Y2K Echo: It May Be Time to Upgrade

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Y2K Echo: It May Be Time to Upgrade Your IT Systems

Remember the frantic run-up to Y2K? The theory back in 1999 was that

computers were programmed for six-digit date-and-year references and

they could crash when eight digits turned over at 12 a.m. on Jan. 1,

2000. Because nearly everyone came through Y2K unscathed, it's now

a faded memory. However, businesses, governments and other entities

around the globe gave their IT systems a thorough going over in the

mid-to-late 90s, and in many cases either upgraded or replaced their

systems.

Today, manufacturers and other companies may be experiencing a

phenomenon called "Y2K Echo." Fortunately, with Y2K Echo, we don't

have to be concerned about widespread mayhem. Y2K Echo only

pertains to the companies that have not yet sufficiently upgraded or

replaced their IT systems in recent years. And it doesn't hinge on any

potential for universal system failures.

Out With the Old

Essentially, Y2K Echo means that, since companies typically replace

computer systems every 10-15 years, we are in year 12 following Y2K.

This could have the potential to create changes that extend beyond your

own company's computer and automation systems.

For example, Y2K coincided with bigger shifts in business and

technology around the world. It ushered in an explosion in offshore

services and an influx of overseas workers to places like Silicon Valley.

Some gave Y2K upgrades credit for the New York Stock Exchange

being able to reopen just six days after shutting down after the Sept. 11,

2001, terrorist attacks.

We don't have to go back to 1999 to talk about what companies can do

to bring measurable change to their operations with the Y2K Echo.

Much has happened in the IT world in the past three years alone. Cloud

computing, virtualization, e-marketing, mobile computing and social

media are not just fads. They are here to stay. Because of the number

of sophisticated new high-tech opportunities, the Y2K Echo could cause

big shifts in the way companies conduct business, just like Y2K did.

It's now well into 2011, and by a rough estimate, 75 percent of

companies in the manufacturing sector could potentially be looking at

major tune-ups to their IT systems. Of this group, perhaps another half

may need to replace their systems altogether; most will need to make

hardware changes (if they haven't already). These figures do not involve

any hard data, but they do signify the potential for change.

A Complete Check-Up of IT Systems

Y2K Echo involves a complete check-up of IT systems that haven't been

reviewed in recent years. Just like Y2K, the Echo has the potential to

help companies clean up their IT systems, and more importantly, their

operations.

Manufacturers have a number of things to think about when looking at

IT upgrades and replacements. The primary areas to evaluate involve

security, disaster preparedness, capability, mobility, capacity,

productivity, efficiency, ROI and customer relationships. More

specifically, these considerations involve taking a close look at the

following:

Has the company defined a clear position in the market?

Has the company effectively embraced its channels?

Are there effective measurements in place?

Are the people, processes and technologies aligned?

How, objectively, is the organization performing?

Unlike Y2K — which Fortune magazine estimated cost businesses a

total of $500 billion — we won't see a frenetic surge in IT spending due

to a chronological deadline. But we do have the potential to witness

history in the making once again. This time, the catalyst for change is

survival in a tough global economy. As many organizations have been

holding back on discretionary investments, there appears to be pent-up

demand that will likely surface as the economy continues its recovery.

Contact us about conducting a complete check-up of your IT systems.

The information contained herein is general in nature and is not intended,

and should not be construed, as legal, accounting, or tax advice or opinion

provided by Clifton Gunderson LLP to the reader. The reader also is

cautioned that this material may not be applicable to, or suitable for, the

reader’s specific circumstances or needs, and may require consideration of

non-tax and other tax factors if any action is to be contemplated. The reader

should contact his or her Clifton Gunderson LLP or other tax professional

prior to taking any action based upon this information. Clifton Gunderson

LLP assumes no obligation to inform the reader of any changes in tax laws

or other factors that could affect the information contained herein.