Y2K: Smug as a bug

There may only be little more than 11 months to go, but it's not too late to eke a profit out of the millennium bug cash bonanza. SMEs unsure of how to tackle the issue could provide resellers with valuable extra revenue.

With all the publicity about the millennium bug, you'd be forgiven for thinking you've run out of time to make money from it. The big companies have made plans, hired staff and bought products, and many are in their final phases of testing.

But there remains at least one sector of the economy that, less than 12 months from M-Day, still has to get to grips with the bug or spend serious money on fixing it - SMEs. It's not that they haven't heard of the problem, they just don't know what to do about it.

The latest figures from the government-funded Action 2000 show 40 per cent of SMEs have not even assessed the risks of the bug, let alone done anything about it. And those that have, may not have considered all the risks.

'Awareness of the bug among SMEs is very high - more than 98 per cent - but action as a result of this awareness is still woefully lacking,' says Gwynneth Flower, managing director of Action 2000. 'Too many people believe all they have to do to cure the bug is look at their computer hardware. They forget about embedded systems, supply chain issues and the infrastructure.'

Many SMEs find it hard to think more than three months ahead and still think they have plenty of time. They don't realise there is already an acute shortage of millennium skills, both technical and in project management, or that their IT staff and project managers could be lured away by higher salaries elsewhere. They are unaware that their directors may be legally liable for millennium-related system failures, especially in areas such as accounting and health and safety, because they should have foreseen the risks.

SMEs fail to see that accounting systems may need to be installed and tested by the start of the financial year in April and do not know that the experts recommend all changes should be implemented by the end of September at the latest. Nor do they realise the implications for cashflow around the turn of the year - they may have to lay in extra stock against millennium-related interruptions in supply and year 2000 problems may mean customers fail to pay on time.

The most unlikely systems could also be affected, especially those with embedded chips. The brewing and leisure industries are concerned that beer pumps and toilet air-fresheners will go haywire on New Year's Eve.

Anyone attending a millennium party would be advised to take a spare six-pack and wear a gas mask when they visit the smallest room.

But it is the medium-sized businesses - those with between 50 and 500 employees - that face the biggest risks. Too small to be under pressure from shareholders and lacking adequate in-house technical skills or manpower, they may still have complex PC-based systems, with a mixture of packaged, bespoke and user-written software combined with embedded systems in manufacturing or processing machinery. Any medium-sized business that has not yet begun its year 2000 compliance programme must to be persuaded to start right away.

Large companies, now well on the way to sorting out their own systems, are becoming increasingly concerned about the way businesses in their supply chains are tackling the bug. ICL analysed its relationship with all 12,000 of its suppliers and calculated that a quarter of them were falling behind.

'You have to ask yourself: if this supplier goes down, will it take you out of business?' says Jane Burns, marketing communications manager for the year 2000 at ICL. 'If the answer is yes, you have to be ruthless in making sure they're compliant. There's a point at which we shall have to consider other sources of supply.'

She says this point will probably be around the end of April. Other corporates, such as Unilever and Sainsbury's, are looking at similar dates, while banks and auditors are becoming more concerned too.

While all this spells potential disaster for SMEs, it could at last enable Vars and resellers to do something many have long believed impossible - make some serious money from the SME sector.

According to Midland Bank, a typical medium-sized organisation might spend between #20,000 and #40,000 on diagnosing and fixing its millennium bugs and the associated project management costs. But it is hardly likely to call in EDS or Andersen Consulting to do the job, so it could easily be persuaded to go to the reseller from which it bought its original systems.

The experts recommend careful analysis of the individual business, from PCs and embedded systems to health and safety and supply chain liabilities.

This means consultancy, preferably from a firm that understands the business, the local economy in which it operates and the technology it uses are all requirements that a local reseller is well placed to meet.

Expecting to rake in #2,000 a day for consultancy is optimistic, but the DTI's Business Links says between #5,000 and #6,000 for the total job is a reasonable price. It can take up to a week just to make an assessment before installing any fixes or systems. If the SME can't afford the full cost, then government subsidies, administered by local Business Links, can cover up to 40 per cent. It also maintains registers of approved consultants for year 2000 and other work.

Compliance assessments of hardware and software often form the core of millennium consultancy. The going rate is about #80 per PC, #700 for a 10-PC network. Auditing PC hardware is usually straightforward, using a product such as GMT's Check2000 to examine the Bios and real-time clock compatibility.

For packaged software, most testers rely on the software manufacturers, many of which publish compliance information on the Web. With common sense, it is usually possible to tell which are telling the truth.

'If a manufacturer says all its products are compliant, don't trust it,' says Frank Gipson, managing director of Compliance Training Services and a consultant to Business Link Essex. 'But if it produces a compliance listing of all its products, their level of compliance and the level to which they've been tested, it should be reliable.'

Alternatively, there are all-in-one compliance assessment tools such as the National Computing Centre's ComplY2K, a fixed-price service that resells for #495. The SME fills in an inventory questionnaire and the consultant visits the site, usually for two to three hours, checking the inventory is correct and helping to assess the criticality of hardware, software, embedded systems and ancillary issues such as contracts and health and safety.

The audit is then sent to the NCC, which checks the compliance of all the products, either on its own database or with the original supplier, and emails back a report of between 50 and 100 pages recommending what needs to be done and in which order. These reports are proving valuable for small companies to demonstrate to their customers, auditors and bank managers that they are taking the millennium bug seriously.

