Y2k Italian Government Committee

1
Y2k Italian Government Committee

• The Y2k Problem
• Assessment of country readiness and of market
  consequences
• The Y2k and the Infrastructure-based Society in
  Italy
• (from a Presentation of Prof. Augusto Leggio at
  the FOREX Conferrence
• July 3rd, Milan)

2
The Framework Fundamental Trends

• Political - Decentralization and Autonomy in
  Decision Making
• Economic - Globalization, Single European
  Currency
• Technological Electronic Commerce, Electronic
  Money, Convergence of Information Technology,
  Telecommunications and Media Y2K
• Social Decrease of the Welfare state,
  Redefinition of Labor Markets on the Global Scale
• Financial Liberalization of Capital Flow
• Industrial - Public Services Privatization

3
Y2k - Economy-wide Impacts (OECD 1998)

• Short-term inflationary pressures in countries
  close to their peak in the economic cycle due to
  demand for new investment, supply-side
  disruptions, and significant wage-increases
• Negative reactions from financial markets as the
  level of Y2k-related risk of firms and countries
  becomes more apparent
• Possible declines in productivity growth
• Transitory drop in output due to a significant
  number of failures in critical information
  systems throughout the economy

4
European Union Y2k Resolutions Commission
(February 25th, 1999) Council (April 14th,
1999) Parliament (June 1st, 1999)

• Complete remediation process
• Accelerate preparations in public administrations
• Develop contingency plans to ensure the business
  continuity of vital public sectors operations,
  and ensure that similar plans are established for
  infrastructures (energy, water,
  telecommunications, transportation and finance)
• Encourage cooperation in the areas of information
  provision to and protection of consumers, within
  and between private and public sectors
• Disclose information about Y2k readiness of
  products, services and organizations
• Manage public confidence
• Avoid litigation

5
Business Risks(Gartner Group November 1998)

• Products (Made compliant tested, modified
  warranties?)
• Investors (Will investors be impacted by
  failures, delays perceptions?)
• Customers Partners (Will largest customer base
  partners have business interruption problems?)
• Supply Chain (Will all mission-critical products
  services be compliant in time?)
• Internal Solutions ( All found, fixed, defects
  removed?)
• Vendor Solutions (Defects removed, will be
  delivered as promised?)
• PC LAN (All found assessed, any
  mission-critical, training done?)
• Embedded Systems (Non compliant all found
  replaced?)
• Public (Negative disclosure effects or negative
  perceptions fixed?)

6
Business Risks

• Direct Correlation between Business Risk and
• level of ICT investments
• internal and external integration of processes
• Inverse correlation between Business Risk and
• strategic vision
• ability to progamming, to control, to manage
  Technology
• availability of Human and Financial Resources

7
Y2k Time- based Risk

Average
Time
to Level
IV
is
30
months
Level

Small Companies
Level
0
No
started activity


Small Companies
Preliminary activity, Awareness

Level
1

Many Developing Countries

Many Developing Countries

Level
2
Problem Determination, Inventory, Process
Analysis, Inter/extra dependencies

Middle

East
(
except

Israel
)

Middle

East
(
except

Israel
)

IV


60
Level
3
Plan
Complete, Business Priority, Human and
Financial Resources Committed

Healthcare

Healthcare
Level
4
Operational Sustainability



Oil
/
Natural
Gas

Oil
/
Natural
Gas
Level
5
Fully
Y2k
Compliant
IV


50


Education

Education

Some
Mid Companies

Some
Mid Companies
IV


40

Chemical

Chemical


Transportation

Transportation
III
25


Largest Companies

Largest Companies
III
20

Insurance

Insurance

Investment Services

Investment Services
II

15

Banking

Banking
I
3
Russia, China, India,
,
Thailand, Philippines, Middle East,
Argentina, Venezuela, Food Processing,
Government Services, Agricolture
0
0
1.0 0.9 0.8

0.7 0.6

0.5

0.4

0.3
Complete
Probability of a Mission-Critical System Failure
a
-
(
Gartner Group
-
November
1998)
8
Predictions
(
Gartner Group
-
November
1998)
9
The Infrastructure-based Society Energy

• Trends
• Strong Growth in Consumption
• Privatization, Fragmentation of the Productive
  Process
• Entry into the Telecommunications Market
• Critical Issues
• Huge Differences in per capita Consumption
  between Countries
• Nuclear Energy Pollution
• Social and Political Implications
• Risks of network instability

