"We're on war alert with this 2000 bug," someone in the computer department at police headquarters tells us.
What does that mean?
"What does that mean? You remember the last Gulf crisis? The whole country equipping itself with gas masks and preparing sealed rooms? Panic? That's what it's like here."
The Israeli economy is expected to spend $600-700 million on adapting computer systems to the year 2000 over the next three years, a report by Ilanot Batucha finds, but these impressive numbers are remote from representing an all-clear. "The country has gone hysterical," an industry expert says. "Computer department managers are quaking with fear, directors have suddenly understood they have a problem."
In the US, for six years now, the media have been flooded with doomsday warnings: aircraft that will crash, nuclear missiles that will be launched at the say-so of a godforsaken chip, and stock markets that will breathe their last. Federal Reserve chairman Alan Greenspan says the 2000 bug has already begun to take a bite out of the US economy, and experts expect a crash and a continuing crisis on stock markets around the world.
An interactive look at Y2K
In Israel, people are lethargically rousing themselves from the millennium siesta. The banks are leading the process, at least in terms of declarations about the budgets they are allocating to solving the problem - some $100 million, and the insurance companies are in the same category. Companies which export, particularly to the US, have been forced to get ready early. The Americans don't play around: whole departments have been set up in large companies whose entire brief is to check the readiness of customers and suppliers for the year 2000. Anyone who fails to meet the criteria, is liable to lose fat contracts.
The last to get ready - as in most countries - are government ministries, and all those public bodies which have their hands on the controls of the economy, and in certain cases are even responsible for citizens' lives. Software people say many The organisations have not begun the conversion process at all.
The indifference to the year 2000 problem apparent in Israel stems, it seems, not just from the usual delay in catching up with what happens in the US, or from our native attitude of "everything will be OK", but also from the low level of involvement of directors and senior managers in computer matters. Questions we addressed, in another context, to the general managers of the country's six largest companies about the 2000 bug met with no response, were immediately referred to computer managers, or were answered with "I don't deal with such matters."
Reinforcing the "it'll be OK" approach in Israel are those who seek to give the lie to the horrors that will come a moment after the millennium new year kiss. Tales from a thousand and one nights, say the accusers in the US too, that make fine headlines, but are nothing more than a well orchestrated conspiracy on the part of companies which do year 2000 conversions, their PR people, and a few professional prophets of doom, who have made their names thanks to the well publicised bug.
Media diversion tactics
The chances are that a world war will not break out at midnight of the year 2000. The reality will evidently be greyer: a chain of noisome glitches, such as rejected credit cards, lifts getting stuck here and there, errors appearing in bank statements, salary systems and production lines that will be disrupted, and perhaps a power station somewhere will give up the ghost. In business terms, though, the reality will not be greyish, but, almost certainly, black.
In a world in which information systems are interwoven like spaghetti, and everything is timed down to the finest detail, there will be to tolerance of delays, mistakes, and breakdowns. Lack of readiness for the year 2000 is liable to threaten the economic stability, and even the legal status, of companies. It could cause a hiatus in production, loss of market share, and harm to reputation an profitability. It could expose a company and its managers to class actions, to claims of professional negligence and managerial and directors' responsibility. It could even lead to loss of insurance cover.
The belated preparations play into the hands of the companies that carry out year 2000 conversions. The tenders committee of the Electric Corporation's board of directors a few weeks ago approved the handing of a project for converting computers to the year 2000 to Tadiran and Formula without a tender. The deal is worth $12 million. The reason for awarding the project without a tender was that the timetable for carrying out the project was critical. Why did they wait? The company's internal auditor had previously said that the company was gearing up too late to convert its computers.
Does that mean the Electric Corporation will be ready for the year 2000? Almost certainly not. "The Electric Corporation doesn't intend to convert all its systems," an industry source says. "It has specified a certain number of systems and the interfaces between them. It will leave the rest untouched." The consequences? A power station in the US which had been adapted to the year 2000, did not pass the test. When it was put back to the year 1998, it started working again.
Not a few organisations are conducting diversionary media exercises in relation to their readiness for the year 2000. They set up committees that investigate their customers' preparedness, and bring out precise instructions for testing organisations with which they have a business connection. "They all write letters," one of the conversion companies said, "so that, if there are investigation committees, they'll be covered." This does not necessarily indicate that these bodies are ready; it is intended to create a feeling that the problem has been probed in depth, and thus to divert the focus of attention outwards..
