IDC Research Predicts Huge Opportunities For Service Providers To Correct Year 2000 Problems

FRAMINGHAM, Mass., Dec. 17, 1996 — A new report from International Data Corporation (IDC) reveals a huge opportunity exists right now as companies need help in figuring out what they should do to solve the Year 2000 problem, what the best way is to do it, and what resources are required from service providers to help. This study, based on a survey conducted with more than 500 CEOs, CFOs, and CIOs, indicates the opportunity for service providers will only get larger in the next two years as the urgency of the problem gets worse, resources get scarcer, and service providers can command more premium pricing.

"The majority of spending is yet to come," said Susan Tan, a senior analyst in IDC's Systems Integration Services research program. "Internal resources in many companies will be stretched and outside services will be needed. IDC forecasts 1997 and 1998 to be the biggest years for outside services to help meet the demand for organizations needing to fix their Year 2000 problem." Spending by U.S. companies to fix the Year 2000 problem is expected to reach $115 billion.

According to IDC research, the communications industry is behind the curve in solving the Year 2000 problem, therefore representing the largest opportunity to service providers currently entering this market. The insurance and banking industries also consider the Year 2000 problem extremely critical to their businesses, making these industries other excellent sources for growth opportunities to service providers.

Contrary to what is reported in the press, the CEOs, CFOs, and CIOs surveyed for this research study are aware of the Year 2000 problem, as well as its impact on the business and the legal liabilities involved if compliance is not translated into action. Of the companies surveyed, 53.3 percent expect to use outside services for achieving Year 2000 compliance. This is higher than the average of 39.6 percent for use of outside services for systems integration and the 43.9 percent for custom software development as a whole. This means an additional 10 percent or more of companies will be demanding outside services as a result of the Year 2000 problem. This increase in demand in itself will be an opportunity for service providers offering this service.

This IDC report presents various recommendations for service providers wanting to take advantage of the potential opportunities related to the Year 2000 compliance problems. Among the recommendations outlined in detail are developing relationships with potential accounts early, educating senior managers within organizations needing to fix Year 2000 problems, and educating their clients on the complexity of the operation to secure work upfront.

This survey-based report examines the status of the Year 2000 problem among U.S. companies with 1995 revenues of $100 million or more in the following six industries: investment houses, banking, insurance, manufacturing, utilities, and communications. Particular attention is paid to the level of awareness among CEOs, CFOs, and CIOs on the business impact of the Year 2000 problem. Obstacles faced in achieving compliance are also examined by industry and company size. Financial issues such as the size of the problem, spending patterns over time, where the budget for compliance will come from, and the impact on other technology initiatives, are also studied. The second half of the report covers the use of outside services and cross-examines the extent of use by industry and company size with the type of services used. Finally, the type of outside service provider preferred and their selection criteria is also covered along with a look at the popularity of offsite work, in particular offshore renovation.

This report, Year 2000: Status of the Problem and Opportunities for Service Providers, (IDC# 12620) is available for purchase by contacting Cheryl Toffel at (800) 343-4952. For additional information about IDC's Systems Integration Services research program, please contact Elizabeth Freedman at (508) 935-4764.

About IDC:

Headquartered in Framingham, Massachusetts, International Data Corporation provides IT market research and consulting to more than 3,900 high-technology customers around the world. With a global network of 300 analysts in more than 40 countries, IDC is the industry's most comprehensive resource on worldwide IT markets, products, vendors, and geographies.

IDC/LINK, an IDC subsidiary, researches and analyzes the home computing market, leading-edge technologies in telecommunications and new media, and the convergence of computing and consumer electronics.

IDC's World Wide Web site (http://www.idcresearch.com) contains additional company information and recent news releases, and offers full-text searching of recent research.

IDC is owned by International Data Group (IDG), the world's leading IT media and research company.

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