10
Y2k Impact on Energy Infrastructure

• Impacted sectors
• Production (in EU nuclear 34, thermal 43,
  hydro 23)
• Transmission and Distribution
• Power marketing and Trading
• Plants and Generation Dispatch
• Metering
• Customer Service
• Billing
• Y2k in Italy
• ENEL inventory, impact analysis, remediation,
  encapsulation, mission critical systems ready,
  control of supply chain, contingency plan
  (november 1999)
• Local distributors of electricity and gas (
  1.000) Recommendation of Energy and Gas
  Authority (july 1999)
• ENI assessment, update, test, contingency
  (august 1999)
• SNAM ready, contingency plan (june 1999)

11
The infrastructure-based Society Water

• Trends
• Privatization
• Increase of utilization by families and
  industries
• Critical Issues
• Not sufficient production
• Increase of cost
• Risks of pollution

12
Y2k Impact on Water Infrastructure

• Water Supply
• Source of supply
• Transmission
• Treatment
• Distribution
• Maintenance
• Operations
• Waste water
• Collection
• Treatment
• Holding capacity
• Maintenance
• Operations
• Y2k Impact in Italy
• Almost the same as energy gas (same local
  companies)

13
The Infrastructure-based Society
Telecommunications

• Trends
• Liberalization, Privatization, Mobile
• Concentration, Mergers and Acquisitions
• Convergence of IT, TV, Telecom (Telephony and
  Data)
• Massive Development of Internet
• Very high Demand
• Critical Issues
• Tariffs and Billing in Interconnected Neworks
• Complexity
• Domino effect of software errors in the network

14
Y2k Impact on Telecommunications Infrastructure

• Impacted sectors
• Trunk/junction, local loop, customers data-bases
• Network control
• Local loop installation maintenance (line
  testing repair)
• Switching
• Transmission
• Basic telephony and data transmission
• Value added services
• Front-office support
• Billing
• Y2k in Italy
• Telecom Italia ready contingency plan
  (september 1999)
• Mobile companies ready contingency plans
  (june 1999)

15
The Infrastructure-based Society Postal
Authorities

• Trends
• Deregulation
• Slow Liberalization and Privatization
• ICT alternatives in the most profitable business
  area
• Better Offer by the private sector
• Mergers and Acquisitions between public and
  private organizations
• Critical Issues
• Market Erosion
• More Demanding Customers
• Universal service
• Labor tensions
• Social implications

16
Y2k Impact on Postal Authorities Infrastructure

• Impacted sectors
• Automated switching of letters parcels
• Counters
• Telex
• Telegraph
• Hybrid mail (Postel)
• Financial Services (money orders savings)
• Y2k in Italy
• Poste Italiane ready contingency plan (october
  1999)
• Postel (national hybrid mail) ready
  contingency plan (june 1999)

17
The Infrastructure-based Society Transportation

• Trends
• Liberalization (complex)
• High Demand
• Intermodal Transportation and intensive Use of
  Information Technology
• Critical Issues
• Incompatible Infrastructures
• Congestion, Environmental and acoustical
  Pollution
• High Investments
• Red Balance Sheets at local level

18
Y2k Impact on Transportation Infrastructure

• Impacted sectors
• air (airlines, ATC service, providers, airports,
  regulators)
• maritime (seaports, ships)
• railways
• awareness varies widely
• programs vary widely
• Y2k in Italy
• air (Alitalia, ENAC, ENAV, main airports)
  ready, contingency plan
• maritime supply chain of seaports almost ready
• railways (FS) process analysis, contingency
  plan
• highways and roads process analysis,
  contingency plan
• in general two - layer industry

19
The Infrastructure-based Society Banks and
Finance

• Events
• Creation of the Economic and Monetary Union
• New and more open Banking Regulatory Environment
• High Technological Innovation
• Trends
• Privatization, Concentration, Mergers and
  Acquisitions
• Strong Growth of Private Pension Plans
• Business Process Reenginering, New Product and
  Service Offerings
• Critical Issues
• High cost of labor
• Instability due to globalization
• High level of interdependencies

20
Y2k Impact on Banks and Finance Infrastructure

• Impacted sectors
• Banks (System functions, Counters, Payments
  system)
• Insurance companies (difficulty to provide
  continued insurance cover)
• Markets (instability)
• Domino effect
• Y2k in Italy
• Integration test among main operators (made in
  june 1999)
• High level of Readiness of the highest
  percentage of operators
• Strong effort of regulators (Banca dItalia,
  ABI, CONSOB, ISVAP)

21
Conclusions

• Italian Y2k Committee Guidelines
  Recommendations
• Be aware at the maximum administration/company
  level
• Control the Supply chain
• Control the Cash flow
• Provide the human and financial resources
• Make internal and external Integration tests
• Set up a Contingency plan
• Set up a stable Group for Contingency plan
• Cooperate with Unions and Consumer Associations
• Give support to customers
• Avoid litigation
• Transform Y2k from a cost a risk to a chance
  for development