Infotech: Year 2000, The Day After

This is the bug that accounts for 38 per cent of India's software exports. But, on January 1, 2000, when work on all Y2K projects must end, many software companies will find that much of their business-and profits-have vaporised. Survival, for India's software czars, could become scary.

On January 2, 1999, every single pink tablet of Niagra--the hot anti-cold medicine formulated by the transnational pharma major, Fizer & Co.--will, suddenly, be trashed by every retailer, wholesaler, distributor, and manufacturing facility in the world. Such a command will be issued by the HAL 7511-based mainframe computer system, which centrally monitors the manufacturing- and expiry-dates of Fizer's products and, accordingly, issues global expiry instructions every day.

Since Niagra has a shelf-life of 1 year, the manufacturing-date of the batches packaged on January 1, 1999, will be recorded as 010199, and the expiry-date, which is January 1, 2000, as 010100. This inconsistency will be discovered by the system during its routine check the next morning on which batches expire on January 2, 1999. Since the year of the manufacturing-date (199) will be seen by the program to be later than the year of the expiry-date (100), it will conclude that all those batches of Niagra manufactured until then should be trashed.

Expire Date = Manufacture Date + 365
if Expire Date < Today Date
then Order Trashing of Expired stuff
End if

It is such non-compliant code that must be fixed by a Y2K program. Wherever there is a date comparison in the code, it should be handled by a Y2K fix, which will modify it in the following fashion:

Expire Date = Manufacture Date + 365
Date Diff = Expire Date - Today Date
if Year (Expire Date) < 90 then
Date diff = Date diff + 100 years
if Date Diff / 365 > 1
then Order Trashing Of Expired Stuff
End if

In other words, instead of making a straight comparison, the difference between the expiry-date and the current date will first be calculated. In problem-cases, this will yield a negative number that is 100 less than the correct answer (00 - 99 = -99). Then, an assumption will be made that if the year of the expiry-date is a number smaller than 90-anything from 0 to 89, depending on when the company started making Niagra-the date is, actually, post-Millennium. In such cases, 100 will be added to the difference, and this will bring the -99 back to 1. Which is the correct expiry-date. And Niagra, Fizer, and your cold will be safe.

Hemant Bharat Ram

"At some point, there will be panic about software stocks because of the implications of the end of the Y2K problem."
Hemant Bharat Ram
CEO, DCM Data Systems

That is not, paradoxically, India Inc.'s Y2K problem. Even if the Millennium Bug does not crash India's computers, it will certainly crush her Rs 11,800-crore software industry. For, once the Y2K problem disappears, so will a chunk of the revenues-and an even-larger share of the profits-earned by India's software giants. After all, if it is to deliver results in time, all Y2K-related software programming work must end by midnight on Friday, December 31, 1999. On Monday, January 3, 2000, as the world wakes up after the long weekend welcoming the new millennium, the new century, and the new year, the Y2K problem should be a thing of the past.

And India's software companies will find their Y2K business gone, their revenues vanished, their profits vaporised, their infrastructure gathering dust, and their employees lining up to collect pink slips. Without exaggeration, the quantum of business gone may not be large; it could be enormous. Of the software exports of Rs 8,000 crore that India's infotech industry generated in 1997-98, the Y2K-related business swept in about Rs 3,000 crore. Or 38 per cent.

Moreover, although cost-structures vary across the industry, operating margins of 50-65 per cent are commonplace in the case of Y2K work. Powering this is the fact that the problem needs to be solved before the deadline. In the next 15 months, therefore-as in the past 24-many of the country's software companies will cash in on the gigantic opportunity that the task of fixing the code, on which the business-processes of thousands of corporations around the world run, offers.

All told, infotech-driven business enterprises will have collectively spent $600 billion (Rs 25,20,000 crore) to fix the problem that, at the moment, will set all computer clocks to 010100 on January 1, 2000, thus making the date appear to be 100 years before, instead of one day after, the previous date of 123199. Unless the error is fixed before M-Day, all these computers could crash, destroying the data they contain, and creating inconsistencies that will snarl their functioning, and send all computer-dependent processes into disarray.

Unfortunately, once it is fixed, no upgrades will ever be required. While many customised software projects bring a stream of continuous business from upgradation, Y2K work is a one-off opportunity that offers no second chance. And the lucrative revenues it offers India's software companies today will be conspicuous because of the instant shrivelling of the top- and bottomlines of those companies in the 21st Century. For India's software stars, will there be life after Y2K?

A looming deadline explains why Y2K is the only kind of business anywhere in the world where the price per unit of output is rising rather than falling. From 75 cents-$1.10 (Rs 31.50-46.20) a year ago, the fee per line of code has jumped to between $2 and $2.25 (Rs 84-94.50) today. Says S.S. Sinha, 50, the Head of the Applications Division of the Rs 374-crore software exporter, HCL Consulting: ''The demand for Y2K-related work far exceeds the capacity available worldwide. This is continuously pushing up the price per unit of work.'' So lucrative is this business that 30 per cent of the 220,000 programmers employed by India's software companies are, at present, working on Y2K-related projects.

