by Athan Koutsiouroumbas & Trevor Gunn
As 1999 draws to a close, Y2K remediation in the former Soviet Union is an issue of major concern. U.S. companies need to pay close attention to remediation efforts by government agencies and private industry in Russia. Although the problem is being addressed on many fronts, U.S. companies should be proactive in working with Russian counterparts to prepare systems for the year 2000.
Russia and the Millennium Bug
Russian Finance Minister Mikhail Kasyanov estimates that the government will budget $187 million for Y2K remediation, although some estimates of Russia’s potential remediation needs exceed that figure tenfold. The Gartner Report, prepared by well-known IT consulting firm, The Gartner Group, forecasts that Russia will experience severe Y2K disruptions. It predicts that utilities will operate at 40 percent of capacity for the first two months of 2000; transportation will be disrupted 80 percent of the time and telecommunications 50 percent of the time for a three-month period; hospitals will deal with nothing but emergencies for at least two months; financial markets will be disrupted for 30 trading days; and banks will be disrupted for 20 business days. However, there is reason to believe that there have been marked improvements in Russia since the publication of this report.
Most Russian businesses are aware of the Y2K problem and realize that Y2K remediation is a necessity for conducting trade. “Quite a few businesses have become aware of it because there has been quite a bit of publicity. There is also widespread skepticism, though, and a huge amount of faith that they will be able to pull off some sort of repair, if needed, when the time comes,” said William McHenry, professor at the McDonough School of Business at Georgetown University. “I suspect a lot of Russian firms have tested their PCs and, finding some that have problems, have become a lot more serious.”
U.S. Efforts to Assist Russian Y2K Remediation
The U.S. Agency for International Development (usaid), in conjunction with the Russian State Telecommunications Department (Goskomtelekom), has established 71 “Y2K Competency Centers” throughout Russia to provide Y2K consultation. Goskomtelekom has also compiled a contact list of 164 Russian Y2K remediators. Information on Competency Centers and Russian Y2K remediators, as well as other official Russian Government Y2K documents, can be found at www.y2kresourcecenter.ru/Library/Lib_main.htm.
Various U.S. companies are working in Russia to remediate the Y2K problem. Relativity Technologies Inc. (Cary, NC), a software developer, was awarded a multimillion dollar contract with Russian systems integrator Lanit Holding to remediate Y2K in Russia. Lanit Technologies also operates one of the Y2K Competency Centers. The two companies will be working together in both the private and public sectors. Their clients include the Russian Federal Government, gas monopoly Gazprom, and Aeroflot.
“Large companies like Gazprom have secured funding” to address Y2K issues, said Vivek Wadhwa, CEO of Relativity Inc. “In St. Petersburg, the phone company has tested its service and it will work fine. But, it does not possess the resources to fix the billing system. So, if you’re in Russia wishing somebody a Happy New Year over the phone, you might end up receiving a multimillion ruble phone bill.” However, small companies face a greater challenge due to a lack of funds. To ensure that business operates as effectively as possible, Wadhwa envisions that most noncompliant offices will be fully staffed at the time that the failure is expected to occur.
The U.S. Department of Commerce offers free software, called “Y2K: Managing the Challenge,” which can be obtained on the Internet at www.doc.gov/y2k. The CD-ROM, which is available in both Russian and English, includes a program that enables users to complete an inventory of assets that may be susceptible to Y2K problems, gauge the criticality of business processes, develop contingency plans, and conduct remediation activities. It also contains a 10-minute discussion video, a software program for managing the Y2K process, a self-assessment checklist, a contingency planning template, a user guide, and hotlinks to many helpful Y2K sites. U.S. companies should recommend this software to their Russian partners.
Businesses Must Prepare
The best way for businesses operating in Russia to combat Y2K-related failure is, first, to verify their Y2K status. “We have spent considerable effort internally in ensuring our own hardware and software have been updated to comply with Y2K requirements,” said Peter M. Cohn of Exxon Ventures, CIS. A company then must work with Russian partners to learn their plans for Y2K remediation. “We have also worked with the banking institutions we are associated with in Russia to ensure they have implemented appropriate safeguards to minimize exposure to potential Y2K-related problems. Specifically, we requested our banks to confirm to us in writing that they indeed had met certain minimum standards regarding year 2000 compliance,” said Cohn.
Be direct with Russian counterparts. “The most effective thing American firms may be able to do is to forestall the situation by finding new suppliers, telling their Russian suppliers about it, and demanding information about Y2K compliance in exchange for not taking their business elsewhere,” suggested Professor McHenry of Georgetown, whose report on Russia’s Y2K readiness can be read at www.msb.edu/faculty/mchenryw/personal/pubs/cais.htm.
The Senate Special Committee on the Year 2000 Technology Problem has held numerous hearings on U.S. business community efforts to ensure Y2K remediation among overseas affiliates, suppliers, and partners. Senate testimony on Y2K can be accessed at www.senate.gov/~y2k.
For a nonexhaustive listing of companies able to assist with Y2K remediation in Russia, visit BISNIS Online at www.bisnis.doc.gov/bisnis/isa/isa.htm#Aisa.
Athan Koutsiouroumbas was an intern at BISNIS during the summer of 1999. He is currently studying in Nizhny Novgorod.
Trevor Gunn is BISNIS’ Deputy Director. He can be contacted via email at Trevor_Gunn@ita.doc.gov or by telephone at (202) 482-4656.
Special thanks to Richard Dickerson at the Department of Commerce’s Office of Computers for contributing to this report.