Computer apocalypse on horizon Year 2000 analyst calls recession likely

Economy

May 10, 1998|By Jay Hancock

THE LAST TIME the Christian odometer ticked over three zeros, the world was in for Armageddon and Judgment Day. This time it's economic recession, which sits on about the same shelf in prevailing theology as the Four Horsemen did 10 centuries ago.

After midnight on Dec. 31, 1999, says economist Ed Yardeni, computers will seize up, crash and spill grit in the gears of commerce.

"The recession odds are now up to 60 percent" because of millennial computer failures, Yardeni told the Bank for International Settlements last month. "And there is even a chance of a depression."

His speech marked a new altitude of alarm over the Year 2000 problem, or Y2K, to cognoscenti.

In case you haven't stayed up nights worrying if your OS process logic has been resynced for Y2K compliance, the problem has to do with computer calendars. Many can't tell the year 2000 from 1900. It's digital dyslexia. Exhibit No. 1 of the concern it has spawned is the multibillion-dollar Y2K consulting industry.

"I am a Y2K alarmist," says Yardeni, chief economist for Deutsche Morgan Grenfell. "Despite many warnings, the situation has only worsened."

With only 600 code-crunching days left until the Apocalypse, Yardeni and many others fear many companies are too far behind on Y2K repairs to duck trouble.

Calendar functions are everywhere, hiding on obscure chips and disks, affecting seemingly unrelated programs and often written COBOL, the computer-language equivalent of ancient Linear B. New Year's Eve computer failures may shut down air traffic and nuclear plants, torpedo corporate billing systems, disrupt supply lines and render financial accounts into gibberish, some fear.

xTC Standard & Poor's DRI, an economic forecasting firm, thinks Y2K fixes and glitches will chop 0.3 percentage points from the national growth rate next year and half a point in 2000 and 2001.

Among the hand-wringers, Yardeni is widely respected and has made prescient calls on the stock market and other areas.

But in their rush to chart technical booby traps, analysts have overlooked a resource that may turn Y2K into an economic footnote: American workers. It's not as if they're unfamiliar with computers behaving badly.

By some measures, computers are a huge economic disappointment. They aren't increasing labor and capital productivity as quickly as advertised, and when they do it doesn't come without headaches, heartaches and costs that go way beyond the price of the software and hardware.

An amazing 40 percent of all corporate information-technology projects are scrapped before they're completed, according to a survey by the Standish Group International, a Dennis, Mass., consulting firm. Nearly half the chief information officers queried believed computer failures have increased over the previous five years.

You've seen this. How many times has your HMO's computer died when you checked a claim? How many times have servers crashed at your job? Do the words "America Online" and "busy signal" mean anything?

A fancy reservation system shared by American Airlines, Budget Rent-a-Car, Marriott and Hilton got so dysfunctional the companies landed in litigation. SAP's infamous multifunctional software has bred its own jokes.

"Software development projects are in chaos," the Standish report said. "The cost of these failures and overruns are just the tip of the proverbial iceberg. The lost opportunity costs are not measurable but could easily be in the trillions of dollars."

Sounds apocalyptic.

But all these failures have happened already and are happening now. The economy is great. American Airlines and Marriott are making money. People are coping with blown silicon in the time-honored way: keeping paper records, working late, rebooting, waiting for the patch.

Business Week magazine frets that, in fixing Y2K bugs, "experienced programmers and computer-science Ph.D.s are doing what is essentially unproductive labor." This is new? Doing unproductive labor is a job description for these people!

What computers haven't given in economic benefit, they may not be able to take away on New Century's Eve.

Not all Y2K repairs will happen on time. But it's a good bet that essential ones -- in nuclear plants, electrical grids -- will. The others will yield gray hair, high blood pressure, late hours and slammed telephone receivers. But not, perhaps, a recession.

It's time to find another millennial specter. Now about that asteroid

Pub Date: 5/10/98

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