October 13, 1999 Web posted at: 12:18 p.m. EDT (1618 GMT) by Juan Carlos Perez

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(IDG) -- A widespread misconception that most Y2K problems will occur between late December 1999 and early January 2000 could leave companies worldwide unprepared to deal with outages that happen outside that time frame, an analyst has warned.

"The real period of risk has not been well understood," said Lou Marcoccio, a Gartner Group analyst that specializes in Y2K issues. Gartner gave a presentation titled "Year 2000 World Status" at the company's ITxpo '99.

Many companies are making arrangements to have additional IT staff on duty and extra inventory stocked up in late December 1999 and early January 2000, but do not seem to be extending those precautions much beyond those dates, Marcoccio said.

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"Most companies believe they only need to worry about supplier interruptions and failures occurring on January 1, 2000," he said.

Yet, Gartner predicts that about 25% of Y2K related problems would arise during the fourth quarter of 1999 and 55% throughout 2000, with some more cropping up during 2001, Marcoccio said.

"Most failures will occur when date-forward transactions are run, and they are not all run in early 2000," he said.

For example, the number of transactions that take into account the year 2000 will increase 800 percent in the fourth quarter of 1999, compared with the fourth quarter of last year, he said.

Meanwhile, companies are spending between 20% to 40% of their IT budgets on Y2K issues in 1999, but they will get no respite in 2000, when Gartner expects companies will have to devote up to 40% of their IT budgets to fixing Y2K problems. Y2K spending will begin to wane in the second half of 2000 and is expected to take up no more than 8% of companies' IT budgets in 2001, Marcoccio said.

In terms of regional progress, Gartner expects that 60% of companies around the world will reach the highest level of Y2K readiness by Jan. 1, 2001 - up 10% from Gartner's expectations two years ago, Marcoccio said. This level of preparedness, which the consultancy calls "Level 5," implies that a company has fixed and tested 100% of its so called "mission-critical" systems and has drawn up and tested the necessary contingency plans.

"There has been tremendous progress in 1999," he said.

Countries that have shown the most progress lately are Chile, Costa Rica, Bahrain, Kenya, Germany, Sweden and China, Marcoccio said. Countries with the highest levels of compliance as of this month are Australia, Belgium, Bermuda, Canada, Chile, Costa Rica, Denmark, Finland, Iceland, Ireland, Israel, the Netherlands, Norway, Singapore, Switzerland, Sweden, the U.K. and the U.S.

However, Marcoccio cautioned that a high level of compliance on the part of a country does not necessarily mean that business is at a lower risk of being affected by Y2K problems related to the country's basic-services infrastructure.

If a country relies heavily on telecom, trade, computers and electricity, as is the case of the U.S. and the U.K., even a few outages can be very disruptive of business, Marcoccio said.

The same principle holds true for specific industries. Investment services, banking, government and telecom stand to lose much more from a Y2K outage than sectors such as oil, chemicals, retail and food, Marcoccio said.

Overall, in most regions, the Y2K problem will cause isolated technical failures, most of which will be solved promptly, Marcoccio said.

However, the analyst warned that widespread panic could cause considerable problems. In September, Gartner surveyed 14,000 "general public" individuals in 21 countries and found that a large percentage of respondents plan to stock up on cash and food, which could cause shortages, he said.

For example, 55% of respondents say they plan to withdraw cash to last between two and six weeks, when normal behavior is to get cash for four or five days. Meanwhile, 67% plan to stock up on food to last between seven and 18 days, as opposed to the regular food reserve of four to five days, Marcoccio said.

Finally, Gartner recommends that companies implement an "event management center," which would be a central command post for Y2K issues to coordinate internal and external communications, schedule resources and maintain operations during failure or outages, Marcoccio said.