UK: Six-figure sums for two-digit skills.

UK: Six-figure sums for two-digit skills. - The millennium bug has a knock-on effect for firms anxious to keep their IT staff.

by David Bowen.
Last Updated: 31 Aug 2010

The millennium bug has a knock-on effect for firms anxious to keep their IT staff.

Paul Cantwell, a partner in the financial markets division of Andersen Consulting, was offered a valuable commodity recently - for a price. The document was a list of the names and addresses of a group of middle-aged men with very special knowledge.

The men were the computer programmers who many years ago had built and then maintained the IT system of a large bank. They knew it intimately, and they also knew the languages it originally used: the likes of Cobol and Assembler. Five years ago these languages were deemed about as useful as medieval Venetian, and many people who understood them were made redundant.

So why are these individuals now so prized that their very names and addresses have value? For the same reason that if they trade in their garden forks for keyboards, they may find they can earn £500 a day. Thanks to the millennium bug, Venetian has made a comeback.

The millennium bug, the year 2000 problem, Y2K to American chipheads - call it what you will - has generated massive publicity and even greater bafflement. The difficulty lies in the fact that many computer programs use two-digit dates and cannot cope with the concept of the year 2000.

When they come across a date ending in 00, they will assume it is 1900, with potentially disastrous results. Either the computer will go haywire or it will simply come to a stop. Even more worryingly, the problem is not just confined to the older computers, as is popularly perceived. According to Robin Guenier, executive director of Taskforce 2000, a non-profit organisation initiated by the last government to raise awareness of the issue, nearly 50% of computers currently for sale are still affected by the bug.

'The system I was approached about was built many years ago, and has since been enlarged and amended, mixing all sorts of programs,' explains Cantwell. Furthermore, the bank has lost the source code - which means that finding the trouble spots will be like locating a town's drains without any plans. Hence the interest in the original engineers: if anyone stands a chance of knowing where the problems lie, they surely will.

The sheer volume of work needed to check and modify programs is mindboggling: it will be impossible to go through every program line by line. But while some automation will be possible, the implications for HR are vast. In the past couple of years, large organisations have been running the numbers to see just how big the repair job is - and have been horrified. The bugs must be spotted and corrected, then the system has to be tested - all without bringing chaos to the business.

Cantwell estimates that a large European bank might have 40,000 programs to check, a US one 100,000. A government report puts the cost of rectification at a vast £31 billion.

The panic is almost upon us: because most programs have elements that look a year ahead, companies must have their systems debugged by the end of 1998. 'Not everybody will be ready in time,' says Pat Cooke, managing director of recruitment company Brunel IT Services. 'Large organisations will need hundreds of man-years of work. There are already shortages of people, mainly in the big mainframe marketplace.' Jackie Olivier, director of Transmillennium Services at computer services giant Cap Gemini, agrees: 'There is going to be an imbalance of supply and demand.' Companies which have to look far ahead spotted the problem early, and should have overcome the danger. Insurance companies, used to dealing with pensions, should be safe (though some are not), retailers with their 'best before' dates are also more or less in control. But many other companies are marching side by side at the double - and they all need the same set of IT skills.

With skills shortages already pinching and pushing up rates of pay to previously unclimbed heights, where will HR managers find the required staff and what can they do to keep those they already have? The IT employment market is complex. Some specialists are on the permanent staff of the end user: Barclays, for example, has 3,000 IT workers in-house. Others work for groups that provide IT skills: the likes of EDS, Andersen Consulting and Cap Gemini. Then there is a great pool of freelance contractors who move around from project to project, and whose rates are highly sensitive to the market.

Even before the year 2000 reared its head, demand for IT staff was outstripping supply, pushing contractors' rates up by 10%-15% a year. There is much variation according to skills: a contractor expert in the popular SAP business software could command £500 a day, while someone who knew only an unfashionable programming language might get a quarter of that. A few years ago Cobol and Assembler were as unfashionable as you could be; now they command rates near the top of the scale.

