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June 8, 1999
Web posted at: 12:13 p.m. EDT (1613 GMT)

by Kathleen Melymuka

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(IDG) -- Corporate IT managers have been dreaming Internet dreams while living the realities of year 2000 preparation. But as companies near the Y2K homestretch, the next round of innovation is finally in sight.

How and when they get from here to there will be affected by how they've handled Y2K. Some companies will be wearing completion of huge Y2K projects like a badge of honor to distinguish themselves from their competitors. Others are gradually shifting Y2K resources to other projects as they finish up. Companies that have managed to keep the technology pipeline flowing throughout Y2K projects will be in business-as-usual mode. And for some of the new Internet companies, Y2K was never an issue.

At FDX Corp., more than 95 percent of applications are already Y2K-certified and back in production. "We feel good about the fact we can say that," says Robert B. Carter, vice president and chief technology officer at the Memphis-based holding company of Federal Express Corp. "That's an important market distinction for the rest of this year."

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With Y2K work virtually complete, Carter says, "We can put our emphasis on moving forward." That will mean "putting all of our [bets] on Web-enabled, supply-chain-based enhancements to our base of applications."

Specifically, FDX is planning to redefine the concept of inventory as products in motion. "The more movement you can put in your supply chain, the more effective it will be," he says.

"Anything that's sitting still is money being lost," Carter explains. So FDX is working to make the entire supply chain as accessible to customers as their own warehouses. Through access to FDX's massive data warehouses, customers will know when shipments will arrive and exactly what they contain. That will allow them to plan their production cycles so efficiently that supplies will arrive and be manufactured into products and shipped without ever coming to rest, Carter says. "We actually think this is going to change the world -- to change the way markets work."

Many supply-chain projects have been enhanced by companies' Y2K experiences. David Kelble, Y2K project manager at Wawa Inc., a convenience store chain based in Wawa, Pa., says Y2K helped lay the groundwork for some initiatives that are set for next year. "We've been able to clean up our vendor list and put it in one database," he says. "We've talked to a lot of vendors and have a better feel for them, and there's a better general awareness of how we deal with them."

Some companies are gradually shifting out of Y2K gear. "They're keeping an eye on the ball, but they're starting to think what's beyond that," says Jim Huser, vice president for the IT strategy and planning practice at Cambridge Technology Partners Inc. in Cambridge, Mass.

At a large financial institution, for example, the Y2K project manager is spending one day a week laying the groundwork for a huge new project that kicks in next year. Elsewhere, post-Y2K initiatives have already sneaked under the tent in the guise of Y2K enhancements. "Some people are using Y2K as a vehicle," says Scott Shemwell, who works with the oil and gas industries at Electronic Data Systems Corp. "They know they can get various projects approved if they can tag Y2K to them."

Some companies have escaped a lot of the Y2K pain by converting their systems as part of major corporate face-lifts. At Sanofi Pharmaceuticals Inc. in New York, for example, Y2K work has been so integrated into a general overhaul of business systems that it's hardly been an issue. "We've been actively working on Y2K as part of a complete refreshment of our infrastructure, our applications portfolio and our business processes," says CIO Kevin O'Rourke.

Not a total distraction

This approach and an early start meant that "Y2K has not prevented us from doing other things," O'Rourke says. For example, Sanofi is in a joint venture with a large pharmaceutical company in which their combined sales forces are co-selling, using the Internet, an extranet, Web sites and secure e-mail to share call and follow-up information.

Many companies used enterprise resource planning (ERP) implementations to lessen the pain of Y2K. "Now we're looking into how we leverage that work and move forward," says Steve Frycki, who heads the year 2000 practice at DMR Consulting Group Inc. in Jersey City, N.J. For example, analysts expect a "second wave" of ERP, where companies will revisit ERP systems hastily implemented as Y2K fixes and fine-tune them for added benefit.

And companies that didn't have time to implement ERP before Y2K will be rethinking that option afterward. "We're looking at the possibility of some enterprise systems," Kelble says. "The timing wasn't right before because we knew we couldn't get those changes in place by Y2K."

But ERP isn't for everybody. At Phoenix Home Life Mutual Insurance Co. in Hartford, Conn., a venerable mainframe system was buffed up for Y2K. Next, it will be moving customer service into the Internet fast lane.

Phoenix will use middleware to bridge the gap between the mainframe and customer-oriented Internet and voice-response systems, enabling customers to see current policy information, submit changes such as new addresses to records and update critical information about their policies, such as the number of people covered. "There's no reason to walk away from these mainframe systems," says Pat Theurkauf, assistant vice president for applications engineering. "We've made the investment to make them Y2K-compliant, and we see great potential for leveraging them."

Peaceful coexistence

For many companies, Y2K work has not stopped other major initiatives, so their transition from Y2K will be less of an issue. For example, The Home Depot Inc. in Atlanta has been piloting a new concept in customer-centric retailing called the Expo Design Center, and next year it will be expanding beyond the eight pilot locations. The Expos take a project-oriented, consultative approach to customer service. For example, a customer who wants to redo his bathroom goes to an Expo and has the whole project laid out for him, complete with materials from fixtures to curtains and advice on how to put it all together.

"The Expo focuses on designing a project and working with somebody," says Curtis Chambers, a manager in Home Depot's infrastructure technology group. "It's more of a contact management business than pure retail."

Expos will present some challenges as IT creates new systems to support the new, consultative business model while integrating them with the existing retail systems. "It's a whole new way of doing business," Chambers says. "You have to make sure you follow up with customers and are doing all the right things."

New front ends

After Y2K, many customer-service initiatives will face a challenge of marrying back-office systems with new front ends. For example, a large financial institution has been building models to predict the most likely products a customer may need in the future and using technology to get that information to salespeople when they talk with customers.

The project will heat up next year when it faces a huge technological challenge. "The real key is capturing the information you exchange [with customers] and getting it looped back in so it can improve what we do in the next go-round," says the head of customer analysis, who declined to be named.

For example, a customer who's offered a bank loan may tell the salesperson he's not interested today, but next year, when his daughter graduates from high school, a loan for college might come in handy.

"The challenge is to get that kind of information back into the database so that nine months from now it can kick off a trigger to get in touch with you," he says. "How can we treat you like the mythical hometown banker?"

In other words, how can the system use what it's "learned" to do better next time? "We have to figure out how to capture and systematically quantify information that is relatively free-form in such a way that the system can help us understand it and act on it."

There are some lucky companies for which Y2K has hardly been an issue. "I read these articles with great pleasure knowing that competitors are spending on these issues," says David Lord, CEO of Toysmart.com Inc., a Waltham, Mass., educational toy company. "It's another advantage we have."

Because Toysmart.com is a new company, it was designed from the start to be Y2K ready, so Lord can focus on other concerns. "We're not trying to do the retail thing online," he says. "We're looking to build a whole new business model. . . . The Internet will be integrated into your whole life, and we're trying to design ourselves to be in the middle of that."

As companies move beyond year 2000, they'll change, and so will IT. "Y2K forced a lot of IT people to get better at what they did," Shemwell says. "It has forced IT shops to become more like business."

And with CEOs taking an active interest in Y2K, senior managers are finally getting the exposure they have needed to understand the impact of technology, he says. That should raise IT's status in the company moving forward, even if there are major Y2K glitches that cost some CIOs, or even CEOs, their jobs. "There will be a real recognition that IT really does matter," Shemwell says, "so it's a win for IT regardless."