|By Jeffer, Mangels, Butler & Marmaro LLP, February,
Expect chaos to hit the world's computer systems on January 1, 2000.
The Year 2000 crisis, dubbed "Y2K"
for short, is less than 700 days away. The crisis stems from the fact that
most older computers and software created even a few years ago only use
two digits to record the year in their data. Therefore, they will think
that the year is 1900 when the millennium turns.
First, identify where Y2K could hit you.
Some worry that planes will fall out of the sky and bank vaults won't
open. But in the hospitality industry, our biggest concerns are probably
the reservation and property management systems. Can your reservation system
book a reservation for the year 2000? Will your hotel or auto rental desk
be able to accept a credit card with an expiration date in the year 2000?
We worry about all the little systems that have calendars buried in them,
like safety locks for doors. Did you know that virtually all systems built
before 1996 have the Y2K problem? And how about the automatic elevators,
voice mail, PBX, payment systems, alarms, time management and host of other
systems on property and off site used by your vendors?
Once you find all the places the Y2K bug can bite you, move to fix
the problems. Who pays? Is this a breach of an express or implied warranty?
Is there an enforceable limitation on remedies (e.g. damages limited to
purchase price of software with no consequential damages)? Even if liable,
does the vendor have the financial and production capacity to replace your
"defective" system, and everyone else's? Will it take a "fix" or a "replacement"?
Will the cost be a capital expenditure (depreciable but not deductible)
or can it be a deductible expense? As resources stretch to the breaking
point, can you get fixes at any price? What disclosure must be made to
shareholders, banks and investors about your Y2K exposure? What will the
cost and effect of Y2K be on you, your customers, your balance sheet and
Legal issues abound!
Brace yourself for the contract disputes, lawsuits and bankruptcies.
One of the first Y2K class actions was filed in December 1997, claiming
that a software company breached its warranty to charge a fee to make its
To successfully address the challenges of Y2K most savvy businesses
have been working on the issues for at least a year or two. If you have
not started, there is no time to lose. Assemble your Y2K team now. You
will need experts in the areas of information systems, financial, legal
and tax. The budget process this fall will set in place the last fiscal
year budget (1999) for major capital improvements before Y2K hits. It will
take patience and cooperation of owners and operators to squash the Y2K