Bye bye Y2K, no one will be sorry to see you go

The abbreviation Y2K has dominated the vocabulary and budget of corporate IT departments for so long now that many organisations may find it strange to start thinking beyond 2000.

However, with the deadline less than three months away, post-Y2K plans are now part of the immediate rather than long-term future. And, after years of having to reallocate finances and energies towards the Year 2000 "bug", companies are finally getting their budgets and personnel back.

Analysts say there's plenty to keep IT departments busy. To begin with, in North America, 53 per cent of large companies say Y2K forced them to reduce spending in other key areas, according to a recent study from International Data Corporation. Cutbacks hit hardest at applications development - 69.6 per cent of companies said they trimmed budgets for major applications and 53.7 per cent had curtailed systems software projects. Some 67 per cent cut spending on large to mid-range servers and 64.7 per cent on end-user hardware, while 51.9 per cent reduced or postponed work on networks.

Such figures suggest companies are now facing a daunting - and sprawling - to-do list. However, analysts say that once corporates take a good, hard look at both the status of their current systems and at company priorities, most will find that resources need to be channelled into a handful of precise areas as they shift focus from Y2K projects. "The first priority is clearly implementing or acquiring enterprise applications," says Mr Tom Oleson, research director and principal investigator for Year 2000 at IDC. An overwhelming 42.5 per cent of corporate respondents in IDC's study said applications development would lead their projects list, and an additional 10 per cent listed it as their second priority.

Mr Oleson notes that in some sectors, the need for major applications development was particularly urgent: 81 per cent of respondents in business and legal services and 84.8 per cent in process manufacturing said this was a key worry.

Gartner Group research director Mr Dale Vecchio calls this the "applications tsunami", the huge build-up of applications projects waiting to be unleashed - and which could engulf corporate energies unless carefully managed. Like many analysts, Mr Vecchio believes Enterprise Resource Planning (ERP) packages in particular will lead the way. He also says companies will increasingly outsource such software projects - building, buying, and managing them - rather than coding them in-house. Another leading concern for companies - some analysts feel it will be the major focus - is the Web. "E-commerce, e-commerce and e-commerce," tops the bill, says analyst Mr Andy Bochman with the Aberdeen Group.

"This is what's been delayed, if anything has, and this is where they'll be putting their money and energy." He notes that the Internet is driving the development of company networks in general, and says many companies are reporting that they now write applications specifically for the Web, rather than to the Windows platform - the predominant corporate platform - alone. "As Web applications get richer and more demanding, companies are putting more bandwidth out to each client desktop," he says. Therefore, he sees a range of networking issues - "bandwidth, access, security, maintainability, manageability" dictating the allocation of company IT project resources.

Gartner Group also thinks catching up with the potential business benefits offered by the Web is going to be a top concern for companies after 2000. "There's a huge amount of spending to be focused on e-business - not just e-commerce, but using the Web for business functions," says Gartner's Mr Vecchio.

Until now, for many companies "a lot of their Web development has just been online brochures. Sites are still very informational and they don't really have anything to do with business interactions."

But the Web offers new opportunities for both cost reduction and increasing business through new markets and new opportunities, he says, particularly with the growth of customer relationship management (CRM) applications. These can gather information about customers over the Web or take existing data held in company databases and analyse and classify it to "allow access deeper into the company knowledge base", he says. That lets companies target clients and offer the tailored services customers increasingly demand.

On the other hand, IDC breaks from the pack on the subject of the Internet, and believes the Web is a lower priority item for the companies it questioned. While the need to build or enhance a company website comes second after applications development overall in IDC's poll, Mr Oleson says that only 10 per cent of respondents declared this was their first priority for post-Y2K operations, while 25 per cent indicated it was their second choice. And of course, companies aren't clear of the seemingly endless Y2K spend yet. While 85 per cent of companies indicated to IDC that they'd be Y2K compliant by the end of October, 15 per cent said they were still working on their systems. More cash will go into mop-up operations after the date rollover as well.

"There's going to be some expenditure in early 2000 but it's going to be relatively small in terms of the overall Y2K spend," says IDC's Mr Oleson. Worldwide, the financial impact will be $33.4 billion (€31.18 billion) in the year 2000, compared to $76.4 billion in 1999, and $87.4 billion in 1998, he says.

Looking towards the post Y2K future, the bottom line for companies seems to be - quite simply - the bottom line. "All those Y2K preparations have drained a lot of money out of companies with very little return on investment," says Mr Oleson. "IT executives now want to make sure what they spend on the company brings in more revenue."

Karlin Lillington is at klillington@irish-times.ie