The vast majority of Irish publicly quoted companies contain bland statements about the ability of their computer systems to deal with year 2000 (YK2) problems. That does not mean they are complacent - indeed they are dealing with the potential problems and are, for the most part, confident that they will be able to cope effectively. However, in contrast, it is refreshing to see the detail revealed by companies operating in the US. The SEC 10-Q form, filed by Smurfit Stone Container Corporation (SSCC), which is 33 per cent owned by Jefferson Smurfit Group, indicates the depth of its scrutiny, and the costs involved. SSCC expects to spend $54 million (€51.4 million) this year to correct YK2 problems - $35 million of that has already been spent. The company makes the point that a large portion of these costs relate to enhancements that will enable the company to reduce, or avoid costs, and operate many of its production facilities more efficiently.
Moreover, some of the projects have been accelerated in order to replace existing systems that cannot be brought into compliance by the year 2000.
The approach adopted by SSCC indicates a clarity by that company's management of the potential problems, and a well thought out plan to deal with them. Indeed, the seven-phase plan could be used as a model to be adopted by other similar process companies.
Phase 1 - Planning/Awareness: The planning and awareness phase includes the identification of critical business processes and components.
Phase 2 - Inventory: During the inventory phase, company personnel identified systems that could potentially have a year 2000 problem and categorised the system as compliant, non-compliant, obsolete or unknown.
Phase 3 - Triage: In the triage phase, every system is assigned a business risk as high, medium, or low.
Phase 4 - Detailed Assessment: The detailed assessment provides for a planned schedule of remedial action and estimated cost.
Phase 5 - Remedial Action: This involves what corrective action to take if there is a year 2000 problem, such as replacing, repairing or upgrading the system, and concludes with the execution of system test.
Phase 6 - Fallout: In the fallout phase, the inventory will be kept up to date and no new Year 2000 problems will be introduced. Phase 7 - Contingency Planning: The company is developing contingency plans for the most reasonable worst case scenarios.
SSCC does not try to camouflage its findings. The programme, it said, identified ten high-risk IT (information technology) systems, of which five have been fixed, four are scheduled to be substantially completed in the third quarter of this year, and one is scheduled for completion in the fourth quarter. The group has retained a third party to assist with the verification of phases 2 to 4. It reckons that 92 per cent of the total inventory systems were compliant by the end of the second half.
SSCC believes it will be able to replace, repair, or upgrade all of its IT, and non-IT systems, affected by the year 2000 problems on the timely basis. But what happens if it does not succeed? Here again SSCC tells it the way it could unfold. There could be severe disruption in the operation of its process control and other manufacturing systems, financial systems and administrative systems. Production problems and delayed product deliveries, it said, could result in a loss of customers. The production impact of a year 2000 related failure varies significantly among the facilities and any such failure could cause manufacturing delays, possible environmental contamination or safety hazards. That could affect its ability to meet its financial obligations. And while such disruption cannot be reasonably estimated, "the amounts could be material".
That, of course, is the worst case scenario and is unlikely to occur in SSCC's case. While there is a lot of unjustified scary hype about the problems that may hit corporations, the SSCC doomsday projection does indicate the type of problems that could emerge in non-compliant companies.
Enterprise Ireland has already warned that some Irish companies will go to the wall as a result of the millennium bug. A survey showed 90 per cent were confident the Y2K issue will not disrupt their businesses, and half consider the issue has been overblown. But Enterprise Ireland has warned that many have underestimated its potential for disruption. Getting letters from suppliers is not enough - verification is also needed. But those compliant companies which have taken the opportunity to advance their systems will obviously be better equipped to grow in the next century.
