As Y2K work wanes, companies search for new niches

IMRglobal, the leading company in the Tampa Bay area working on the Y2K problem, will turn its attention to other projects including working with European businesses on euro monetary conversion.

By DAVE GUSSOW Times Technology Editor

© St. Petersburg Times, published May 2, 1999

A bug that costs billions Y2K may lead to why not sue Coaxing computers to comply with 2000 For economy, Y2K bug is contagious Buy a bug Preparedness progress report Their Y2K motto: Be prepared Calm, not calamity, in local forecast for Y2K Firms say they're prepared for Y2K

Few businesses would seem as ephemeral as those that have made their livelihood fixing year 2000 computer problems. By January, their mission should have been accomplished -- at least for, say, another millennium.

But that assumption is being challenged by many of the companies whose profits and reputations have come to depend largely on Y2K fix-it work. They are working to find new niches as their Y2K work shrinks and the calendar rolls to 1/1/00.

IMRglobal is the leading company in the Tampa Bay area working on the millennium bug.

Although Satish K. Sanan founded the company in 1988 to develop software, it is best known for the Y2K work that has accounted for about half the company's revenues since 1997. Its clients include such major corporate players as John Hancock, Michelin, TWA and Dow Corning.

Frank Blainey, head of investor relations, said IMRglobal is still picking up Y2K work from existing clients, even as it works to replace revenue with other services and acquisitions. Its post-Y2K projects include a $7.5-million contract from Schroder Investments Management Limited for software maintenance; a contract with Merisel Inc. to assist with electronic commerce planning; and working with businesses in Europe on euro monetary conversion.

A report from Raymond James & Associates is bullish on the strategy: "Recognizing the temporary nature of year 2000 work, the company is successfully transitioning its year 2000 business into long-term relationships."

IMRglobal's Y2K revenues declined to 39 percent of its $46.7-million fourth-quarter revenue last year, Blainey said, from 49 percent of the $42-million in the previous quarter. Raymond James analysts predict the Y2K revenue will fall to 15 percent by the fourth quarter. Nonetheless, they predict earnings will hit 96 cents a share this year, up from 72 cents last year, and rise to $1.25 next year.

Even as they scurry to develop new lines of work, the companies handling Y2K work don't expect that task to stop Jan. 1.

"On the computer side, the estimates are another two years worth of work," said Steven Friedman, president of T3 Technologies (http://www.T3T.com) in Tampa. "There are billions and billions of lines of code out there. If they do a 99 percent correct job, there's still millions of lines of code that need to be fixed."

Some companies are handling only problems that are critical to their operations, delaying complete fixes until at least next year, Friedman said. T3, which also sells IBM mainframe computers, created a unit to handle Y2K business, which Friedman estimates will be half of T3's revenues this year. The private company does not release revenue figures.

Engineered Systems Inc. in Tampa focuses on small businesses, those with up to 20 computer users. Its solution: Toss the old equipment and start fresh. "We don't have time to make it all work," president Jeff Nelson-Folkersen said.

For those ignoring the problem, "there are people who are not going to make it because of Y2K, that are healthy businesses, and that's a shame," he said.

Nelson-Folkersen works with what he calls eight virtual employees, people who do contract work for him. Costs for clients range from $10,000 to $15,000 on the low end to $50,000 to $70,000, including the new computers and software. He has done only one job that cost more than $100,000.

He also expects business to remain strong beyond Jan. 1, even if it is not Y2K work.

"My client base is stable, and I will have an excellent audience to discuss future work," he said.

Even though Robert Hurt of Data Depot (http://www.datadepo.com) in Clearwater doesn't think Y2K will be that big of a deal, it didn't stop him from developing software for technicians to use to overcome the problem.

"We did it because we want to make money," said Hurt, who estimates he has sold about 20,000 copies of his Y2K Wizard, starting at $54 a copy before volume discounts. He said it makes up 5 percent to 10 percent of his software business and does not expect many sales beyond Jan. 1. His company does not diagnose or fix computers; it just makes the software.

The software checks a computer system's clocks to make sure they will roll over correctly and, if not, indicates what needs to be fixed.

T3's Friedman expects Y2K to keep him busy the rest of this year.

"I'm not permitted a sick day," he said, "nor is anyone else in the shop."