'The nearer you get to 2000, the faster rates will go up,' says Tony Coombes, director of recruitment group Software Personnel. 'I would be surprised if what is now being charged at £1,200 to £1,500 a week didn't get to £2,000.' In other words, the people who have been quietly cultivating their gardens could find themselves earning six-figure sums, in annual terms. In the US, Cobol consultants can get $100 an hour (about £430 a day), and rates are expected to rise at 50% a year.

In a free market, such increases are obviously dependent on local conditions. Shannon Couch, millennium programme manager at Rover Group, is about to start hiring contractors in the West Midlands. She says rates there are not yet inflated, but adds that she is budgeting for a 30% increase over the next year.

The Americans, as ever ahead of the Europeans, will aggravate the problem.

'I have people asking me to let them know about anyone with Cobol skills,' Cooke says. 'They say they can get them green cards very quickly.'

With predictions that demand for skills will wildly outstrip supply, the possibility is strong that rates will rocket next year. The IT industry is trying to make sure that does not happen. It has been working on a number of escape routes. The first is to re-activate people who have the skills needed. 'We like to get out of retirement people who would want to work two-and-a-half days a week,' Coombes says. 'A lot of them say they have no intention of coming back, but when I ask, "What if you were paid £400-£500 a day?", they say they might do it.' Some companies, he adds, have been sending letters to retired programmers asking if they will return.

A second option is to export the work. Computer programs can be sent anywhere in the world by satellite or down a telephone line. Bangalore, in India, as well as some cities in eastern Europe, are already hawking their skills. 'Their qualifications are good and they only ask 20% of what we pay here,' says Coombes. 'Companies could ship programs down the line to Bangalore, where they could be changed and shipped back.'

For her part, Couch admits she has started vetting offshore companies, especially in Bangalore, but has reservations about using them. 'I don't want our core software being duplicated, so I'm not letting it out of my sight,' she says. 'And how do we test it if it is not on our equipment?' In addition, says Coombes, 'There are issues like the difficulty of verbal communication between the project manager and the people doing the work.' He believes some Indian companies will set up liaison offices in the UK to deal with this problem.

Training is a third option, but time is running short. 'It takes a month to train someone in the concept of a language, but to become a competent programmer takes at least a year,' explains Coombes. And as the skill will rapidly lose its utility, it is not that easy to find recruits. 'There are three ways you can get people to work towards a dead end,' Cantwell says. 'You can bribe them, appeal to their honour or build a career for them.' Andersen Consulting is going for the third option, hiring graduates whose first task will be to learn Assembler or Cobol, but who will then zoom off into the consulting stratosphere.

NatWest meanwhile believes some millennium-related tasks can easily be handled by non-technical managers, and sees retraining as one alternative to handing staff their cards.

Once a company has got its hands on the sought-after skills, it has to hang onto them. Companies are concerned that the loyalty of staff workers may be eroded by large carrots offered by rival firms. 'I know cases where competitors are targeting other companies to get their people,' Olivier says.

One method of tying people in is loyalty bonuses. But while these have been much talked about, it is unclear how widespread they are. 'They are not something I am planning to offer,' says Rover's Couch, although she hopes that IT contractors joining up for the millennium will agree to sign a contract keeping them on board for at least a year. David Scott, corporate communications manager, group planning operations and technology for Barclays, says he 'hasn't heard of loyalty bonuses'. Investment banks in the City, which are reputed to be offering them, say they 'never discuss remuneration'.

One organisation which admits to having launched a bonus scheme is NatWest.

Jerry Whitmarsh, the bank's millennium programme manager, believes a sharp increase in rates next year is a 'distinct possibility', but he hopes the nature of IT staff will mean they resist temptation from outside.

'They don't seem quite as motivated by short-term gain as some people,' he says. Nevertheless, the bank has taken precautions. