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Information Technology Assn. of America testimony to Congress, May 7, 1998

Statement of Harris N. Miller--President
Information Technology Association of America

Submitted to the Committee on Ways and Means Subcommittee on Oversight
U.S. House of Representatives

A Public Hearing on the Year 2000 Computer Problem
May 7, 1998

Madame Chairwoman and distinguished members of the
Subcommittee, on behalf of the 11,000 direct and affiliate
members of the Information Technology Association of America
(ITAA), I am pleased to appear before you and offer insights into
the single most important information technology challenge facing
government and industry today-the worldwide Year 2000 software

This is not just an information technology challenge. This is a
fundamental challenge to the ability of organizations throughout
the world to continue to function. And it is a challenge which could
have tremendous negative consequences for economies and
governments throughout the world if it is not met.

ITAA represents information technology companies working at the
forefront of computer software, Internet and electronic commerce,
telecommunications, systems integration, outsourcing, consulting
and more. Our members have been on the front lines of the
struggle with the Year 2000 software challenge, helping their
customers leap this hurdle with new products and services or Y2K
specific fixes to existing systems. As an Association, ITAA has
led industry's efforts in dealing with this difficult issue. Because I
also serve as President of the World Information Technology and
Services Alliance (WITSA), ITAA has reached out to many
international organizations such as the Organization for Economic
Cooperation and Development (OECD), the United Nations, the
World Bank, the Bank for International Settlements and the G-8 to
urge them to take Y2K seriously. The WITSA White Paper was the
first international paper on the importance of Year 2000. ITAA is
proud to be the organization that the world looks to for Y2K
information, news, insight and public policy leadership.

You have asked ITAA to provide an assessment of the nation's
Year 2000 preparedness. Let me go on record publicly with what
those in the know are thinking and saying privately. We are very
worried. When ITAA first got involved with the Year 2000 issue
back in 1995, we talked in terms of the marketplace as a "deer in
the headlights." In those halcyon days, we sought a balanced
approach to this situation which would educate organizations to
the urgency for fast movement while not allowing the magnitude of
the problem to cause sensory shutdown.

How far have we come in the last three years? I must say, not very.
On the first part of the challenge-awareness-we have done
reasonably well. Virtually no one can say that he or she is not
aware of the Y2K issue. But on the next stages-commitment to
and actually solving the problem-we are very frustrated. The focus
of conversation among those best versed in this issue is about
how we are going to clean up after what appears now to be an
inevitable train wreck. As a society, we are on the point of
conceding failure. Those unwilling or unable to move off the track
are numerous. Federal agencies. State governments. Local and
municipal governments. School districts. Private sector industries.
Small and mid-sized companies. Critical infrastructure players.
And most foreign nations. It's crazy. It's frustrating. It cannot be
happening. But it is. Now the "smart" questions have shifted to
concentrate on contingency planning, crisis management, and
liability. Lawyers are circling, and that is not a good sign.

Failure is not part of the American fiber. Yet after this transition to
the new century, society may have to admit that here was a
situation it saw coming. Everyone understood its hard deadline.
Everyone appreciated its worldwide scope. Everyone realized its
massive potential to cause harm. And everyone let it happen.

This morning I would like to talk what Congress can do help the
country and the world off the path of fast approaching disaster.

My five step program to Y2K wellness includes:

1.Step up to the challenge
2.Spend the money required
3.Educate the public to the problem
4.Provide incentives to a solution, while highlighting
contingency planning
5.Exercise discipline in setting competing priorities

Stepping up to the challenge means accepting the mantle of
leadership on this issue. The Senate recently established a
special Committee to deal with the Year 2000 situation, and I
encourage the House to do the same. The Senate Committee will
provide oversight and legislative recommendations to help the
government and private sector react quicker and more effectively
to the economic difficulties arising from the Year 2000 system
failures. The Committee will focus special emphasis on such areas
as utilities, telecommunications, transportation, financial
services, general government services, general business services
and litigation, cutting across traditional jurisdictional lines. Under
the leadership of Senator Robert Bennett, the Senate has begun
to take a big step in the right direction.

The government Y2K report cards issued by Congressman
Stephen Horn and the hearings held on this issue by the House
Subcommittee on Government Management, Information and
Technology; the House Subcommittee on Technology; and other
Subcommittees have also helped bring important scrutiny to bear
on the performance of government agencies and, to a lesser
extent, regulated industry. The House is to be commended for its
leadership in this area.

What has been missing throughout this process, stretching back
to the first House hearing in 1996, is a sense of real ownership.
The U.S. Congress is the nation's board of directors. You provide
the highest level oversight of federal agencies, critical
infrastructure industries and international relations. You are
ultimately responsible to your shareholders-the American voter.

