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Today the Gartner Group, one of the leading Y2K research firms, released their testimony report given to the U.S. Senate Special Committee on the Year 2000 Technology Problem October 7th, 1998, Washington, D.C. The report paints a grim scene about the future of the world as we approach Y2K, and yet Y2KSUPPLY.COM points out several glaring oversight errors in the report that make the outlook even worse!

The entire report can perhaps be summed up best by two sentences given toward the end:

"It is now clearly evident that segments of companies and governments throughout the world will not be fully prepared to deal with this problem by 2000."

... and ...

"In the U.S., industry segments such as healthcare, education, agriculture, construction, food processing, governments, and companies under 500 employees are lagging way behind in compliance efforts. Many of these will simply not finish critical systems by 2000."

If you believe the Gartner Group research (and this alert will give you some reasons why you should, and other reasons why you shouldn't...) this thoroughly decimates the "no big problem" theory still floating around out there. Some people, amazingly, still think Y2K is a giant hoax. (Personal hint: don't party with these people on New Years' Eve, 1999.)

Let's start with some of the basic facts (and predictions) given by the report:

* Gartner group surveyed 15,000 companies in 81 countries
* 23% of all companies have not even started Y2K compliance efforts
* 30% of IT budgets were spent on Year 2000 efforts in 1998
* 30% - 50% of all companies and government agencies will experience at least one mission-critical failure due to Y2K
* 10% of those failures will last 3 days or longer
* The United States has no body or group assigned to the Y2K task. Not one government employee has Y2K as their full-time responsibility

In its research, the Gartner Group places every company into one of 27 industries. These industries are further broken down into four risk categories:

* Category 1: 15% of these companies will experience at least one mission-critical failure (insurance, banking, investment services)

* Category 2: 33% of these companies will experience at least one mission-critical failure (medical, software, publishing, retail, and more...)

* Category 3: 50% of these companies will experience at least one mission-critical failure (transportation, power, natural gas, oil, television, law enforcement, and more...)

* Category 4: 66% of these companies will experience at least one mission-critical failure (education, government, food, farming, city services, healthcare, and more...)

Do you detect the pattern here? It seems that, in general, the more important the industry, the further it is behind (except for banking). The fact that "category 4" contains government and food is precisely the kind of worst-case news we'd rather not learn right now. Without food, categories 1-3 hardly matter, and without effective, compliant government, we'd be thrust into sociopolitical chaos (at least in the short term).

INTERNATIONAL EFFECTS
But the U.S. is the furthest AHEAD. It's the other countries around the world that create the most immediate risk. The report says:

"Countries already plagued with financial woes, sharp increases in inflation, limited monetary reserves, and high unemployment are some of the same countries farthest behind with Year 2000 compliance."

The two countries in the most trouble are China and Russia, and Russia alone is on the verge of economic collapse even without Y2K. China is obviously doing much better at the moment, but because it is so far behind on Y2K remediation efforts, that situation could change fast.

In the report summary, the Gartner Group explains further:

"Even if we were to miraculously fix every one of these domestic issues and make certain all U.S. companies and government agencies will get themselves Year 2000 compliant before 2000, the absolute largest risk to the U.S. and to U.S. citizens is the impact from companies and governments outside the U.S."

In other words, due to the interconnectedness of our global economy, the compliance is U.S.-based government agencies and companies ISN'T ENOUGH! Unless the vast majority of companies and governments in the world get compliant, we will suffer enormous, painful consequences.

INFRASTRUCTURE PREDICTIONS
The report goes on to predict what will happen to the infrastructure of countries around the world as a result of Y2K. The scale runs from 1 to 10 with 1 being "no impact" and 10 being "widespread and severe."

For the countries in the worst shape (Russia and China, plus some others), govt. services gets a 10. Power loss, telecommunications losses, and widespread interruptions in air transportation earn a 9, meaning "widespread and moderate." This means you can *count* on these countries losing these critical infrastructure components. Lets not talk about these as mere possibilities anymore. Lets talk about what it means to us here in the States.

The report then takes a somewhat optimistic view with the United States, describing our own interruption of government services as being "moderate and moderate" with other major infrastructure components suffering only "isolated and minor" interruptions.

However, this seemingly contradicts the placement of food and farming industries in Category 4. (Above.) If 66% of companies in the food and farming industries experience mission-critical failures, how is that "isolated and minor?" If you ask me, 66% is widespread, and "mission-critical" is not minor. Sounds pretty major, especially when we're talking about feeding the population.

RISKS TO THE UNITED STATES
Some risks to the U.S., as pointed out in the report, are:

* Too many people lose confidence in the banking sector
* Too many interruptions occur in food or medical supply chain
* Local city and town governments cannot provide critical services

These are serious risks, indeed! Just the first one mentioned here, if it strikes, is enough to make everything else in the report meaningless. Without banking, society grinds to a halt. Interestingly, the report fails to mentioned that the weakness of our banking system lies in the "fractional reserve" structure, meaning that the funds needed to actually cover deposit obligations simply don't exist. In fact, it's not even close.

