March 15, 1999 Web posted at: 9:23 a.m. EST (1423 GMT) by Jessica Davis

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ALSO:    The Y2K ripple effect INTERACTIVE: Does your company have a post-January 1 contingency plan in place? Yes No View Results

(IDG) -- Although many companies these days are focusing intensely on year-2000 remediation and testing, experts say peering beyond the Jan. 1 deadline is equally useful in making businesses competitive.

Having a well-stated contingency plan in place when the year changes and some systems fail will give companies a leg up vs. other suppliers or partners that cannot ensure continued operations. And the time to involve IT departments and business managers on contingency planning for year-2000 failures is now.

"Without contingency plans at the business-process level, an organization will enter the new millennium `deaf, dumb, and blind' and will be relying on sheer luck," the Stamford, Conn.-based Gartner Group stated in a recent research note. "Contingency plans can be thought of as an insurance policy that can provide the bridge between an uncertain future and success ... without them, the enterprise's very existence will be in doubt."

Contingency plans should prepare companies for peak failures around the critical year-2000 dates such as Jan. 1, 2000 and the beginning of fiscal years. They should also include plans to prepare for the slow failure of the supply system.

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IT and business project leaders need to look at the process and data-flow diagrams to identify potential points of failure and then plan for manual work-arounds and replacements for automated processes, said Rick Knaggs, practice leader in Year 2000 at DMR Consulting Group, in San Francisco.

"Look at each input, but also look at each decision point," Knaggs said. "What's the plan if you lack the information to make a decision?"

Knaggs also recommended that companies seek legal advice and create a legal strategy. They should also review their contracts to make sure warranty, indemnity, and compliance statements are in order.

Many businesses already have experienced events that called for contingency plans or continuity plans to be put in place. Snowstorms, hurricanes, earthquakes, and other acts of nature are often the cause of business interruption. But the year-2000 computer bug is slightly different, because the resulting problems will happen all over the world and we know exactly when they will happen, experts said.

"There are some things that are unique about Y2K-contingency planning," said Barry Nooryani, an analyst on the year-2000 project management team at BP Amoco, based in London. Nooryani, speaking at a recent year-2000 contingency planning seminar in San Francisco, added, "You can't predict exactly what will happen. The majority of the stuff that will happen will probably come in the first quarter."

Companies can leverage their existing act-of-nature contingency planning for their year-2000 plans.

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To get ready for potential failures in the business process or supply chain, Nooryani recommended that businesses keep their inventory levels high, look to alternative sources of supply, assess their financial risk position and their cash position, evaluate their staffing levels, and decide how to communicate if critical systems fail.

"Plan for the extraordinary," Nooryani said.

One year-2000 manager attending the San Francisco conference said his power supplier would not guarantee that it could supply power on Jan. 1, 2000, and advised the company to look for an alternative source.

Contingency plans should also be industry-specific, according to Chas Snyder, director of the year-2000 project at Levi Strauss, in San Francisco. Businesses should analyze their own risks.

"We don't have to worry about product liability," Snyder said. "No one has ever died from a pair of jeans -- that we know of."

However, Levi Strauss will be working to minimize the business impact of year-2000 failures that occur both inside and outside the company.For example, public fear of year-2000 failures could impact Levi Strauss.

"People act on fear a lot, and in fear there may be a financial impact," Snyder said. "We don't want people going and buying generators when they should be out buying jeans."

Levi Strauss is worried about the effect of that fear on its holiday sales in 1999, the time of year when retailers bring in most of their revenue. Having a contingency plan in place will help, at least in part, to allay fears.

In the Levi Strauss case, and for many IT professionals who have led their company's year-2000 projects, now is the time to step aside and call on the expertise of the business-risk experts.

"Business cannot abdicate this responsibility," Snyder said. "These are business events. They will affect the business. This can't be slid off onto IT."

An event-response team should include members from both the IT side and the business side of the company. The team needs to be able to answer questions such as "How does this year-2000 event affect this computer application?" and "How does it affect this business process?"

Ideally, creators of the contingency plan should report to a business leader, Knaggs said."I don't think contingency planning for Y2K should be led by IT," Knaggs said. "Business owners must decide the `bet the business' cost, risk, and legal trade-offs."

Critical success factors for year-2000 contingency planning include involving senior management, ensuring adequate funding, and working together with other institutions, Knaggs said.

To "sell" the idea of creating a contingency plan to business leaders, IT can talk about how such plans can be leveraged down the road to protect business against other interruptions, and can explain that this is not a plan for the end of the world.

"Most people don't want to think about planning for the worst," Knaggs said. "If you talk about Armageddon, the CEO will look at you and say you're nuts."

Bringing together IT and business for Y2K planning

• Stockpile materials
• Bring service schedules forward
• Invoice customers early
• Eliminate credit to high-risk customers
• Prioritize customers

Event management for M-Day (millennium day)

• Prepare war rooms
• Identify IT swat teams
• Identify business response teams
• Establish clear lines of communication
• Practice drills