Other services will be increasingly in demand as the millennium approaches.

They range from basic training, to get staff up to speed on the latest products or versions of software, to specialist tasks such as converting backup data to be millennium-compliant. As the year progresses, there is also likely to be a bonanza of support work.

Testing is also a potentially lucrative area, whether as compliance tests to find potential bugs or system tests on the fixes. Resellers could be asked to provide not just the necessary technical expertise, but also spare hardware on which to run tests, since testing on live systems is not recommended.

'You've got to be so careful,' says Gipson. 'If you test something and it fails, will you be able to restart it? One accounts system reset itself to pounds, shillings and pence after it was tested.'

The opportunities for product sales are vast. Hardware diagnosis and fix products tend to be cheap, at #60 or less, but they attract high margins.

Other sales opportunities include system upgrades, such as extra memory, to cope with freshly installed software and operating systems; project management software for managing compliance projects; and backup devices and spare hardware for contingency planning. Some SMEs are replacing non-compliant bespoke software with more modern packages, which may not have been on the market when their original systems were written.

Often, the very process of compiling an inventory highlights anomalies that must be rectified, for example by buying more software licences.

'As you do an audit, you find out the business didn't know what computers it had or what software was installed on them,' says Jonathan Hirons, an IT adviser at Business Link London City Partners. 'Often, they need to reorganise their systems as well as fix the millennium bugs.'

More enlightened SMEs can sometimes be encouraged to go even further - not just to spend money on bug fixing, but to take the opportunities of making a clean sweep and investing in systems to gain competitive advantage.

One of Gipson's clients, which has eight staff, estimated that fixing its hardware and upgrading to a compliant version of its old Dos accounting software would have cost #13,000. Instead, the company chose to invest #30,000 in a system with Windows software, better integration and e-commerce links to its Website.

Handled sensibly, system replacement can be one of the silver linings.

Another is the fact that, for many directors of SMEs, the bug has made them think for the first time about their IT systems and their wider implications for the business. Some find they could be doing a lot more with IT - which means spending more on it - than they had thought possible.

A final potential benefit to resellers, and one that is often overlooked, is the potential to be that rarest of things in the IT business, the bearer of good news. Many SMEs are terrified that PC dealers are going to take advantage of them, supplying over-priced consultancy and products that are surplus to requirements.

But these SMEs are unduly pessimistic, believes Tim Little, a business adviser at Business Link London West: 'The cost is probably a lot lower than many SMEs perceive it to be.' He estimates that a risk assessment will only cost a small company #1,000.

Fixing PCs is often unnecessary. 'If your PCs are turned off at night, it won't cost you anything to fix them,' says Mark Gibson, managing director of millennium consultancy Solace. Most PCs will either comply fully or merely need to have their clocks changed once in January 2000. Even if this is not the case, a simple Bios patch might do the trick. The few machines that need to be left running between 1999 and 2000 may have to be checked more closely.

Software, too, could be more compliant than it looks. Sometimes apparent problems can be resolved simply by keying in the full four figures for the year or by ignoring cosmetic issues such as displayed dates on screens or reports. Some of the software installed on users' PCs is not even used any more and can be ignored.

Conscientious resellers could do worse than point out some of these simple fixes to their customers. Not only will they be creating goodwill, but they will leave the decks clear to tackle the more serious and potentially more lucrative problems that many SMEs will face during the next 12 months.

MILLENNIUM CHECKLIST

Here are some things SMEs should be doing to avoid going down with the millennium bug:

Project management Appoint a project manager for the millennium project, set milestones and establish regular meetings with all relevant personnel, including board directors.

Plan Assign a budget and staff to the project and draw up detailed plans to avoid oversights and duplication.

Assess the problem Compile an inventory of individual pieces of hardware and software, including possible embedded systems such as PBXs, machine tools and security and safety equipment. Be specific and assess the effect on each item as 'yes, no or maybe'.

Be realistic Prioritise the list of hardware and software by assessing which items are most severely affected and most vital to the business.

Fix hardware and software Remember, many fixes are cheap or free (such as software patches obtainable from the Web) and others may be unnecessary.

Fix data Probably more critical than fixing software. Existing data may have to be upgraded, while from now on, all dates should be keyed in eight-figure format if possible.

Test Many SMEs don't realise the significance of testing, which is as important as making the fixes. Allow plenty of time and don't do it on live systems.

Make contingency plans This could include finding backup systems, readying paper-based alternatives for invoicing, stock control or payroll and laying in extra stock in case of supply problems.

Check your contracts Some hardware and software suppliers may be contractually liable to supply systems that can handle the date change, although their responsibilities are far from clear.

Check your supply chain Contact your main suppliers and customers and satisfy yourself that they are dealing with the problem. Be prepared to reassure your bank and auditors, too.

Check your insurance Loss of business due to unforeseen circumstances could be covered by existing business interruption insurance, but read the policy carefully. And are you covered for third-party liability?

Be cautious Don't make any big expansion plans or increase your overdraft until you are sure that you, your suppliers and your customers are well clear of the millennium hurdle.

Be active Consider installing better systems instead of fixing old ones, especially if you also need to deal with

the euro and e-commerce.

Start now - if you haven't already.