(IDG) -- A new global survey of year-2000 readiness shows that many firms do not plan to test new systems and up to two-thirds of businesses in some countries -- particularly in Asia, South America, and the Middle East -- are expected to have at least one significant mission-critical failure.

However, the research by GartnerGroup did find that companies worldwide are spending more of their IT budgets on fixing computer systems to properly handle dates from Jan. 1, 2000 onward.

The United States continues to lead the way in preparedness among businesses and government agencies, followed closely by Holland, Belgium, Sweden, Canada, and Australia. Western European countries are generally making good progress, with the exception of Germany, which is "quite a bit behind" other nations in the region, said Gartner research director Lou Marcoccio Wednesday during a teleconference outlining the research.

Two-thirds of the companies in Russia, China, India, the Middle East excluding Israel, Argentina, and Venezuela and half of the companies in Japan, Germany, Mexico, and Malaysia are expected to have one major mission-critical failure, Marcoccio said.

Gartner is surveying 15,000 companies in 87 countries worldwide every three months to track their progress in making their systems year-2000 compliant. Worldwide, 23 percent of all companies have yet to begin dealing with year-2000 issues.

"That sounds like perhaps a high number, and, yes, it is as far as actual numbers of companies; however, one year ago 50 percent of all companies had not started," Marcoccio said.

While some of the recent findings are startling, Marcoccio also wants to alert companies that if they believe business insurance policies will cover losses related to year-2000 problems, they will likely be surprised to learn that is not so.

More than 40 U.S. states are allowing insurance companies to exclude losses resulting from business interruptions owing to lack of year-2000 compliance "even though these policies were sold under the assumption that business interruptions would be covered, period," Marcoccio said.

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Three large insurance companies that operate in various parts of the world also have said they will not cover accidents that result from year-2000 issues, he said, declining to name the companies during the teleconference.

"This can get very sticky in the future," Marcoccio said. "It can be said that, gee, if a plane crashes and that plane had to carry 10 percent more cargo because a company was increasing their stock to avoid a potential year-2000 crisis, (the insurance companies) can say that was a factor in the crash" and therefore refuse to pay.

Most older software systems were written with two-digit date fields that are expected to read the "00" in 2000 as "1900" and consequently make incorrect calculations. Some industries such as banking are fairly well along in making computer systems year-2000 compliant, but others, including food processing, agriculture and farming, some government services, construction, law, and medical practice are lagging, Marcoccio said.

Insurance, banking, and investment services are ahead of other industries. At the other end of the spectrum, two-thirds of the companies in food processing, government services, farming or agriculture, health care and education, and half of the companies in chemical processing or manufacturing, construction, the oil industry, power, gas and water utilities, and the legal industry are expected to have one major mission-critical failure owing to year-2000 problems. The semiconductor industry is similarly ill-prepared, Marcoccio said.

Failures already have been happening and will continue over a wide time span.

"The failures are not all going to occur on Jan. 1, 2000, or Jan. 2, 2000," Marcoccio said.

But there is increased awareness of and spending on year-2000 issues, the survey found. In 1997, just 5 percent of IT budgets were being used to deal with the problem. That figure jumped to 18 percent for the first two quarters of this year and is expected to jump to 29 percent by the end of the year.

While that might be viewed as good news in one sense, it's bad news for other areas of IT budgets where companies are foregoing spending.

More dismal still is the view apparently being taken by IT professionals. A Gartner survey of 6,000 IT professionals found in November of 1997 that 38 percent said they will take one month to three month's worth of money out of the bank to cover expenses as 2000 approaches. A recent revision of that survey found the figure had jumped to 50 percent.

It has yet to be seen if that level of alarm will indeed be warranted, but Marcoccio said that given the tenuous financial situation in countries that are teetering on bankruptcy now, serious worldwide disruptions could be in the offing.

"This could have a considerable effect on the global economy and the world in general," he said.

Gartner will provide additional survey results at its upcoming Symposium/ITxpo 98 in Lake Buena Vista, Fla., Oct. 12-16.

Other year-2000 news out this week from researchers Meta Group, Giga Information Group, and the Information Technology Association of America (ITAA) includes the following:

Meta, based in Stamford, Conn., said that it has available Y2K: A Practical Business Guide, which offers advice to companies trying to prepare for 2000. Pricing information may be obtained at http://www.metagroup.com.
Giga, based in Norwell, Mass., warned that enterprise networks and the telecommunications infrastructure on which networks depend are at risk of failure. Many companies have not considered Internet connectivity in year-2000 plans, the market researcher said.
A supply-side survey from the ITAA, in Arlington, Va., found that most IT companies that offer products or services dealing with year-2000 issues say that business has been far from brisk. The survey of 100 businesses found that 37 percent are meeting year-2000-related sales and revenue projections and just 12 percent say that they have all of the business they can take on for the next half year.

GartnerGroup Inc., in Stamford, Conn., can be reached at http://www.gartnerweb.com.

Nancy Weil is a correspondent in the Boston bureau of the IDG News Service, an InfoWorld affiliate.