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The Year 2000 software meltdown has gone
prime time: widespread coverage in the media, hearings before Congress
and warnings by tort lawyers that they are preparing to pounce.
If you haven't heard by now, many software
programs that perform calculations by reference to the calendar year will
utter their last meaningful gasp on Dec. 31, 1999; thereafter, these programs
will belch out nonsensical results. For example, employees hired in 1996
may be logged in as being employed for negative 96 years as of Jan. 1,
1996 (as the program subtracts 96 from 00).
Even today, you may run into difficulty
renting a car if your license expiration date is after 1999. One congressional
subcommittee has estimated that the repair cost to the federal government
alone is $30 billion. For states and the private sector, the bill could
be a multiple of that.
It seems incomprehensible that we allowed
a problem of this magnitude to sneak up on us. Doomsday is 3.3 years away,
but analysts have concluded that it is already too late to fully address
the problem. Many will suffer, but some will be impacted more than others.
Financial institutions (especially banks), insurance companies, and other
industries with intensive date-sensitive computer systems will be the hardest
hit, according to many well-respected Year 2000 experts.
Many organizations, both well-established
and lesser known, are offering or developing fixes to the problem, and
those packages vary significantly in terms of price complexity, efficacy,
and guaranteed results. Most of the "Big Six" accounting firms,
and all of the major management consulting firms, are preparing to hit
the streets with comprehensive solutions. Before you spend, however, consider
the following points:
Principle 1: The most important device and your first line of
defense for protecting yourself from the Year 2000 meltdown is the license
agreement in your files. (You did keep it, didn't you?)
The ultimate fix to your Year 2000 problem may be technical, but theremediation
process will begin in your file cabinet. Every piece of software is governed
by a license that may have specific provisions critical to addressing the
Year 2000 crisis, including warranties, representations as to functionality,
and access to the "source code" that's necessary to make fundamental
changes to software. Chances are, unless your contract was vigorously negotiated,
it probably is subject to broad waivers of warranties and limitations of
Nevertheless, depending on the language of the license, applicable state
law, and the skill of legal counsel in deciphering the intent of the parties,
the license may have a few precious nuggets that can be used to your advantage.
Do not simply jump into a technical solution. Rather, first determine your
contractual rights to shift the burden, in whole or in part, to a responsible
party. That may affect which technical solution should be selected and
how, by whom, and by what means it should be implemented.
Principle 2: The company best able to fix your software (and
perhaps the only one capable of doing so lawfully) is the one who developed
it, but the window of opportunity for a conciliatory resolution is closing
Practically, software is modifiable by its source code only; in all
likelihood, only the developer of the software has the source code and
the right to modify it. Thus, once you know your license rights, your next
call should be to the software developer. You may get lucky and find that:
(1) the developer already has a patch for the Year 2000 problem; or (2)
it is willing to release its source code to permit modification; or (3)
if you found useful provisions in your license, the developer itself may
feel compelled to undertake the repair.
In all circumstances, the resolution achieved must be carefully documented
to ensure that the fix works technically and legally. Keep in mind that
conciliatory fixes will become less common as software developers get swamped
with calls from, and claims by, frustrated licensees. Settle up amicably,
reasonably, and early, and you may achieve a resolution that others may
not be afforded. If, however, that avenue is foreclosed, follow the guidelines
under the next principle.
Principle 3: Technology solutions have a religious quality in
that (1) there are many variations on the same theme, and (2) you will
be told that all of them are absolutely wrong, except for the one being
pitched to you.
Nontechnical professionals and managers do not want to learn the inner
workings of computer software or hardware. They simply want someone to
take control and make the problem go away. But often these nonprofessionals
cannot make an informed decision because the fundamental facts and lingo
are foreign to them.
On the other hand, technology professionals have a single-minded fervor
that often precludes balanced decision making. Ask a Macintosh user what
is good about a PC. The answer will be clear, definitive, convincing, and,
for the most part, empirically useless.
The bottom line? Year 2000 corrective measures may or may not work,
depending on how well you manage each step of the process and how well
you have protected the investment you have made in a solution. Remember
. . . there will not be time for you to do it all over again. So, (1) be
certain that you are advised of all options, risks, likelihoods, and possible
scenarios by technical professionals who have no stake in the outcome;
(2) do not rely on the advice and opinions of the solution-seller alone;
(3) always seek multiple views, including those of a competent Year 2000
consultant if your technical issues require such expertise; (4) obtain
from all service providers the best possible (written) proposals and contractual
assurances of a timely and effective fix; and (5) follow Principles 4 and
Principle 4: Do not seek only outside help to implement the
solutions; seek qualified help to manage the solutions.
A single adviser/manager should orchestrate the process of assessing
and pursuing license rights, selecting and contracting with outside solution
providers, and closely managing the implementation of the solution. There
will be a multitude of decisions to be made (especially if you need a separate
solution provider for each software program you have). Do you replace your
system entirely? Contract for a fix? Gear up to sue your vendor? Or do
nothing and gear up to defend against the consequences? What will these
various options cost? If you do not have diverse in-house capabilities
to answer these questions, you should consider hiring an adviser/manager
from the outside no ties to the solution provider(s) who can act as the
Principle 5: Notwithstanding Principles 1 through 4, prepare
for the worst (or at least for the next to worst).
The "worst" means that you will not have taken the necessarysteps
to fix the problem by Jan. 1, 2000. Since that is unthinkable and you will
have little recourse by then (there is no escaping the turn of the century)
at least prepare for "the next to worst." That means, get ready
for the lawsuits against (and perhaps by) you, for they are virtually sure
to come even if you meet that immutable deadline.
Assess the legal issues that must be addressed. For starters, determine
what (if any) shareholder disclosures are necessary regarding the problem
and the anticipated solutions. This is an especially important issue for
publicly traded corporations that are required to identify events or uncertainties
that are reasonably likely to result in the corporation's liquidity increasing
or decreasing in any material way.
Next, review your existing contracts with customers. What obligations
do you have that might be affected by the Year 2000 problem? Do contracts
have to be renegotiated or amended? As for future contracts, make sure
that the problem is properly addressed. Will a limitation of liability
clause do the trick, or are other contractual terms appropriate? These
are just a few of the considerations that should be covered.
Finally, directors and officers must be protected. While it may seem
unfair to hold directors and top executives responsible for computer glitches,
think of it this way: If a bank's computers suddenly cannot handle or accurately
make date-sensitive calculations or if a corporation's computers can't
input orders beyond 1999 and revenues are lost, someone will be sued andyou
can bet that it won't be the company computer programmer.
The fiduciary duty of due care requires
the exercise of reasonable diligence and care, including the obligation
to make informed decisions. The standard of care inevitably will be determined
by reference to similarly situated boards of directors and officers. If
your competitors are getting the necessary advice on Year 2000 issues and
are assessing and addressing the problem, you may be in trouble if you
do not do likewise.
Following these principles alone may not
save you or your company from the millennium meltdown. But at least it
should give you a leg up if nothing more than to stave off the lawsuits
against officers and directors, a feat in itself.
* Text reprinted with permission of Legal Times,
1730 M St., N.W., Washington, D.C. 20036, Copyright 1996.
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