The Rs 1,800 Cr Hoax?

It was probably the most hyped non-event of the millennium. Costing the world a total of $600 billion. That's almost the same as South Asia's total income and five times the amount required to write off the entire debt of developing countries. And the amount spent by a poor country like India to tame the bug? Rs 1,800 crore, or $3.6 billion.

For the whole of 1999 - in some places even before that - the global village was made to poise on the brink of disaster.Human civilisation as we know it, the prophets of doom had predicted, will end as we enter the year 2000.Merely because when we made computers, we cut costs and forgot to put in the first half of the year.

Survival kits were prepared in most developed countries where life revolved around computers and electronic gadgets; human beings stocked food, water and batteries and went back in history to live in the deserts. Yet, at the stroke of midnight on December 31 when life actually rolled over to the new year, it did so without a hitch. Was this the millennium hoax? Or, more correctly, the hoax of the millennium?

Expectedly, the US and Britain led the hype and spent billions of dollars to track and exterminate the "millennium bug". More interesting was the fact that many others - Russia, Italy, some countries in Africa, Latin America and Asia - did much less or next to nothing. By and large, they ignored it. Yet, their nuclear plants didn't blow up and planes didn't dive into the sea.

Writing in The Times, London, recently, scientist Anatole Kaletsky describes the Y2K panic as the biggest example of human gullibility in history. In fact, so crestfallen were the world's doomsayers that they tried very fervently to pass off a technical problem in Japan's telecom infrastructure and one of its nuclear plants, and an even smaller glitch in a US satellite television link, as examples of the bug's footprints. Which the respective agencies denied, ascribing the snags to human and mechanical errors.

The US alone spent about $150 billion. Britain added another £20 billion to inoculate its systems. Kaletsky says this would be about half of what the government spends on the National Health Service. According to International Data Corporation (IDC), the world spent between $200 billion and 300 billion in software repairs, $100 billion in database repairs, $50 billion in hardware chip replacement, $75 billion in hardware performance upgrades and set aside another $100 billion for litigation. As expected, computer firms went berserk. Hewlett-Packard alone spent over $250 million in internal readiness.

As for India, the National Association of Software and Service Companies (NASSCOM) says the Y2K issue cost India Rs 1,800 crore in both government and private sector efforts, with Rs 600 crore going for software and services. It includes the massive media campaign carried out by the government's Y2K Task Force, led by Montek Singh Ahluwalia. An amount which could have been used otherwise for, say, providing safe drinking water to 1 lakh dwelling clusters - that's what the current budget allots for the programme. Still, IDC is not happy. India, it says, is vulnerable to an impact of about $0.4 billion. Also, India is among the 12 countries which IDC expects could lose 0.3 per cent of its revenues for 2000 on account of the bug - it's placed fourth on its pain index of Y2K problems and had a rather critical bug rating of 8.

Still, even IDC admits that the world over-reacted out of a fear of the unknown. It undertook Project Magellan to track the impact of the Y2K issue. The Magellan team, which spoke to 15,000 companies across 17 countries, believes that the world overspent on fixing and preparing for the Y2K bug, apart from generally making people miserable on New Year's eve. Most of this expenditure came from cost of labour and overheads in contingency planning, overspending in Y2K remediation and paying salaries for extra staff-on-hand over New Year's weekend (see table). In the US alone, 4.5-5 million extra people were estimated to have worked on New Year's eve on this. IDC's survey shows that globally, large companies kept 72 per cent, medium companies 43 per cent and smaller ones 25 per cent of their information technology (IT) staff available at midnight of December 31, 1999.

Infotech experts sure have an explanation for all this. They say, predictably, that although people are calling it wasteful expenditure, no one opened his mouth before December 31, 1999, unaware that the transition to 2000 would be as smooth as this. To question the bug's existence or its seriousness at that time was to risk appearing an ignorant fool. Who can say with certainty, they ask, that things wouldn't have come to a grinding halt if these efforts were not made? Says Ganesh Ayyar, president, Hewlett-Packard, India: "It is something like airport security. There's always a debate on whether one should spend more or not. Because there's always the probability that something would go wrong. Why take a chance on something that's so vulnerable and something that can easily be rectified?"

Indeed, while New Year revellers were welcoming the first rays of the millennium sun, computer and software professionals were on tenterhooks. Says Rajeev K. Arora, resident manager, Tata Consultancy Services (TCS), a company which wrote more than 650 million lines of code for Y2K correction: "We were confident but... we even bought for several overseas tickets and arranged for visas so that we could fly our professionals to our overseas customers in case something went wrong." TCS even stocked a large amount of diesel for generators in case power failed. Some others were planning to hire army helicopters to fly rescue teams to areas where the bug would have bitten.

It's not as if India didn't profit from the panic. Indian software companies made hay. The country exported Y2K solutions worth a minimum of $2.5 billion. Says an industry expert: "This was an excellent opportunity. Just look at the number of companies offering solutions." A total of 137 Indian companies exactly. Over 100 Fortune 500 companies got their Y2K solutions from India - a leading software company belonging to one of India's top business houses serviced five of the top 10. Another one was even talking to a concern in Israel which is itself reputed for providing solutions.

Many even maintain that India shouldn't complain at all. The Y2K scare more than made up for slowdown in the software sector's growth. Says NASSCOM president Dewang Mehta: "Y2K was a godsend and might prove to be the turning point for the industry. It firmly established India on the world software map and ensured a smooth future." NASSCOM estimates show that Y2K will help the industry top its growth from 50 per cent in 1997-98 to 55 per cent in 1998-99 and 60 per cent in 1999-2000. And we could do this because India itself was likely to have fewer problems in the absence of computerisation and networking. Says Ayyar: "India is very good at bomb diffusion."

Even in retrospect, the software industry is happy with the Y2K exercise. Says Ayyar: "It gave the industry an opportunity to restructure its systems and see where the codes and documentation were, as a large number of systems functioned in an ad hoc manner. Many corporates took this opportunity to totally revamp their systems rather than do a repair job. It will stand India in good stead in the long run." Mehta agrees: "In the absence of a proper database for our systems, it was a unique chance to create a national inventory of what we have. "

Indeed, companies took no chance. Apart from the expenses on being Y2K-OK, several of them also bought insurance - ranging from a replacement policy to hiring people exorbitantly from computer and software firms on rollover day. And it may not be time to say Amen yet. Says Arora: "Several systems may react to the bug much later than expected as lot of computers do their calculations quarterly, half-yearly or even annually. Apart from this, the first leapyear of the millennium is yet to pass and computers have to face it." Still, if the Y2K experience helps make our industry and society more serious and cautious in assessing technological risks in the future, not all the money would have gone out of the Windows.