IT'S ABOUT TIME

ADAM BLAIR

Who would have thought two little digits could cause so many big problems?

Dealing with the year-2000 computer problem is already straining heavily burdened information technology departments and making IT professionals an increasingly valuable commodity. Its effect is already being felt in some forward-looking systems, and Y2K-inspired litigation may drag on long after Jan. 1, 2000.

In exclusive interviews with SN, five leading IT executives did identify a few silver linings in the Y2K cloud -- mainly the opportunity to replace old systems with newer, more functional technology.

Even companies that believe they're prepared for the date change, however, are worried that their trading partners -- including vendors, suppliers and utilities -- will fail to fix key systems in time to avoid delays, disruptions or outright failures.

The executives are: John Granger, vice president of management information systems at Furr's Supermarkets, Albuquerque, N.M.; Mike Hubert, vice president of management information systems for G&R Felpausch, Hastings, Mich.; Bob Schoening, senior vice president of information systems at Giant Food, Landover, Md.; Jack Scott, chief information officer and vice president of information services for Certified Grocers of California, Los Angeles; and Ron Waldbillig, assistant vice president of management information systems of Hy-Vee, West Des Moines, Iowa.

SN: Would you agree that the message about the importance of making automated systems year-2000 compliant has been heard in the supermarket industry, and where would you say we are compared with other industries?

JACK SCOTT: There's a tremendous amount of apathy out there. At the year-2000 educational session at the FMI Convention in May, which had 37,000 attendees, there were 1,500 chairs available -- and only about 150 people at the session.

Part of the reason for the apathy is misinformation at the retail level. People know they have a year-2000 problem to deal with, and they wonder what they are supposed to do. For example, when a technology vendor says a box is not Y2K compliant, does that mean I have to throw it away? What is not compliant about it? What will happen on the infamous day the clock rolls? Will it blow up in smoke, lock up, or will it print a "00" you still can read?

The Web pages of major equipment manufacturers provide very limited information, because their lawyers tell them not to say too much for fear of being sued.

JOHN GRANGER: I think we are better than most. I'm in an organization that meets monthly, and it is comprised of CIOs from other organizations, no supermarkets. Some people are still not moving very fast and now realize they're not going to make it. It is scary to see that we are less than 500 days away from potential calamity, but people are responding in the supermarket industry, and are paying attention to that.

RON WALDBILLIG: In a number of ways, we are ahead of many other industries because the supermarket industry has embraced new technology. Many of our in-store systems are relatively new. We have a lot of new technology that does not deal with legacy systems. In addition, our industry has added many new retail stores in the last decade, and has remodeled many stores. Along with construction comes new hardware and software. SCOTT: A lot of multistore chains have older platforms running their data centers, however, and they're getting involved with the manufacturers that supplied them with those systems. They need to address that, and they're trying.

MIKE HUBERT: For the most part I think we are in good shape. I think anything that could come back to bite us will be something way upstream. It could even be something as obscure as the blue ink used on a cereal box. And I do not mean [the problem] will be generated from the product manufacturer or even the container maker, but the supplier of the color could have a problem with something electronic on his end.

SN: What have been some of the internal effects of dealing with the year-2000 issue? How has it affected your budgets and technology priorities, for instance?

BOB SCHOENING: The information-technology organization [at Giant] was expected to step up to the problem first. We started to do some work on year 2000 as early as 1995, though we didn't have a seriously focused program, with a project leader, until 1996.

The early stages of the program, inventory and application assessment, proved to be an interesting process. What I found true at Giant was also true in talking to my peer group -- most of us didn't really know all the different application systems we had.

HUBERT: There have been significant expenditures because a lot of systems needed to be replaced. But even before Y2K became a priority, we were already targeting certain systems for updates. Relatively speaking, the impact was not painful.

GRANGER: Luckily, we have been able to minimize our impact. We are buying new systems that are all compliant, and that has caused a minimal effort. We replaced our finance and payroll systems, and human resources, warehousing, purchasing and billing systems.

WALDBILLIG: The year 2000 offers great opportunities. It's an opportunity for us to clean house, so to speak. As we upgrade our systems, we look at new hardware and software, and new functionality they provide. We always want to make our systems better. As we look at outdated systems that may not work in the next century, [we also look] at their effectiveness. If they are no longer being used or needed, this process is helping us throw them out.