In February, the banks announced they would give customers new credit, or increase their existing credit lines, according to the extent of their preparedness for the year 2000. The banking sub-committee of the Knesset Finance Committee even requested Examiner of Banks Ze'ev Abeles to order the banks to prepare lists of customers at risk because of failure to carry out adaptation. This was the report's headline in the newspapers. The detailed report said that the banks' representatives claimed in the committee that they were making all necessary preparations to cope with the problem, but there was a shortage of professional manpower to carry out the work.
The Securities Authority announced in February that it would compel all Tel Aviv Stock Exchange listed companies to report the extent of their preparedness for the year 2000. The Authority itself is in the throes of conversion, and it announced it would be ready at the beginning of 1999. What is likely to happen if it is not ready? On January 3, 1997, the first trading day of that new year, the Brussels stock exchange ground to a halt, because its trading system had not been switched to the year 1997. The result: Orders from December 30, 1996, the last trading day of the previous year, were identified as instructions from the end of 1997. This prevented investors and brokers from modifying their orders to reflect the Wall Street collapse on December 31, 1996,when the Dow-Jones index fell 101.10 points. Many lawsuits are still being heard in the Belgian courts in this connection.
Income Tax and National Insurance, an industry source says, will not be ready. "Companies and individuals should make it a working assumption that there will be problems with these bodies in the year 2000," the source said. "It will be worth doing the necessary to ensure that advance tax payments are not too high, because it will be impossible to get rebates. I already know of organisations that have begun to plan their tax affairs so as to be in balance by the year 2000, and not in need of tax rebates."
Wages departments can also expect shocks. An industry source says the Hashavshevet program, for example, which is used by 25,000 organisations, has no version that supports the year 2000. Hashavshevet is behind in bringing out a new version.
What problems are to be expected as a result?
"If I start 1999 working with Hashavshevet, I can't stop in the middle. Let's assume they bring out a new version, on the shelves in the third quarter of 1998. There is still no prospect of all businesses installing it and managing to convert all their data from previous years and starting 1999 with the new version."
You can't shut down the world in the millennium's honour
The adaptation problem is especially acute in production plants. The difficulty here is not with software, but with embedded systems. Date-dependent chips embedded in production lines are hard to locate, and many factories are expected to discover their existence only after serious disruption, or the crash of the entire production line.
Giora Shaked, general manger of software company Applicad, which does not deal in year 2000 solutions: "In plants like these, it is very difficult to check preparedness, because that means stopping the entire production process. The only way of checking is to change the dates to December 31 and see what happens for a couple of days. Even so, it could be that you have still forgotten some control mechanism, that will signal its presence only on the real date. I think many factories will close down and time maintenance or an overhaul for that date, so that the damage will be controlled. The trouble is, you can't shut down the whole world in honour of the millennium."
An example of the damage expected in production lines is the story of a small industrial chemicals factory in the US which was not clever enough to deal with the change from 1996, which was a leap year, to 1997. On New Year's Day, the computer crashed, and halted the production systems. As a result, the chemical solutions in the pipes congealed and hardened. The factory did not manage to clean the pipes, and had to change them at a cost of some $1 million. The production line was inactive for several days, and the result was delayed supply to customers.
These chips are to be found not just in production lines, but in a whole range of devices, such as lifts, guided missile systems, and so on. "As far as I know, no organisation in Israel has started checking embedded systems," says a manager in one of software companies that carries out year 2000 software conversions. He said it would be a complicated process, because of the difficulty in identifying the suppliers of the components in question.
Component manufacturers are also in trouble, because they are liable to exposed to lawsuits. "Companies that developed components like these, including Israeli companies," says the same source, "distributed them via other companies, who incorporated them into equipment that they sold to a third party. Try finding them now. Even if you want to solve the problem, it's impossible to know who to approach."
Quite a few companies are still sitting on the fence. "There are those who rely on some last minute trick," says Shaked of Applicad. "But there's no magic solution. The banks are the only ones treating the problem seriously, and even they are not sure that they'll be ready in time. Bank Hapoalim's computer manager has said that, unless he succeeds in completing conversion by August 1998, they may as well close the bank."
Published by Israel's Business Arena on April 8, 1998