Future Shocks

Future Shocks

The Y2K problem has turned into a long, expensive chore. By the time New Year's Eve rolls around, companies will have spent billions to correct a technically trivial problem that too few people took seriously-until it threatened to bring our lives and corporations to a grinding halt.

After such an experience, Mahogany Row inhabitants might be forgiven for examining their IT systems with a slightly wary eye; if it happened once, it can happen again. Thinking that forewarned is forearmed, we asked a group of business and technology pundits to list their top choices for the IT-related crises that lie beyond Y2K.

The conversations were marked by phrases like "Internet time" and "customer-centric," but fascinating as they were, no single peril emerged as the next Y2K. Instead, the experts veered from wild blue-sky prophecies to practical predictions of a more granular nature. Their wide-ranging lists underscore what inhabitants of the Information Age should already know: Technology permeates corporate life so thoroughly that the term 'technology problem' slices too thin. Technology powers not only business innovation within many companies but also serves as the engine driving our robust economy. So these days, executives need to realise that a technology problem isn't just about computers. It's about the business.

With the end of the Y2K nightmare in sight, now is the time for business executives to take a long-sighted look at the Gordian knot of business and technology. Peruse our short list of the next big "technology" crises and start working to avoid them.

Stephen S. Roach

A New York Times reporter recently called Roach, chief economist and director of global economic analysis for Morgan Stanley Dean Witter in New York City, a "techno-pessimist." But Roach believes he's a realist-especially about technology's potential to affect productivity gains. He predicts the following: A major disappointment in Internet investment payback. "The Internet piece of the market is now dominant, so Internet valuations are having a highly disproportionate impact. Should the Internet prove to be a disappointment, it could have a very bad effect," says Roach. Most investors are betting that the Internet will ultimately result in an entirely new business climate. But, Roach asks, "What if it turns out that the Internet is nothing more than a reshuffling of the same deck rather than a new paradigm of wealth creation?" For example, if online book buying cannibalizes the corner bookstore rather than creating a new avenue for a different kind of book purchase, Internet stocks may well collapse, and the effect would be felt throughout the economy.

"It would have a pretty pervasive impact on the investor base in the United States." Technology will fail to increase worker productivity. "In knowledge-intensive occupations, it is really difficult to boost productivity at all. The processor for the knowledge worker is not a PC or laptop; it is the human brain. Barring some type of breakthrough in genetic engineering, I think it is unlikely we will see a cerebral productivity gain. It's not going to come from IT." Roach disagrees with industry observers who attribute gains to IT investments finally paying off. "I happen to love technology personally, but the paybacks for the economy are far, far down the road." Crippling IT budgets. "The technology commitment is now so enormous that it's setting us up for a major earnings disappointment for the entire corporate sector," Roach says. "It used to be that the bulk of the service economy was variable cost producers. Due to waste mechanisms, these companies had a lot of flexibility to protect their margins in tough economic times. In the Information Age, this variable-cost service sector has been transformed into a collection of fixed-cost producers, [who are] lacking in flexibility and vulnerable to a downturn." Eric K. Clemons Top executives often call on Clemons, professor of operations and information management for The Wharton School of Business in Philadelphia, to help them chart the future. But the crystal ball isn't the answer, says Clemons. "If you can't tolerate ambiguity, you're going to get caught flat-footed five years from now." He forecasts that flatfoots will stumble over the following: Wrong CIO skill set. "The guys who run systems groups tend to have the wrong skill sets for today's changing business world," he says. "They're focused more on finance and performance and less on strategic uncertainty. They like concrete answers and certainty." Unfortunately, there's nothing certain about the technological war zone of the Information Age. "Today, many heads of IS in large organisations understand historical risk profiles, managing technology risk and project complexity. But those have very little to do with business strategy," says Clemons. He adds that executives looking to hire a CIO for the new millennium will "look for people who were a disciplinary problem in high school. You've heard of thinking outside the box? We need people who can't even find the box, who don't know why there are rules." Inflexible IT systems. Companies will miss huge profit opportunities because their systems do not interoperate as they should. "Everyone is talking about the interconnected, virtual company, but our information systems do not enable that," says Clemons. The result? "Many companies will be unable to make the move toward flexible, modular, responsive, customer-focused systems," he says, a change that he thinks is vital as companies develop closer ties with their customers.

Laggardly development cycles. "CIOs will have to move much faster than [those at] most companies today are capable of doing," Clemons notes. Most senior IT executives still expect to spend five years gathering requirements, customizing, training and rolling out an enterprise application, he says, and that's four years too long if an organisation is looking for a competitive advantage from the project.