Even so, the demand for manpower outstrips the supply. Wooing Y2K programmers from rivals is one of the most finely-honed corporate skills in the land. Recounts Sinha: ''We actually apprehended a recruiter from a Y2K specialist hiring-firm, who was going from cubicle to cubicle in our office offering people jobs.'' Outside the main entrance to the Santa Cruz Export Processing Zone in Mumbai, urchins can be seen holding banners that read Any COBOL Experience. English Speaking. Immediate Job In USA. Call This Number in a bid to catch the eye of programmers being driven into the complex.

However, the banners will fall, and the headhunters will close shop when January 1, 2000, rolls round. And the impact on companies will be high, rising in proportion to the degree of revenues and profits that Y2K-related work contributes. According to the National Association of Software Services & Companies (NASSCOM), there are at least 114 companies doing Y2K-related work in this country, all of whom will have to contend with falls in sales and profits. In fact, had Indian software companies been able to meet the target of $1 billion a year that had been set by nasscom for Y2K work, the post-Y2K drop would have been higher.

At the receiving-end then will be investors buying software scrips, lured by the high profit-margins of companies involved in Y2K projects, since those spreads will quietly vanish. Predicts Hemant Bharat Ram, 33, the CEO of the Rs 70-crore dcm Data Systems: ''At some point, there will be panic about software stocks because of the implications of the end of the Y2K problem.''

With the Millennium Bug having created thousands of high-earning careers, there may be many a personal dream that could come crashing down too. Code-grinders working here on Y2K projects earn Rs 5 lakh-Rs 6 lakh a year now-up from the Rs 2 lakh-Rs 2.25 lakh that those with similar profiles would have earned 2 years ago. Those doing on-site work in the US earn about twice as much in hard currency. Says Nirmal Jain, 52, the CEO of the Rs 332-crore Tata Infotech: ''The financial rewards are putting a lot of pressure on programmers to switch to Y2K-work.'' All these takings could be snuffed out once the Year 2000 dawns.

N R Narayanamurthy

"Y2K work will, probably, start tapering off by the second half of 1999, but may continue beyond January 1, 2000."
N R Narayanamurthy
CEO, Infosys Technologies

Actually, not every Y2K problem in the world will be solved by January 1, 2000. On the contrary, most companies woke up so late to the problem-panic-buttons weren't really pressed till late 1997-that few of them hope to have the entire issue resolved before their computer calendars are set to 00. As a study by the global infotech consultants, Gartner Group, reveals, only 34 per cent of the 2,000 largest companies in the US expect to have solved all their Y2K-related issues before Day One.

And the experience of Indian software companies suggests as much. Confirms Sinha: ''Even at this stage, we come across customers who are just starting to tackle the problem. They are aiming to solve only the bare minimum by the deadline so as to keep functioning.'' The Y2K strategy adopted by most corporates: target the absolutely critical applications first, and, even within them, focus on the bugs that can stall the functioning of key applications. For example, many companies that woke up late have decided to fix only their transaction-recording software, temporarily ignoring the reporting functions.

Although this will enable them to carry on doing business, they will not be able to generate the aggregated numbers that managers need in order to take decisions. However, once the critical systems are fixed, tested, and confirmed as Y2K-compliant, the reporting systems will have to be repaired too, kicking off a new cycle of activity. Concludes N.R. Narayanamurthy, 53, the CEO of the Rs 260-crore Infosys Technologies: ''Work will, probably, start tapering off by the second half of 1999, but it will certainly continue beyond January 1, 2000.'' Agrees Tata Infotech's Jain: ''It will go on for at least a year after that.''

The question, however, is whether software companies can continue charging the hefty fees they are now. For one, being able to meet the deadline will no longer count as a reason for a premium. For another, with a large amount of the work completed, there will, suddenly, be many software companies chasing the same business. Predicts Bharat Ram: ''Immediately after January 1, 2000, there will be frenzied activity to fix critical systems still left over, or critical systems where the fixes turn out to be bug-ridden. But, after that, even though there will be work, the balance of supply and demand will change, and the margins will not be as good.'' In other words, even if it doesn't happen on January 1, 2000, the Y2K business will come to an end sooner rather than later.

How, then, will the software czars cope with this overnight downsizing, and disappearance, of an entire market? That depends on, essentially, two factors: the extent of a company's dependence on the business. And the ability to transit to a different business while leveraging the skills honed by Y2K work.

Some prescient companies have been taking care not to put too many people into the Y2K basket, consciously limiting their exposure to it. Infosys, for instance, has set an internal ceiling of 25 per cent on the proportion of its revenues that should come from Y2K-work while the Rs 1,405-crore Tata Consultancy Services has set the figure at 30 per cent. Adds Arvind Thakur, 44, the Executive Vice-President of the Rs 333-crore niit, who heads its Rs 309-crore software exports business: ''We are making it a point to keep our Y2K revenues down to 15 per cent of the total.''

