Y2K figures hide hardware upgrades

The federal government's Y2K czar John Koskinen says the United States has spent $100 billion on the Y2K date change problem since 1995. But behind that eye-popping figure is an unspoken truth: a lot of the money went for equipment upgrades that had little to do with Y2K compliance.

"The figures we've been seeing for the costs of Y2K remediation are a little overblown," says Dale Vecchio, research director for application development at the Gartner Group, Stamford, Conn. "Companies may have spent millions, but they got a lot of IT modernization under the guise of Y2K remediation. Lots of organizations used Y2K as an excuse to upgrade their routers, their mainframes and their PCs from 486s to Pentium IIs."

Among the companies that bought new hardware in conjunction with their Y2K efforts is Virginia Power. The Richmond, Va.-based utility invested in client/server systems, networking equipment and Web development in parallel with its Y2K testing, according to Chief Information Officer Lyn McDermid.

"During the same three or four years that we were working on Y2K, we were building our distributed network. We were pretty much a mainframe shop before that," McDermid says. She adds that one advantage of doing both activities at the same time is that "we were able to employ the discipline of the Y2K remediation and testing as we built out the network."

Thomson Financial in Boston kept its Y2K and IT operations budgets separate, but individual IT groups still benefited from the extra funds. "As part of the Y2K effort, we were able to retire a few systems early," says senior messaging analyst Mike Green, who runs the company's global e-mail system. "It also gave us some halfway decent systems to set up a lab for testing new software and upgrades."

Did companies spend too much on Y2K? That's an impossible question to answer, says Tom Oleson, research director at International Data Corp., Framingham, Mass.

"The IT executive is the single most conservative person in the company because if their systems go down, the company is out of business," Oleson says. "I think they probably spent less than they could have on Y2K. They had the CEO coming in and saying 'Don't let my company fall apart.' They probably padded some of the budgets early on, but that's why most of them finished the job by midyear 1999. They've spent the second half of the year just testing their systems."

Oleson adds: "Overall I think there was very conservative management of these projects."

Regardless of whether Y2K investments were too large, everyone agrees that companies that upgraded their systems and networks are now in a better position vis a vis the competition. "Because of Y2K, many organizations are much better prepared to deal with the Internet and e-commerce than they were before," Vecchio says.

Contact Senior Editor Carolyn Duffy Marsan

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