20/12/985

For some folks, computer problems starting like it's Dec. 31, 1999

By DAVID E. KALISH AP Business Writer

So much for the "year 2000" glitch that will gum up the world's computers two years from now. The next millennium already has arrived for a small but growing number of frustrated consumers and businesses.

-- Moviegoers used to paying with credit cards recently discovered a feature missing from nearly 100 of AMC Theatres' box offices: The ability to accept cards expiring in 2000 and later.

-- In upstate New York, Corning Inc.'s computer system for processing supply contracts crashed because the technology couldn't read a couple of zeros in three-year contracts.

-- Some insurers refuse to issue policies such as property and casualty longer than one or two years for fear their computers can't process them.

Experts long have warned of a massive computer glitch when many of the world's older computer systems translate the first day of 2000 into 1900. That's because, to save digital space, dates in billions of line of computer code were shortened to include only the last two digits.

Thus, after the stroke of midnight, Dec. 31, 1999, computers that haven't been rejiggered may think that government benefits have expired and mortgage payments are way overdue. Some doomsayers predict air traffic could stall, nuclear power plants may shut off and taxpayers could be assessed penalties for failing to pay taxes dating back a century.

U.S. businesses are spending a staggering $440 billion to fix the problem, estimates Standish Group International, a high-tech research group based in Dennis, Mass. Much of the money goes for high-paid outside consultants to pore through millions of lines of computer code to identify problem dates, assess whether it's necessary to reprogram or replace the computers or software, extensively test the changes, then actually implement them.

But the process is taking too long. Already, 8 of 108 large companies and other organizations in a random survey have experienced a computer failure related to 2000, according to industry consultancy Cap Gemini America.

The scattered snags could grow into wider outages a full year before the millennium -- the first business day of 1999 -- because so many firms work a year in advance, from projecting profits to booking halls.

"You'll see more and more of these little instances" as 1999 nears, said Bruce Hall of Trigent Software Inc., a year 2000 consultancy based in Southborough, Mass.

Typical is Corning, which writes multi-year contracts for chemicals and other raw materials to smooth out fluctuations in supply and prices. But last summer, when it came time to start entering contracts expiring in the year 2000, "The system aborted with a programming error" and took several weeks to fix, recalls Jim Scott, technology director of Corning's science and technology unit.

For consumers, the glitch could mean that stores reject valid credit cards as expired.

Visa and MasterCard last October gave banks the go-ahead to issue cards expiring in the year 2000 and after, saying nearly all check-out terminals had been adapted to properly read the new dates. So far about 2 million year 2000 Visa cards have been issued.

Although Visa estimates that more 99 percent of all check-out machines can handle the new cards, problems are starting to crop up, said Cathy Hotka, vice president for information technology at the National Retail Federation, the Washington-based trade group for retailers.

The AMC chain of movie theaters says it needs until the end of January to reprogram software in nearly 100 of the company's older theaters. Scattered merchants, from the Godiva chocolatier chain of 150 North American stores to the Produce Palace supermarket in Michigan, also report credit-card terminals refusing to read plastic.

"Everything has to be done manually," said Brian Parker, a Bingham Farms, Mich., attorney representing Produce Palace in a lawsuit against the cash register maker and a local vendor. The store says it's lost business because of the machines' inability to read some cards.

Still, experts see a silver lining in the early problems if the troubles wake businesses from complacency.

One-third of 873 companies worldwide surveyed by the Meta Group research group haven't even assessed their computer systems to see what needs to be fixed. And the Cap Gemini survey found 82 percent of technology managers saying they underestimated their costs for addressing the year 2000 problem.

The laggards include the auto, utility and insurance industries, says Bill Goodwin, who edits a New York-based newsletter on fixing the glitch.

Not surprisingly, the business furthest along has the most at stake -- the U.S. finance industry, which is spending $6 billion to update its vast network of interconnected computers.

To be sure, the Securities Industry Association plans to recommend that financial markets be closed on Friday, Dec. 31, 1999 to give Wall Street an extra day to update its computers.

Government has a lot more work to do, experts say. The White House's Office of Management and Budget recently raised its projected costs for reprogramming the computers in federal agencies to $4 billion from the $2.3 billion it estimated less than a year ago. To address the shortfalls, more than a dozen federal agencies are redirecting hundreds of millions of their technology budget dollars.

But for some, the future is approaching too quickly. The departments of Energy and Labor, if they continue at current paces, aren't expected to remedy their problems until the year 2019. The Defense Department won't finish until 2012, and the Transportation Department is barely better with a completion date of 2010, according to a study released last month by the House Subcommittee on Government Management, Information and Technology, which is overseeing the U.S. government's effort.

Even the most prepared agency, the Social Security Administration -- scheduled to be year 2000 "compliant" in 1999 -- last year discovered 30 million lines of code in its disability benefits computers that still need fixing.

"We don't really know the extent of the problem. Obviously there are serious areas," U.S. Rep. Steve Horn, R-Calif., chairman of the House subcommittee, said in a telephone interview.

Estimates of the broader fallout vary widely. One prominent economist warns of a 40 percent chance of a serious global recession that year, noting even if the U.S. licks its computer glitch other nations probably won't. A berserk computer overseas could easily gunk up the works here, sending stock markets plunging, drying up bank loans and scaring off prospective merger partners.

"I think most (U.S.) businesses will have the problem fixed. But the real problem is that computers have to be fixed 100 percent around the world," said Edward Yardeni, chief economist at Deutsche Morgan Grenfell in New York.