Year 2000 is an issue which will affect shareholder values. Those
values are measured in the health of the national economy,
consumer confidence, global trade, political stability and similar
constructs. The proliferation of information systems into virtually
every facet of modern life, from the embedded chips in
complicated weapons systems to the wafer thin chip on a smart
card, puts Y2K on a collide path with business as usual.

With the notable exceptions that I mentioned just now, Congress
has been slow to grapple with this issue of the century date
change. The Year 2000 is a potentially devastating issue with
breathtaking scope and an immovable deadline. The Year 2000
challenge is a call to think beyond the routine in response to an
unprecedented situation. Today, leadership demands that
Congress move past exploratory hearings to concrete actions;
tomorrow, your accountability will be to the American people.

How do you exercise this leadership? First, use the power of the
Legislative Branch to get the President Clinton and Vice
President Gore. John Koskinen, the recently appointed Y2K czar,
is an outstanding public servant doing exceptional work in
attempting to marshal a cohesive federal response. But his
appointment came very late. We have drifted well beyond the
point where anyone but the President and Vice President of the
United States can put the country on the necessary emergency
response footing. The office of the Y2K Czar is staffed by four
people and does not have the needed resources that a problem
of this magnitude requires.

Other nations have come to this realization. In the United
Kingdom, despite some stumbles along the way, Prime Minister
Tony Blair has put the force of his government behind the Y2K
issue, placing a Cabinet Minister in charge of a ministerial-level
Y2K oversight group and forming a government program, Action
2000, to coordinate a government/industry response. Prime
Minister Blair has proposed a set of initiatives valued at almost
100 million pounds, with 30 million pounds slated for "bug
busting" training courses and 17 million pounds for programs
affecting small and mid-sized businesses and related work.

In Canada, Task Force Year 2000, a blue ribbon commission of
key industry CEOs, is working with the government to make
recommendations as an impetus to action. We would do well as a
nation to use the commission's series of 18 recommendations to
bootstrap a national action agenda for the United States.

In Australia, a national television advertising campaign is about to
bring a Year 2000 focus into the homes of average citizens and
on to the radar screens of thousands of small and mid-sized

By any measure, the U.S. is the world leader in information
technology. Just last month, the U.S. Department of Commerce
released a report showing that information technology accounts
for 8.2 percent of GDP, up from 6 percent just a few years ago,
and contributes more than twenty five percent of GDP growth.
With so much at stake, should we really be doing less than the
U.K., Canada or Australia? Of course not. That is why we believe
President Clinton should make a major national address on the
issue immediately. That is why we believe Vice President Gore
should be using his status as the "high tech" Vice President to
press the urgency of the Year 2000 message to industry groups
and his standing as the "reinventing government" Vice President
to ramp up the response within federal agencies.

Step two. Congressional leadership on this issue will require
spending the money required to make the necessary repairs
inside government and to understand the status of external trading
parties. John Koskinen referred to the current Y2K funding
situation in Washington as "a grand kabuki" dance, with federal
agencies refusing to step forward with requests for additional
funding and Congress unwilling to supply the funds until such
requests are made. President Clinton, speaking through the
Office of Management and Budget, has told his agency heads to
reprogram the necessary dollars.

This dance has been going on for at least two years now.
Unfortunately, federal agencies have too often placed the need to
protect programs and jobs in front of the more urgent requirement
to solve their Year 2000 problems. Nothing will change.unless
you change it. I urge you to stop the kabuki dance by forcing
agencies to disclose the level of reprogramming now underway. I
respectfully suggest that if an agency is not appropriated new Y2K
funds and is not reprogramming existing funds, insufficient date
repair work of consequence is being performed. I am pleased that
the U.S. government will run a budget surplus this year for the first
time in decades, but if one of the prices for doing so is not fixing
the Y2K problem, that is a very bad trade-off. The negative
economic consequences of not fixing Y2K could, some
economists are predicting, lead to a substantial slowdown in our
country's economic growth. This, in turn, would lead to reduced tax
revenues and head our federal budget back towards deficits.

Congress can be part of the solution by demonstrating the risk
management strategies now urged for the marketplace as a
whole. Part of risk management involves having the vision to plan
for contingencies. Given where the federal government stands
today, I feel very confident in predicting that some mission critical
government systems will fail-perhaps as early as January 1, 1999.
A recent ITAA survey showed that 44% of organizations have
already experienced a Y2K failure.

