Almost two thirds of New Zealand businesses are failing to fully assess the impact of the "millennium bomb", according to the results of a survey carried out by international management consultants - PA Consulting Group.
David Elton, a Managing Consultant with PA, said the results of the company’s "International Millennium Bomb Survey" carried out in September/October 1997, should be taken as a warning that New Zealand businesses need to accelerate their plans now before time runs out.
The survey, which is the fourth in a series of millennium bomb surveys carried out by the company, surveyed approximately 1,000 public and private sector organisations in 15 countries including New Zealand.
The survey results follow hard on the heels of recent public debate about insurance claims arising from this problem and served as a timely reminder that New Zealand businesses should not be complacent.
"Of the 73 New Zealand companies surveyed, over half of the organisations have put in place a formal year 2000 programme, but only one third have completed a full audit of the scale of the problem. This illustrates that a significant number of organisations are unable to give a clear indication of the scale of work required," Mr Elton said. "Even where companies state they have a plan in place, it is likely to underestimate the scale of the problem until it is backed up by a complete audit."
Results show that 93 percent of New Zealand’s IT professionals are aware of the problem, but the message still isn’t getting through to senior management.
"On average, only 64 percent of New Zealand’s senior managers are perceived to be fully aware of the implications and, therefore, of the likely costs involved."
Mr Elton said senior management involvement and support for the issue is critical, if the millennium bomb is to become a top priority project and receive sufficient funding and resources.
"This issue is perhaps unique in testing senior management’s ability to effectively manage a technical risk with a large business impact," he said.
When it comes to estimating the number of person-years required to fix the problem, 49 percent of respondents were unable to do so. A further 25 percent were unable to estimate the cost of putting in place a programme to address the issue, and 16 percent were unable to say how they plan to resource their millennium programme.
Mr Elton said the survey also indicates that organisations who are tackling the problem are finding it a lot more expensive than first estimated.
"The average cost of the millennium programme for those organisations who were able to provide an estimate is $2.3M," he said.
"Given the costs involved and the fact that 62 percent of organisations in New Zealand expect to be impacted by the problem before the year 2000, it is alarming that so many of them have failed to fully assess the problem and take formal action."
The survey also asked respondents to indicate whether or not they had included embedded systems, that is those systems that rely on an inbuilt chip, as part of their millennium audit. Only 62 percent of organisations had done so, to date.
"Embedded systems are a relatively unknown quantity in terms of their millennium compliance. They are present in every organisation and in many cases run business critical systems and processes. Whilst they are relatively easy to detect, the problem most organisations face is that testing embedded systems is difficult," Mr Elton said.
PA anticipates approximately half of the organisations surveyed will actually begin to experience problems as early as 1998. The company also believes that many of these organisations will fail to fix the problem in time, and it is likely that severe disruption to normal business operations will occur as a result.
According to PA figures, on average, it will take New Zealand companies 10 man-years of effort for each organisation to fix their millennium problem.
"This figure escalates to 181 man-years for organisations with a turnover in excess of $1.6B [US$1B]."
The widely held industry view that a skills shortage is beginning to occur in the areas of technical and project management skills is also substantiated by the New Zealand findings which show that 48 percent of planned human resource will need to be obtained externally.
"This projected demand will be extremely difficult to satisfy and those organisations who still do not know how much effort will be required, will find themselves competing for personnel in an increasingly fierce market."
When the data from all countries in the survey is viewed by organisational turnover, it appears that smaller organisations are doing even less to address and understand the problem. Only 43 percent of senior managers are aware of the problem in smaller organisations, compared to 73 percent in larger organisations.
And when it comes to putting in place a millennium programme plan, only 37 percent of smaller organisations have addressed this, compared to 79 percent of larger companies.
"Organisations must recognise the magnitude of this problem. To solve it requires extensive project management experience, and financial and human resources. PA’s experience indicates that organisations who are tackling the problem are consistently finding that it is far more complex than originally thought, that’s why we’re urging people to take action now," Mr Elton said.