James A. Harding

Harding, CIO of temporary staffing services provider Olsten in New York, says he worries a lot about being blindsided by IT crises. The disasters he fears most: Missing the e-commerce boat. "We have huge, pent-up demand from the marketplace for Web-enabled applications. Right now, our customers have to phone one of our offices to place an order for a temporary employee. They want to place the orders [on the Web] and get the status right from their desk. Another service we provide is extensive reporting on how much money [our customers] save by using temporary staff versus full-time staff. Today, all that information is mailed out, but it should be on the Web. CIOs face the pressure of timely delivery to the marketplace," says Harding. The implied threat: If companies can't meet customers' Web needs, the competition will.

Unreliable Internet bandwidth. "The performance of distributed computing systems is a huge challenge. With Internet applications, you don't control the infrastructure. Even if you beef up your systems, you're reliant on the computers that bring the user to your system. If I do [create this Web application], how will I ensure it will work like my internal stuff?" asks Harding. The short answer is that you can't. Running customer applications over the Web is a little like depending on a pitcher who throws knuckleballs: expect both brilliance and complete disintegration.

Watts Wacker

CEO of US-based think tank FirstMatter, Wacker is also the reigning futurist at SRI International. Wacker says executives spend too much time thinking logically. "Reason-centric thinking must give way to knowledge-centric and media-centric thinking," he says. His top IT problems: The profusion of operating systems. "There are close to 100 OSs with some degree of viability," which represents exponential growth in recent years, he says. Wacker thinks that OS price wars will break out among vendors vying for position, and companies will be paralyzed for fear of picking the wrong vendor.

"It doesn't matter if they drop [OS] prices if you can't figure out the right decision. I don't want to be trapped." The development of a knowledge underclass. "We're moving toward ubiquitous access to PCs and the Internet. But knowing what to do with all this technology will become a point of social demarcation," Wacker says. Ironically, he thinks the knowledge underclass will be partially populated by CEOs and other top executives who still don't know how to send an e-mail message and perform other basic activities. Organisations headed by a member of the knowledge underclass will lead their companies to disaster.

Giving away the information store. Wacker refers to information about a product as meta data. Meta data can be a hidden source of profit, Wacker notes, but many companies will miss this opportunity. For example, he says the Official Airline Guide made more money from its flight data between 1984 and 1994 than the airline carriers combined. "The crisis lies in giving away things that you did not know had value. Recognizing the value is tricky." Anant Agarwal As a professor at MIT's Laboratory for Computer Science (as well as Chairman of InCert Software ), Agarwal believes the speed of what he calls "Internet time" will be at the heart of most IT crises in the near future. His picks: Software quality decay. The Internet has significantly increased consumer demand for software applications through intranets, extranets and transactional Web sites. And those consumers don't want to wait. "People's expectations have increased dramatically," says Agarwal. But as development cycles accelerate to meet user demand, Agarwal predicts that quality will suffer. "If your software applications do not withstand the needs of your customers, your company will not survive." Inadequate security. Even small breaches of a company's system infrastructure-whether caused by viruses or criminal hacks-can have devastating effects. And as the popularity of online shopping explodes, there will be a corresponding rise in the number of security incidents. Under intense pressure to get e-commerce applications out, many companies have given security short shrift. Up until now, most hackers have been bent more on mischief than on crime, says Agarwal. That will change soon, as terrorists and criminals launch their own campaigns against the companies and people who use the Internet.

Willie Sutton's famous quote about robbing banks because "that's where they keep the money" will soon apply equally to the Internet as transaction volumes rise significantly. "Defense organisations around the world see the problem looming," he says. "Consumers haven't seen anything yet-but they will." Capers Jones As chief scientist at Software Productivity Research, Jones says Y2K is not the last system-related date disaster. His dates with disasters include the following: August 21, 1999. The rollover of the GPS (global positioning system). The network of 24 GPS satellites keeps track of dates by recording the number of weeks from midnight on January 5, 1980. By August 21, 1999, the counter will reset to 0000. Companies and government agencies that use the GPS system must test ground units and software applications to ensure the rollover will be handled correctly.

February 29, 2000. The year 2000 is an especially rare type of leap year that occurs once every 400 years. Many applications may assume that 2000 is not a leap year, says Jones, and that assumption needs to be tested. Computers that fail to recognize this could either shut down or double-post calculations.

Either could cause disaster.

Sometime in 2012. Around this time, the number of phone numbers in the United States will exceed the capacity of the number of digits currently assigned, unless another number scheme has been introduced. When the saturation point is reached, massive software updates will be necessary.

January 19, 2038. The Unix operating system stores dates as the number of seconds accrued since January 1, 1970. This method works until Unix time reaches 2,147,483,647 seconds, which will occur on January 19, 2038, at 3:14 a.m. Some applications written in C may then revert to January 1, 1970, as the current date, while others may assume it is December 13, 1901.

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