Firms See Boom in Year 2000 Work
By Andrea Novotny
Small and large businesses alike are counting on rising demand by states and localities for year 2000 products and services to boost the businesses' profits and steer them into new markets.
The year 2000 issue "provides a vehicle for us to enter into markets and client relationships where we might not have been otherwise," said Mike Guido, senior vice president of CACI International's year 2000 division. "Once we get our foot in the door somewhere, the chances are good that we will stay there."
As the deadline nears for reprogramming computers that use only two digits to designate the year, officials at companies - ranging from IBM Corp. of Armonk, N.Y., to smaller players like Caddtech Productivity Inc. of Liverpool, N.Y. - said officials at agencies governmentwide are scrambling to fix the software glitch.
Some governments "really haven't grasped the year 2000 problem yet," said Ed Van Naerssen, manager of Caddtech's Harrisburg, Pa., operations. "They are starting to become desperate, and our company sees that as [a business opportunity]."
For his engineering and business solutions company, the year 2000 issue could spell better than half of its $12 million in projected revenues for 1998, Van Naerssen said. Indeed, Caddtech's profits from year 2000 work alone are expected to exceed last year's overall revenues of $5 million, he said.
Caddtech's big seller to state and local governments is its PowerLink 2000 software product, which finds where the date-code glitches are in systems, Van Naerssen said.
The company is a pre-qualified year 2000 vendor in New York City, Pennsylvania, Virginia and West Virginia, and serves as a prime contractor on several projects in those areas, he said.
Caddtech also teams on projects with large vendors and provides them with year 2000 consultants. Industry officials said that sharing resources better positions year 2000 vendors to meet the heavy demand for these programmers.
At the same time, many large vendors have reached their limits in terms of exploiting the year 2000 issue, said Leslie Kao, a public sector market analyst with G2R Inc., Mountain View, Calif.
"By the time lagging counties or states address year 2000, the major vendors will have their plates full," Kao said. Most large vendors already have been grabbed by the private-sector entities, which are well ahead of the public sector in addressing the problem, she said.
For many governments looking to contract for year 2000 services, the place to turn to is small and midsize vendors. Another avenue is to rely on their own internal resources to achieve compliance, Kao said.
|State and Local Government Spending on Year 2000 Services |
|1996 ||$70 million |
|1997 ||$1.1 billion |
|1998 projected ||$3.2 billion |
|1999 projected ||$2.2 billion |
|2000 projected ||$560 million |
|Source: G2R Research Inc., White Paper on the Year 2000 Problem in State and Local Government|
G2R estimates state and local government spending on year 2000 services will rise to $3 billion in 1998 from roughly $1 billion one year ago. Year 2000 spending is then expected to level off at $2 billion in 1999.
"The demand for year 2000 [services] is going to grow explosively this year," said Jim Brady, chief executive officer of MatriDigm Corp., San Jose, Calif. The privately held software technology company specializes in maintaining legacy systems. Currently, it is focused on providing corporate and government clients with year 2000 solutions to convert their Cobol code programs.
Among MatriDigm's government clients are Dallas County, Texas, and the state of Nevada. However, the firm expects its year 2000-related business to soar in the coming year, possibly growing in excess of 50 percent per month.
For the state of Washington, the answer has been to rely on local or regionally based vendors for most of its year 2000 work, said Steve Kolodney, director of the state's Department of Information Services.
Washington is generally viewed by analysts as one of the more aggressive states in attacking the year 2000 problem. Last month, for instance, the state announced that its Social Service Payment System had achieved compliance nine months ahead of schedule. So far, the state has fixed 77 of its 630 mission-critical systems, officials said.
Closer to the other Washington, CACI International Inc. of Arlington, Va., is looking at year 2000 work as a way to tap into new state and local government markets, as opposed to using it as a specific source of revenue, Guido said. CACI does not break out its revenues for year 2000 work, he said.
Meanwhile, IBM is able to keep its year 2000 work strong by looking at alternative ways to address the situation, recognizing there is a shortage of skilled workers, said Scott Davies, year 2000 executive for IBM's Global Government Industry.
The company is pursuing do-it-yourself year 2000 capabilities to offer its customers. IBM's package includes find, fix and test solutions that allow customers, such as state governments, to do the work themselves, Davies said.
"We are much more filled up now ... and it's getting harder to get [year 2000] resources," he said.
Some smaller companies, such as Cincinnati-based Tominy Inc., are taking a similar tack. The software and professional services firm converts mainframe systems to client/server systems. It also sells a do-it-yourself year 2000 desktop-based product to help customers make their systems compliant.
But Tominy's migration efforts have taken a back seat to the year 2000 work, said Bill Dorece, vice president of business development.
The company expects its annual revenues to double this year to $10 million, most of which will stem from selling its year 2000 product, called Tominy Comp2000, Dorece said. Potential government customers are the states of Ohio and Pennsylvania, where the company is a pre-qualified year 2000 vendor in each, he said.
"The year 2000 has become a significant part of Tominy's business," Dorece said.
Unlike some companies that have put all their eggs in the year 2000 basket, Tominy is counting on its other niche to pull it through when the year 2000 issue passes, he said. And the company expects many of its client relationships from year 2000 work to carry over, he said.
"The dilemma for a lot of year 2000 vendors is what to do when it's over," he said.
The year 2000 issue "provides a vehicle for us to enter into markets and client relationships where we might not have been otherwise."
- CACI's Mike Guido
|Major Year 2000 Competitors in Government and Commercial Markets|
|ADPAC Corp., San Francisco |
Big 6 accounting firms (Arthur Andersen, Coopers & Lybrand, Deloitte &Touche, Ernst & Young, KPMG Peat Marwick, and Price Waterhouse)
Cap Gemini America, New York
Computer Based Systems Inc., Fairfax, Va.
Computer Associates International Inc., Islandia, N.Y.
Computer Horizons Corp., Mountain Lakes, Calif.
Computer Sciences Corp., El Segundo, Calif.
Compuware Corp., Framington, Mass.
Data Dimensions Inc., Bellevue, Wash.
Electronic Data Systems Corp., Plano, Texas
Forecross Corp., San Francisco
HCL James Martin Inc., Fairfax, Va.
GTE Corp., Stamford, Conn.
IBM Corp., Armonk, N.Y.
Interactive Business Systems Inc., Oak Brook, Ill.
Intersolv Inc., Rockville, Md.
| INTO2000 Inc., Jasper, Ga.|
J.D. Edwards, Denver, Colorado
Keane Inc., Boston, Mass.
Micro Focus, Mountain View, Calif.
Millennium Dynamics Inc., Cincinnati, Ohio
Product Knowledge Systems Inc., Wellesley, Mass.
Platinum Technology Inc., Oak Brook, Ill.
Prince Software Inc., Allendale, N.J.
RCG Information Technology Inc., Edison, N.J.
Specialized Computer Technologies Inc., Minneapolis, Minn.
Software Emancipation Technology Inc., Burlington, Mass.
Sybase Inc., Emeryville, Calif.
TRW Inc. (including BDM International), Cleveland
Unisys Corp., Blue Bell, Pa.
Viasoft Inc., Phoenix, Ariz.
Wang Global, Billerica, Mass.