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  1. Technology
September 21, 1998


By CBR Staff Writer

Gartner Group took the world by storm several years ago by making us all aware of the potential price tag for millennium bug fixes; at the time, it estimated that the Y2K bugs lurking in the world’s computer code could cost anywhere from $300bn to $600bn to fix. Gartner’s major competitor in the IT analysis business, International Data Corp, has just released a report that pretty much confirms Gartner’s low-end estimate for Y2K fixes. According to The Financial Impact of the Y2K Problem report, the total worldwide spending on Y2K projects from 1995 to 2001 will tally up to $297bn, which accounted for 2.9% of total IT budgets during that time. IDC says that one of the major reasons that the numbers aren’t higher is that companies are dropping client/server and other projects to fix their Y2K bugs. Companies faced with Y2K problems have undertaken to solve them at minimum cost and have not invested their IT operating budgets enough to allow their IT organizations to continue spending at the same level as before on non-Y2K projects, says Thomas Oleson, research director at IDC. Instead, companies have shifted priorities and managed to reduce spending or defer projects in other areas so total IT budgets have increased only about 14% compounded annual growth rate in the past three years. IDC says that its grand total figure is based on survey information from 12,000 small, medium and large businesses worldwide, which account for 80% of all IT purchases. IDC says its numbers are good to within 5%, up or down, although it is a little hard to pin the company down on that since it isn’t yet 2001. IDC says that worldwide spending on Y2K will peak this year at $87bn, which comes to 6% of total IT spending; in fact, IDC expects that not only will Y2K budgets fall next year in the US and Europe, but that overall IT budgets will fall 8.7% next year. This year, says IDC, total Y2K spending will be $1.4bn higher in the US than in Europe mainly because of the complexity of having to handle Y2K and Euro currency updates at the same time. Next year, IDC expects that Y2K emphasis will shift from mainframe application fixes to desktop and client/server applications. IDC also predicts that economic woes in Asia will cause companies in the region to defer Y2K projects until 1999; about 5.2% of IT budgets are expected to be allocated on Y2K projects in the region at that time. Somewhere in early 2002 or 2003, IDC believes that IT expenditures as a percentage of annual revenues will drop back to the lower levels common in the mid-1990s, somewhere between 1% and 2%.

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