ITAA is not alone in stating this likelihood of failure; the General
Accounting Office (GAO) also shares this assessment If and when
these failures happen, reprogramming dollars or protecting
federal workers-the federal kabuki dance--may at last be
considered beside the point. I assume that at that unhappy point
in time, government agency heads will be ready to contract with
private sector firms specializing in Y2K remediation and testing to
expedite the necessary repairs. We suggest that a special $500
million contingency fund be established to cover the period of
October 1998 through February 1999. Congress will be adjourned
during most of this period-a period during which emergency
access to additional funds may prove critical.

I also urge this Subcommittee--and every other Subcommittee
with oversight authority--to require agencies to identify and
respond to their inter-government and extra-government
interfaces. Such electronic handshakes must be made with state
governments, municipalities, foreign nations, and private sector
firms. The smooth functioning of government depends on the
ability of these highly integrated systems to operate without date
errors. While Mr. Koskinen and the Federal CIO Council are
making attempts to build the list of external interfaces with state
governments, I suggest that Congress make this cross-cutting
project its own, spending whatever funds are necessary to acquire
the private sector expertise necessary to perform quickly and
effectively the work.

Step three. Public education is critical. I mentioned the public
service advertising campaign launched in Australia. I urge
Congress to make Year 2000 a the top priority issue of the U.S.
government for at least the next two years. No services are more
important to Americans than Social Security and Medicare; no
system may be more important to the efficient operation of
government than tax collection. Your conviction to hold this hearing
today is a stake in the ground. Now build on this good start by
continuing to hold Y2K hearings. Also, as you get public and
private sector CEOs, CFOs, and CIOs in these witness seats,
whether or not the hearing is specifically related to Year 2000, ask
about Y2K status. The answers you receive may be very
revealing. And do not accept pat responses or easy assurances.
Congress is the steward of the public trust. I urge Congress to
keep asking questions and to drill down for substantive answers.
Doing so will help the public understand this issue, and where they
should concentrate their concerns moving forward.

Individual Congressmen and Senators can also use other tools as
their disposal such as newsletters and town meetings to increase
the awareness among the general public.

Step four. Public education will inevitably lead to public demand
for rational solutions. We have not begun to scratch the surface on
creative public policy responses to this issue. Countries around
the globe are considering emergency tax incentives to help the
most-at-risk populations-small and mid-sized enterprises-deal
with this issue. We have begun to hear about low interest
government loans to stave off bankruptcies. R&D tax credits and
credit guarantees. Expedited procurement processes.
Productivity corps to assist small firms and proliferate best
practices. Enhanced training opportunities and associated tax
credits. And much more. We are limited in creativity only by our
willingness to engage this issue directly.

And that brings me to my final point this morning. Step five.
Discipline. Having the will to attend to the Year 2000 problem and
to solve it. Within our local communities. Across states. Around
the nation and throughout the world. During World War II, we did
not become distracted by other concerns and divert precious
resources to other efforts. As a country, we found the collective will
to win. We discovered the discipline. Today, America's efforts to
cope with the Year 2000 are diluted and disconnected. Indeed,
we often talk about the tepid response to the Y2K tidal wave in
terms of "the Big Disconnect."

This Congress can help the country find its will to win by
exercising discipline. As Congress goes to pass new laws that will
require computer system changes, ask yourselves whether the risk is
worth the reward. In Europe, we have the example of a rush to
judgment on the Euro implementation-a competition which at
best dramatically decreases the odds for successful Year 2000
conversion in some of the world's largest economies. Here, we
have a similar concern with the Internal Revenue Service (IRS).
With systems already committed to the limit, Congress must show
flexibility in asking the IRS to maintain existing systems, introduce
changes to the tax laws, modernize and conduct the Year 2000
conversion. ITAA urges Congress to follow Commissioner
Charles Rossotti's request to soften some of its timelines in the
current legislation in order to ensure that our tax collection system
is able to operate effectively in the Year 2000.

Congress must reconsider any legislation that requires major
changes in the federal IT systems. Canada is attempting to
implement a "change freeze" in its government IT systems so all
energy can be focused on Y2K. It is too late to expect government
agencies to fix their systems while also adapting them for new
programs. Today, by ignoring this simple reality, Congress is
perpetuating "the Big Disconnect." The pervasive apathy. The
business as usual mentality. Today, you can help end it. With

In conclusion, I urge this Subcommittee to do everything in its
power to make Y2K preparedness a national concern. There are
602 days left. Although the train is barreling down the track, it is
still not too late. Congress has a critical role to play in meeting the
challenge, and the five step program I have outlined here today
can help. Congress does not want to be placed in the position of
wishing it had taken this issue more seriously while there was
time left to address the challenges. The American public-and the
world at large--are counting on you. ITAA is ready to assist you in
every way possible.

Thank you very much.