STORY:
Small firms address Y2K bug

America's small-business community has made substantial progress toward inoculating itself from "the millennium bug," according to an updated study released today by the NFIB Education Foundation. But, the report notes, small employers still have a long way to go: More than half of all small firms using computers or other devices with time/date microchips have not yet taken any steps to make sure their systems are immune to "Y2K" problems.

The study estimates that, from May to November of last year, more than 900,000 small firms acted to cut their Y2K risks. According to foundation estimates, 1.9 million small firms -- some 40 percent of all small employers with equipment that should be checked for Y2K vulnerability -- have now addressed the issue. As of late October, another 19 percent planned to follow suit, though they had not yet begun. Estimates in the study are based on a Gallup Organization survey of 500 small-business owners.

"The good news is that most small-business employers have either already checked out their Y2K status or made plans to do so," said William J. Dennis, senior research fellow at the foundation and author of the study. The bad news: "About a third of those who know about the problem and have time/date- sensitive software or equipment -- roughly 1.5 million small employers -- still have no plans to assess their risks of falling prey to Y2K. Another five percent aren't even aware of the Y2K problem, even though they use equipment that may be vulnerable to it."

Most small employers with no plans to look into their Y2K vulnerability feel the problem isn't serious enough to worry about, Dennis noted. The study indicates many of these business owners may be right -- at least when it comes to their own operations.

Nine of every 10 small firms (89 percent) reported that their most critical software was less than two years old. Nearly all (95 percent) reported no critical software more than five years old. "The rather impressive rate at which small firms have updated their critical software in the normal course of business may yield an unintended benefit," Dennis noted. "Relatively few small firms should suffer from software problems written in ignorance of the Y2K glitch."

However, though their own software may be millennium bug-free, many small firms still risk being "bitten" by Y2K problems afflicting their suppliers, customers or financial institutions. Little more than a third (35 percent) of small employers have checked the Y2K preparedness of their suppliers or banks.

"Many small-business owners feel they are in no position to ask for Y2K verification, particularly from customers," Dennis said. "Acutely aware that they don't have 'market power,' many are loath to introduce a new and inherently challenging element into established business relationships. One can only hope they won't regret their decision on January 1, 2000."

The latest look at small-business preparedness for Y2K updates an April 1998 NFIB Education Foundation study funded by Wells Fargo Bank. The earlier study found that less than a quarter (23 percent) of small employers aware of the Y2K situation had done anything about it, but nearly a third (31 percent) planned to do something.

"Doubtless a substantial portion of the 900,000 employers who acted on the problem during the six months following our initial survey came from that large pool of planners," said Mike James, executive vice president of Wells Fargo's Business Banking Group. "Unfortunately, the pipeline leading from plans to actions seems to be drying up."

The number of firms now planning to act is nearly 300,000 less than the 1.2 million poised to act last April, the new study found.

DATE: 1/5/99

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