# PREPARING FOR THE YEAR 2000 IN RUSSIA

 

by Athan Koutsiouroumbas & Trevor Gunn

 

As 1999 draws to a close, Y2Kremediation in the former Soviet Union is an issue of major concern. U.S.companies need to pay close attention to remediation efforts by governmentagencies and private industry in Russia. Although the problem is beingaddressed on many fronts, U.S. companies should be proactive in working withRussian counterparts to prepare systems for the year 2000.

 

Russia and the Millennium Bug

Russian Finance MinisterMikhail Kasyanov estimates  thatthe government will budget $187 million for Y2K remediation, although someestimates of Russia’s potential remediation needs exceed that figure tenfold.The Gartner Report, prepared by well-known IT consulting firm, **The Gartner Group**, forecasts thatRussia will experience severe Y2K disruptions. It predicts that utilities willoperate at 40 percent of capacity for the first two months of 2000;transportation will be disrupted 80 percent of the time and telecommunications50 percent of the time for a three-month period; hospitals will deal withnothing but emergencies for at least two months; financial markets will bedisrupted for 30 trading days; and banks will be disrupted for 20 businessdays. However, there is reason to believe that there have been markedimprovements in Russia since the publication of this report.

 

Most Russian businesses areaware of the Y2K problem and realize that Y2K remediation is a necessity forconducting trade. “Quite a few businesses have become aware of it because therehas been quite a bit of publicity. There is also widespread skepticism, though,and a huge amount of faith that they will be able to pull off some sort ofrepair, if needed, when the time comes,” said William McHenry, professor at theMcDonough School of Business at Georgetown University. “I suspect a lot ofRussian firms have tested their PCs and, finding some that have problems, havebecome a lot more serious.” 

 

U.S.Efforts to Assist Russian Y2K Remediation

TheU.S. Agency for International Development (usaid),in conjunction with the Russian State Telecommunications Department(Goskomtelekom), has established 71 “Y2K Competency Centers” throughout Russiato provide Y2K consultation. Goskomtelekom has also compiled a contact list of164 Russian Y2K remediators. Information on Competency Centers and Russian Y2Kremediators, as well as other official Russian Government Y2K documents, can befound at *www.y2kresourcecenter.ru/Library/Lib_main.htm*.

 

VariousU.S. companies are working in Russia to remediate the Y2K problem. **Relativity Technologies Inc**. (Cary,NC), a software developer, was awarded a multimillion dollar contract withRussian systems integrator **Lanit Holding**to remediate Y2K in Russia. Lanit Technologies also operates one of the Y2KCompetency Centers. The two companies will be working together in both theprivate and public sectors. Their clients include the Russian FederalGovernment, gas monopoly Gazprom, and Aeroflot. 

 

“Largecompanies like Gazprom have secured funding” to address Y2K issues, said VivekWadhwa, CEO of Relativity Inc. “In St. Petersburg, the phone company has testedits service and it will work fine. But, it does not possess the resources tofix the billing system. So, if you’re in Russia wishing somebody a Happy NewYear over the phone, you might end up receiving a multimillion ruble phonebill.” However, small companies face a greater challenge due to a lack offunds. To ensure that business operates as effectively as possible, Wadhwaenvisions that most noncompliant offices will be fully staffed at the time thatthe failure is expected to occur.  

 

The U.S. Department of Commerce offers free software, called“Y2K: Managing the Challenge,” which can be obtained on the Internet at *www.doc.gov/y2k*. The CD-ROM, which isavailable in both Russian and English, includes a program that enables users tocomplete an inventory of assets that may be susceptible to Y2K problems, gaugethe criticality of business processes, develop contingency plans, and conductremediation activities. It also contains a 10-minute discussion video, asoftware program for managing the Y2K process, a self-assessment checklist, acontingency planning template, a user guide, and hotlinks to many helpful Y2Ksites. U.S. companies should recommend this software to their Russian partners.

 

Businesses Must Prepare

The best way for businesses operating in Russia to combatY2K-related failure is, first, to verify their Y2K status. “We have spentconsiderable effort internally in ensuring our own hardware and software havebeen updated to comply with Y2K requirements,” said Peter M. Cohn of **Exxon Ventures, CIS**. A company thenmust work with Russian partners to learn their plans for Y2K remediation. “Wehave also worked with the banking institutions we are associated with in Russiato ensure they have implemented appropriate safeguards to minimize exposure topotential Y2K-related problems. Specifically, we requested our banks to confirmto us in writing that they indeed had met certain minimum standards regardingyear 2000 compliance,” said Cohn. 

 

Be direct with Russian counterparts. “The most effectivething American firms may be able to do is to forestall the situation by findingnew suppliers, telling their Russian suppliers about it, and demandinginformation about Y2K compliance in exchange for not taking their businesselsewhere,” suggested Professor McHenry of Georgetown, whose report on Russia’sY2K readiness can be read at *www.msb.edu/faculty/mchenryw/personal/pubs/cais.htm*.

 

The Senate Special Committee on the Year 2000 TechnologyProblem has held numerous hearings on U.S. business community efforts to ensureY2K remediation among overseas affiliates, suppliers, and partners. Senatetestimony on Y2K can be accessed at *www.senate.gov/~y2k*.

 

*Fora nonexhaustive listing of companies able to assist with Y2K remediation inRussia, visit **BISNIS**Online atwww.bisnis.doc.gov/bisnis/isa/isa.htm#Aisa.*

 

*Athan Koutsiouroumbaswas an intern at **BISNIS**during thesummer of 1999. He is currently studying in Nizhny Novgorod.*

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*Trevor Gunn is **BISNIS**’ Deputy Director. He can becontacted via email at [email protected] or by telephone at (202)482-4656.*

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*Special thanks toRichard Dickerson at the Department of Commerce’s Office of Computers for contributingto this report.*