SCOTT: Early on in our assessment program, we made conscious decisions that for certain applications we weren't going to simply remediate [to achieve Y2K compliance], we were going to look at [upgrading to] value-added applications. It was an opportunity to kill two birds with one stone. In addition, according to fair accounting practices, if you remediate, it's an operational expense. But if you're installing a new application, it can be capitalized.

SN: How have decisions been made as to which systems are "mission-critical," and which ones have been making that list?

SCHOENING: The decisions on what was critical were primarily made by my staff, but in most cases we'd sit down with the [affected] business unit and say "This is the assessment we've made." For the most part, there were no changes in prioritization of the work.

We took our portfolio of applications and divided it up into priorities, on a one to four scale, with one the most critical, two almost as critical. For threes and fours, if there were some period of down time, it wouldn't seriously affect the business.

Of the 131 major systems supported by our IT organization, on the mainframe and in the mid-range area, 99, or 68.7%, are ones and twos.

GRANGER: Retailers would be lost fast without frequent-shopper information. We would certainly still be able to order from stores and ship to them, but we can't go for a long period of time with no control on that data, because promotions are based around it. It has become mission-critical because we are suddenly unable to respond to changes in our frequent-shopper program and [customers'] shopping habits.

In addition, our customers will not care that our headquarters burned down. They only care that they are not being charged properly. I can't say I blame them.

WALDBILLIG: We look at all applications that we feel are critical, and what effect they might have on customers. The basic ones that come to mind are register systems because they handle customer activity, and our pharmacy customer activity. For us our major issue is our point-of-sale systems, and second are our purchasing and distribution systems.

HUBERT: Our biggest worry is getting product on the shelf. Any processes outside that are out of our span of control.

The other thing we noted was that state and federal governments may not get things done, such as food stamps and welfare programs being up on time.

SN: We've also seen a lot of stories about the scarcity of personnel brought on by the year-2000 problem, as well as the need to put other projects on hold. Has that been true in your organizations?

SCHOENING: Both are absolutely true, not hype. During the summer, I issued a memo informing our management that for the next four months, [the IT department] would be focusing on the year 2000. We would continue on with projects already out there that needed support, but we would defer any new work until we got our Y2K house in order. It wasn't a panic decision, but a pre-emptive strike on getting the work done.

Part of the reason for this decision is that we felt we could not use people from the outside, and management has accepted that. With various types of applications, there are all different test conditions you have to step through.

To properly select enough of the right test conditions is tedious work, and it requires people who are intimately aware of what the application is doing. You can't just hire someone off the street and say "Write a test plan for this particular application." If they don't have a knowledge of what the application is going to do, they won't test enough of the right kind of scenarios, and they won't give you confidence that the software has been properly tested.

GRANGER: We treat year-2000 work as a priority, and it is worked on daily, but it is not the only thing we are doing.

SCOTT: We're positioning ourselves to be Y2K-ready by the middle of next year. Then we'll have our internal IT resources available for our retailers and vendors, to help them through the triage. That's what a lot of companies are doing, saying "I need to get done, then I can help others."

SN: What are some aspects of the year-2000 problem that aren't talked about as much as others?

SCOTT: Like most distributors and wholesalers, we have a significant number of electronic data interchange partners, and almost none of them has the [Y2K-compliant] EDI 4010 standard installed, so we can't even start testing. In addition, while all the major companies we deal with -- a few hundred vendors that represent 80% of our volume -- will upgrade, what about the other 2,000 vendors? The little guys will be all over the map, so we'll have to address that.

SCHOENING: The critical issue that all of us face, after the remediation is done, is how do we know that what's been corrected corrects the problem? That can only be accomplished through the process of certification, planning and testing. A lot of companies are going to say they're year-2000 compliant when in fact they may not have done an adequate testing job to assure themselves they really are Y2K-ready.

The example I serve up to management for the need of spending time doing testing is that with the first 11 applications we moved into the certification environment, when we "aged" the data, 10 of the 11 had some failing during the test phase. It was nothing major, and follow-up remediation corrected the problem.

WALDBILLIG: As an industry, our greatest challenge is that we are dependent on others. To make our offices, stores and distribution centers work efficiently and properly we depend on our hardware and software vendors, trading partners and utility companies. Our greatest challenge is being assured that all these partners can continue to support us and keep us functioning into the next century.