Of course, the overnight loss of between 15 and 30 per cent of their business will hurt any company, but it will still not be as harsh as the impact on companies-like, say, the Rs 117.60-crore Satyam Computer Services, 60 per cent of whose revenues are Y2K-related. There are, of course, other potentially-large markets that the Y2K specialists can set their sights on so long as the demand for customised software, writing code for which is the bread-and-butter of India's software companies, doesn't peter out.

Many corporates are realigning their infotech budgets to solving their Y2K problems today, putting on hold other projects for resumption later. From, say, Enterprise Resource Planning (ERP) to the construction of intranets, several business opportunities will re-emerge in the first years of the New Millennium from the shadows they had been pushed into by the Y2K imperative. Agrees Sinha: ''A number of our customers have confirmed specific schedules for post-Y2K projects that are badly needed, but had to be temporarily shelved.''

Besides, much of the Y2K business has come to software companies from outside their current circle of clients. Explains B. Ramaswamy, 51, the CEO of the Rs 62-crore Sonata Software: ''Companies with Y2K needs have looked further afield than their usual suppliers for getting their work done. This has got Indian companies in touch with more clients.'' And the opportunity for establishing relationships with new customers is, thus, high.

Replacing Y2K as the mega-prospect of the first few years of the new century will be the Euro. On January 1, 2002, the Euro is scheduled to become the official currency of Europe, and it will be mandatory for companies based in the countries of the European Union to record all their transactions in the Euro in addition to whatever other currency they use.

Not only does the task of converting software applications to become Euro-compliant represent, potentially, a $80-billion (Rs 3,36,000 crore) market, it is also more complex than the Y2K problem. For, the core logic of applications will have to be changed to incorporate both 2-currency accounting and inter-currency transactions. The value-addition involved in grabbing the Euro-opportunity is, thus, much more.

Crucially, Euro-conversion is not tied to legacy technologies, like COBOL, the way Y2K normally is. In fact, many companies plan to use the Euro makeover to, simultaneously, re-implement their systems using up-to-date technologies like intranets and object databases. The pay-off: unlike Y2K, building Euro-expertise is free of the threat of technological obsolescence. Says NIIT's Thakur: ''The main reason NIIT is not very interested in Y2K is that we want to build expertise only in technologies of the future.''

Not all the expertise that working on Y2K projects has garnered will, necessarily, go waste. Paradoxical as it may sound, the Millennium crisis has, actually, given a new lease of life to legacy platforms by showcasing the robustness of both the hardware and the software they use. Actually, computer systems built in the 1960s and 1970s had not been expected to survive till the end of the century, which is why they had not been made Y2K-compliant. However, many of the needs that they met then have not really been served by better systems, thus extending their lifespan.

As a result, the Indian software industry, which came into being in a post-COBOL world, has now acquired the expertise that is needed to tap into the business that such legacy systems offer. Importantly, such systems are proving hospitable to state-of-the-art applications too, making it worthwhile for their owners to commission software for their legacy systems-particularly after spending a great deal of money making them Y2K-compliant.

Argues Nitin Wagh, 36, the Country Manager of the �630-million Micro Focus, which is the world's largest developer of COBOL-related programming tools: ''It is a straightforward task to implement a Client-Server or even an intranet-Internet application on an older system.'' The end-result: a larger market for Indian software companies, using a competence they have now painstakingly acquired.

Despite these prospects, there is no doubt that the volume and value of business of Y2K-dependent software firms will implode in the 21st Century. The dilemma for many companies, therefore, is whether they should pass up Y2K business for fear of over-dependence, or whether they should take whatever comes their way.

Giving up assignments has been particularly difficult for companies that have been handed the work by their existing clients. Says NIIT's Thakur: ''If a present customer also happens to have a Y2K problem, you have to tackle that as well.'' The consensus: it is never wise to turn away business. Argues Ashank Desai, 45, the CEO of the Rs 29.30-crore Mastek: ''It does not make any sense to refuse work that is available. But companies must have a plan for handling the taper-off, and should not get over-dependent on Y2K business.''

One factor on which managing that transition depends is the extent to which companies can redeploy their Y2K professionals. While there will be a market for COBOL expertise, much of the work involved in Y2K-low-level rote work, which requires more stamina than ability-is of a kind that makes its practitioners unsuitable for other projects. Companies that have built large workforces of this genre will, probably, have to look elsewhere for fresh human capital.

However, software companies could find it easier to re-train their skilled professionals since, as Infosys' Narayanamurthy points out, ''the ability of our software engineers to absorb new technologies and quickly become proficient in them is a major advantage for our industry.'' In any case, most software-writing technologies become obsolete in 3 years, forcing programmers to retrain themselves continuously.

Clearly, the problem is that there may not be another opportunity that matches Y2K either in terms of scale, or in terms of a demand-supply mismatch. Thus, no other business will fall into the lap of India's software industry as easily as this one did. Which is why, in the 21st Century, India's Y2K wonders will not find it easy to re-program profits for themselves.