditors in to review the vendors' compliance projects. "That has met with a mixed reaction," says Del Duca, "from open arms to 'What do you mean?' "

"So many companies are so used to slipping project deadlines, they have no metrics, milestones, or benchmarks for keeping work on schedule."
-- Bruce Webster
Object System Group

Most year 2000 disputes are unlikely to go to court, Marcoccio says, adding that two cases were recently settled -- one for $8.5 million, the other for $2.5 million.

"The tough controversies are being put off because it's important to get the job done," says lawyer Greg Cirillo. His firm, Williams Mullen Christian & Dobbins, in Washington, has more than a dozen year 2000 clients, but its work is aimed at avoiding litigation, rather than charging into court.

Lawyers say they are aware of only four year 2000 lawsuits -- all class-action suits, brought against point-of-sale system vendor Tek America, Norton AntiVirus maker Symantec, and accounting-system vendors SBT and Macola. The last three suits involve disputes over year 2000 fixes being available only when a customer buys an upgrade, rather than being given away.

Next: Avoiding court

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