Y2KSUPPLY.COM has a chart showing the risk to banking in great detail. See it at: http://www.y2ksupply.com/bankchart.htm

EMBEDDED SYSTEMS
Where the Gartner Group report fails is in its assessment of embedded systems. They devote an entire paragraph to the matter, stating:

"Embedded systems will have limited effect on Year 2000 problems, and we will see a minimal number of failures from these devices."

It almost seems that they just didn't have any data on embedded systems, so they skipped over it. Other Y2K experts and many engineers who actually work on embedded systems have a very different view.

Y2KSUPPLY.COM, for example, because it sponsors this free e-mail alert list that now reaches thousands of subscribers, receives daily e-mails from people working *inside* nuclear power plants, state prisons, power companies and government agencies. Their stories are frightening. They say they've identified multiple date-sensitive hardware systems that management is completely ignoring. These people are trying to sound the alarm but they're being completely ignored. Undoubtedly, it is management that is answering these Gartner Group questions, not the frontline engineer, and so Gartner Group is being entirely misled about the status of embedded systems.

Perhaps the best-known "embedded system" bug will occur on August 22, 1999, when the GPS systems lose their week count, resulting in bad date data being transmitted globally. *Some* GPS receiving systems will then begin delivering incorrect dates. When you consider that GPS systems guide missiles, ships, planes, and also help schedule bank transfers, the problem gets pretty serious. August 22 will be an interesting date to watch. Interestingly, the Garner Group report didn't even mention the GPS failure.

COMPANIES AREN'T TELLING THE TRUTH
This is not new to the subscriber here at Y2KSUPPLY. We've reported numerous "discoveries" where companies or government agencies came clean on their Y2K compliance status by admitting they were previously misleading us. There are a lot more to come.

The Gartner Group has obviously seen some of this, too:

"Our experiences shows that U.S. companies are not providing accurate disclosures related to Year 2000 risks and contingencies. There are considerable differences between the status of Year 2000 compliance and critical risks that companies disclose to the SEC, and what the actual status and risks are within that company. This increases the risk of public investments being made without full understanding of Year 2000 risks."

Not only that, it increases the risk of these companies flat out not making the January 1, 2000 deadline. While they're saying to the world, "Everything is on track!" they're actually slipping further behind. (Or not catching up fast enough...)

Are you still throwing money at the stock market in hopes of easy 25% annual gains? The report says:

"U.S. investors are provided very optimistic , often inaccurate, disclosures from publicly traded companies (to the U.S. SEC), and therefore accurate investment risk assessment data is not often available."

INTERDEPENDENCE
Y2KSUPPLY.COM has said that the interdependence of modern civilization *is* the Y2K problem. Isolated compliance is meaningless. On this issue, the report says:

"Interdependencies and interconnectivity between companies and across country borders are also extremely high in significance related to Year 2000 risks. Many of these interdependencies are not being covered by either company, and many times these interconnections and data transfers cannot be easily tested. These are of critical importance in banking, government, healthcare, and for many global manufacturers."

To this statement, Y2KSUPPLY.COM wholeheartedly agrees, yet the statement falls short of explaining the resulting impact if this interconectivity is not reached at near-perfect levels. One weak link can harm the entire system. Telecommunications, for example, enables transportation, banking, power, and defense. Banking is essential for all sectors. So is power. If you take the probabilities of isolated failures and factor in the domino effect throughout the infrastrcture, you end up with some very frightening numbers. Although we are not statistics experts, we would certainly like to hear from any math guru out there who has figured the cascading probabilities. But we don't have to be math geniuses to realize that the chance of failures gets BIGGER, not smaller, when each sectors depends on four or five other sectors.

BOTTOM LINE
The Gartner Group report is certainly valuable, and it provides some startling information about our current Y2K status. But it suffers from several apparent contradictions. The most obvious is the fact that most of the research is based on interviews, discussions, and survey data from companies. The Gartner Group then admits right in the report that relying on companies for compliance status information is folly: they will mislead you and tell you things are much further along than they actually are. Thus, it seems reasonable to suspect that as bad as the numbers look in this report, they are OPTIMISTIC numbers that don't really reflect the true (lagging) status of compliance efforts.

Without a doubt, the Gartner Group did not send Y2K compliance consultants into 15,000 companies. They relied on reports from those companies. And frankly, at this point in the game, it's very difficult to trust anybody's Y2K compliance statement. We've already been misled countless times by companies, states, and government agencies. Why should we believe them now?

Furthermore, the "impact predictions" chart in the report stands at odds with the failure-rate predictions. As mentioned above, if 66% of companies in the food business experience mission-critical failures, how does this translate into "isolated and minor" failures? Lets talk face to face about this now... what does it mean, really, when the food industry fails? What exactly happens when farmers can't run their computers, can't plan crops, can't get deliveries of seeds, and can't ship their harvest because of transportation failures? What does it mean to US?

... it means you have 15 months to get ready.

The Gartner Group link is at: http://gartner11.gartnerweb.com/public/static/aboutgg/pressrel/testimony1098.html

or, access the main page at:

http://gartner11.gartnerweb.com/public/static/home/home.html

- Webmaster, Y2KSUPPLY.COM