Date created:12 October 1999

Last modified: 12 October 1999

Maintained by: John Quiggin

John Quiggin

Y2K bug may never bite

Australian Financial Review

2 September 1999

With the end of 1999 approaching rapidly, there is a lot of concern about the Y2K problem. Despite expenditures of more than $10 billion by some estimates, not all big businesses are fully Y2K compliant. Many small businesses, schools and other institutions have ignored the problem altogether. The situation is similar in other developed countries, while in less developed countries, hardly anything has been done to address the problem.

It may be time therefore to consider the likely effects of Y2K. Fortunately, there is now a fair bit of evidence to go on, and more will become available in the near future, concerning Y2K and other date-related problems. In fact, we are the middle of a run of critical dates. On August 21, the Global Position System, used as the basis for satellite navigation by shipping all over the world experienced a date rollover. The GPS system is a prime example of a mission-critical computer system, where slight errors in dates could lead to disaster. In planning reminiscent of that which led to the Y2K problem, the designers of the original version of the system allowed for a life of only 1024 weeks, which expired last month. Another critical date is the 9th of September, 1999 which may cause crashes in programs that use 9999 as an error code.

More importantly, computer programs all over the world are performing calculations involving dates in the year 2000 to determine everything from the due date for loan repayments to the expiry date on the tins of baked beans being hoarded by Y2K panic merchants. For this reason, the Gartner Group, a leading purveyor of Y2K-related gloom, predicted earlier this year that about 30 per cent of Y2K related problems would occur during 1999, compared to less than 10 per cent actually striking on or close to New Years Day 2000. The majority of the 1999 problems were predicted to occur in the second half of the year as US (and Australian) companies entered the financial year 2000. Although the Gartner Group's predictions about Y2K are not always firmly based, there is no disputing the logic underlying this prediction.

The evidence so far is reassuring. The GPS rollover went flawlessly, except for some obsolete car navigation systems in Japan. As I predicted on July 1, the advent of financial Y2K caused no problems worth reporting, even among the millions of non-compliant small businesses. Emboldened by success, I will chance my arm a little further and suggest that the news headlines for the 9th of September will not include widespread computer failures.

With this experience in mind, we can use the Gartner Group's analysis to conclude that date-related problems in the year 2000 will be about twice as severe as those in 1999. Since twice zero is still zero, it looks as if it is time to start running down those emergency stocks of baked beans.

What lessons can we learn from all this? First, the judgement of the small businesses and schools, not to mention Third World countries, that have adopted a wait-and-see approach to the problem looks like being vindicated. When you have few resources to spare, 'if ain't broke, don't fix it' is often good advice.

Second, money spent on crash programs for Y2K compliance has mostly been wasted. Apart from the hordes of Y2K consultants, the only organisations to benefit from the Y2K problem will be those that took the opportunity for a more substantial overhaul of their systems. A lot of IT departments have used the Y2K crisis as a pretext for extracting the funds needed to replace obsolete hardware and software, and this is all to the good. Similarly, if the hypothetical Y2K crisis stimulated organisations to prepare proper risk management strategies to deal with real risks, it will have done some good.

More fundamentally, the full-scale assault on the Y2K problem has been driven largely by fear of litigation. The US model of a market economy, towards which we are rapidly moving, relies heavily on litigation as a substitute for government regulation. Such a system does not always produce sensible outcomes. As the case of Y2K shows, we would benefit from stopping to think before rushing to follow the example of the United States.

Professor John Quiggin is a Senior Research Fellow of the Australian Research Council, based at the Australian National University and Queensland University of Technology.

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