IT systems have been refreshed, updated and rationalised as a result of companies having to ensure that they can cope effectively with the millennium date change.
The investment needed to defuse the so-called millennium 'bomb' to make computer systems year 2000-compliant looked like a classic 'grudge buy'.
While spending the money would not improve the systems, not spending it at all could mean going out of business.
There have been plenty of complaints about the negative effects of year 2000 projects in terms of the costs, the disruption, and the way in which it has diverted attention and resources from other IT projects.
But the evidence is that companies are reaping unexpected benefits from fixing the so-called Y2K problem. In many cases, this is because companies have used the year 2000 deadline as a prompt to replace legacy systems. But even for organisations which decided keep the systems and fix the code, it has provided the opportunity for a big housekeeping exercise.
As they started year 2000 projects, many companies did not even know what systems they had, let alone if they were compliant.
They have been forced to draw up inventories, assess the significance of each system for the continuation and profitability of the business, properly document bespoke systems, put in place disciplines and routines to ensure that once systems are bug-free they remain so, and examine computerised links with external business partners. In effect, IT infrastructures have been refreshed, updated and rationalised.
Better shape
Norman Tooley, year 2000 programme director at United Utilities, the big UK electricity group, believes that the complete spring-clean prompted by year 2000 means that the company's systems are now in much better shape. 'There is no doubt that it has refreshed the asset base, and made us realise that some assets were not as efficient as they should be,' he says.
Previously, IT departments would work on one system at a time, but the year 2000 project required them to deal with all systems simultaneously. Systems had to be ranked according to their importance to the business, so that a list could be drawn up of which to fix first. This process enabled companies to identify duplications and retire systems they did not need.
Fons Kuijpers of PA Consulting Group says that some clients have retired as many as 70 systems. 'They have cut out duplication, or found a better way of doing something, or decided the function was not really necessary anyway.' The benefits have not been limited to the systems per se. The need to bring the date bug problem to the attention of the board has put the business focus on information technology. As Colleen Kaiser, IT research analyst at BancBoston Robertson Stephens, comments: 'Everyone, including your grandmother, knows about the year 2000 problem. Every chief executive who has previously ignored the IT function, has had to understand something of the technology and its role in keeping the business running, because of the Y2K implications.'
Working relationships between IT departments and end users have also improved because the widespread and pressing nature of the problem has forced the two to communicate and co-operate.
PA Consulting has carried out a survey of 200 companies with turnover over £150m ($245m) to assess the impact of resolving the millennium date changeover problem. Seventy per cent of respondents said that the business and IT communities had been brought closer together by the problem, while 80 per cent said it had made business units realise how dependent they were on IT. Encouragingly, most respondents believe this effect will outlast the end of year 2000 projects.
'The year 2000 problem has made organisations work in a more holistic way, sharing strategy and process of how they test systems and recognising they need to manage large-scale projects in a more structured way.'
The PA survey also found that although it was a cut and dried project with a defined end point, the year 2000 challenge has had a major impact on future IT strategy.
Eighty per cent said it had led to a reassessment of priorities and a rescheduling of projects, based on business needs. It seemed inevitable that the hangover from the year 2000 would be a backlog of other IT projects. In fact, over 50 per cent of respondents said they had still been able to proceed with critical projects, demonstrating that effective prioritisation has allowed strategic projects to proceed.
Balking at the prospect of spending money on creaking legacy systems, many organisations have used the approach of the millennium to buy new ones. 'So long as existing systems were still meeting basic user requirements, they were still used,' says Mr Kuijpers.
'Even though the systems were not cost-effective, they were never a high enough priority to receive investment.' Around 76 per cent of respondents to the PA survey said they had purchased new systems rather than fix old ones. But not every sector has used the year 2000 prompt to improve IT systems and infrastructures. 'Largely, the opportunity has been missed in the insurance industry,' says David Grey of Winchester White, the consultancy which specialises in the sector.
'In our industry, the time scales have prevented the investment in year 2000 being leveraged to improve IT performance. There has been some clearing out of legacy systems but in the main, companies have done the minimum to get by. Even so, the cost has been huge.'
The problem, particularly in the life and pensions business, lies not in installing new systems but in migrating data from the old ones. 'The history of systems development in the insurance industry is that they can get new systems in to support new products, but they can't decommission the old ones,' says Mr Grey.
As a result, there are multiple systems which duplicate support functions. 'There has been too little use of the year 2000 excuse to clear these out.'
According to the PA survey, there will be two types of organisation moving into the next millennium. The first group will have used compliance projects to update their IT systems and infrastructure and will thus be well positioned for the challenges of European monetary union, ever increasing merger and acquisition activity and the development of electronic commerce. The second group will have used a one-off 'fix it' approach, and will be at a disadvantage in facing up to the competitive pressures beyond the millennium.
Copyright (C) The Financial Times Ltd, 1999
