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Y2K: The good, the bad and the crazy

By Robert L. Mitchell
December 28, 2009 06:01 AM ET

Starting in 1998, when remediation work for Y2K began in earnest, "the importance of IT across the organization was better understood at the highest levels of the company," says Lasiter, who is now an IT strategy consultant in Houston.

IT had top management's full attention, so much so that some CEOs were interested in the CIO's every step -- even on New Year's Eve. "One of my roles was to keep the president and board chairman apprised," recalls Ingevaldson. "It was the only time I've received that kind of concern, that I would [be asked to] call them on New Year's morning," Ingevaldson says.

When it came to IT spending, the sky was the limit

It's hard to say definitively how much Y2K cost the corporate world overall. In November of 1999, the U.S. Department of Commerce put the total cost of Y2K remediation at $100 billion.

By 2006, the number had climbed. IDC published a report that year calculating that the preparation and New Year's Eve costs in the U.S. totaled $134 billion, with an additional $13 billion spent fixing minor problems in 2000 and 2001, according to analyst John Gantz. Worldwide, organizations were estimated to have spent $308 billion before the millennium on remediation efforts. That's a lot of cash.

For IT, the millennium bug represented an unprecedented opportunity to modernize. "I don't think we'll ever again get that opportunity to say, 'Hey, we need a blank check to get everything up to date.' We put a lot of fear into the CEOs back then," says Michael Israel, who, as chief operating officer at IT services provider AMC Computer Corp. oversaw the Y2K remediation work at Continuum Health Partners and its affiliated hospitals in and around New York City.

Before Y2K, an "if it ain't broke, don't fix it" mentality had kept outdated equipment, like the 285 original IBM PC AT computers at Continuum, in service. Now they finally had to go. "It was a once-in-a-lifetime opportunity to clean up and standardize," Israel says.

Dick Hudson, CIO at offshore drilling company Global Marine Inc. in Houston in the late '90s, experienced a similar kind of windfall. "Systems were antiquated, but for cost reasons you could never get management to appropriate the money to clean them up," he recalls. "[Y2K] scared the bejabbers out of CFOs and CEOs, so IT was able to clean up a lot of the garbage. It was a cathartic time, one of the best things that ever happened to IT."

Continuum's CFO didn't hesitate to sign off on the $20 million tab for Y2K preparedness, says Israel, now senior vice president of information services at Six Flags Theme Parks Inc.

[Y2K] was a cathartic time, one of the best things that ever happened to IT.
Dick Hudson, former CIO,
Global Marine Inc.

The two-year project occupied 37 full-time staffers and required updates to 37,000 systems, including 7,000 PCs and between 500 and 600 servers. And even that was a drop in the bucket compared with efforts at large corporations like General Motors, which spent hundreds of millions of dollars on remediation efforts.

Y2K put software and services markets on the map

Y2K wasn't just an opportunity to modernize; it also drove a huge payday for IT product and services vendors, says Dale Vecchio, an analyst at Gartner Inc. who consulted with clients on Y2K issues and now works with its application strategy and governance team.

Y2K remediation, in tandem with the emerging dot-com boom, became "one of the single biggest drivers for packaged software," Vecchio says. Venture-capital-driven dot-coms were on a buying spree, telecom companies were building out their networks to meet the demand for bandwidth, and IT organizations, as part of their Y2K remediation, were modernizing much of their software and hardware infrastructure and migrating many mainframe applications onto client/server systems. In that climate, third-party software and services were "an easy sell," Vecchio says.

At AMC Computer, salespeople were suddenly making money hand over fist. The Y2K spending bubble made many people rich. "We made a lot of money on it. A lot of folks thought the gravy train would never end," Israel says.

Portfolio management became the new mantra

To solve the Y2K problem, CIOs needed to know what applications they actually had. IT finally came to grips with the need to get its portfolio in order.

"The very reason why Y2K was a problem was that most CIOs couldn't put their hands on the application portfolio in the first place," says Stuart McGill, then VP of Y2K business at Micro Focus in Rockville, Md., which sold development environments used for client/server and mainframe Y2K remediation work. "They didn't have any discipline around the application portfolio."



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