They think it's all over - but the bug could still bite

So the fat lady's sung her lungs out and it's all over. No serious nuclear disasters, no global meltdown, no riots. Our businesses and ourselves made it into 2000 intact. Did we panic and spend too much, too soon, for too little reason?

Analyst IDC says more than a quarter of the money gone on Year 2000 readiness has been 'overspend'. Worldwide, the group estimates the total cost of the Y2K bug to be $320 billion (£195 billion).

Most large organisations devoted at least 10 per cent of their IT budgets in 1998 and 1999 to Y2K compliance efforts and testing, says IDC. In 1999 alone, UK businesses put $7.9 billion into Y2K.

Based on Project Magellan, IDC's ongoing worldwide research effort involving 10,000 organisations in 17 countries, $70 billion "more than was strictly necessary" has been spent.

John Gantz, IDC's chief research officer and Project Magellan team leader, says the cause of this was companies allocating too much on staff and pre-planning, as well as on actual remediation which he dubs 'hype tax'.

"Year 2000 took on a life of its own through politicians, the media and consultants, all with vested interests in creating a certain newsworthiness," he said last week.

Defending the Y2K overspend
The response from the IT community to the allegation of 'scam' has been clear: the Y2K issue was a reality, the work done a necessity, and the whole concept of overspend misses the point.

One IT programmer in the financial sector neatly sums it up: "When we spend millions vaccinating people against diseases, do we sit back and say it's a waste of money if no-one falls ill? No. We thank our lucky stars that it worked and we controlled the problem."

Robin Guenier, executive director of Taskforce 2000 and one of the industry's most outspoken advocates of Y2K preparation, unsurprisingly agrees. "Preparing for the millennium bug has been one of the biggest IT projects many companies have undertaken. And I have yet to come across any type of IT project that has not seen overspend," he says.

Financial sector forks out for protection
The financial sector was one of the biggest spenders on Y2K compliance. Tim Basford, senior project manager with bank First Direct, doesn't doubt it was worth every penny.

"If we hadn't invested the money we did, it could have irrevocably damaged our business and our customers' confidence. The cost of not doing Y2K far outweighed that," he declares.

Bugwatch: where Y2K did bite
Even so, despite all the paid overtime, lack of city-wide blackouts and charges of wasted money, the new year has not been all plain sailing.

Compared with the rest of the world, our problems in the UK were minor. The Pentagon admitted that it lost contact with a military satellite for three hours; Italian criminals had their release dates changed by a non-compliant IT system; heart monitoring equipment in Swedish hospitals failed; and one man in New York City was charged $91,000 for returning a video a century late!

The bugs are out there?
Experts caution that these are just the tip of the iceberg and that we're not in the clear yet. The more worrying screw-ups are the ones we haven't heard about yet, says Robin Bloor, chief executive of UK analyst Bloor Research.

"There are two types of problem. The more immediate we can fix on fail, such as the Nokia phones that displayed 1990 instead of 2000. This class of bug is easily remedied and it rarely causes any major side effects," he says. "The second problem, though, is less obvious - the ones not attached to magic dates such as 1 January 2000. These are attached to individual records, deep within databases, that will not emerge until a certain process or transaction takes place during the coming business cycles."

Analyst GartnerGroup predicts that fewer than 10 per cent of Y2K runtime errors will occur in the first two weeks of January, with 55 per cent hitting over the course of the year. The results of these glitches could be more troubling, warns Bloor, because vigilance will start to drop.

Cleaning out the IT cupboard
So as the debate rages about whether the world was conned, and as problems continue to be forestalled or dealt with, don't forget that there's another side to the millennium story.

A profound irony overshadows the anxieties over computer chaos following the shift to this new century: it has forced industries and economies into the 21st century a lot quicker than if there'd been no scare in the first place.

US economist Lawrence Kudlow, chief economist with Schroder & Co, a New York investment bank, says the Year 2000 will turn out to be a net plus for the US economy. The additional spend on Y2K-compliant hardware and software boosted economic growth in 1998 and 1999 and resulted in a historic push to modernise, he says.

Many of us probably used Year 2000 to clean out the IT cupboard. A number of UK companies say that upgrading their IT systems in the push to compliance has streamlined operations.

Virgin Atlantic Airways spent £12.5 million and says that its network is now more efficient; British Energy laid out £30 million on Y2K preparation and condensed its spreadsheet software systems from three to one; healthcare giant Bupa spent £21 million upgrading the systems in its hospitals and care homes.

"Of course, we did it primarily to become compliant. But the upgrade has in turn benefited both our business and our customers," says a Bupa spokesperson.

Too early to tell
The smooth transition to 2000 so far has significantly lowered the risk of disruption to global supply chains. But with IDC still predicting that millennium-related downtime will suck a further $21 billion out of the global economy in 2000, and since we are just two weeks into the new year, it's too early to come to any firm conclusions about the industry's remedial action.

And as the hangovers and the party poppers become a distant memory, the real work involved in the millennium bug will become apparent.

"The worst thing that can happen is to let your guard down," says Bloor. "People must realise this is only the beginning."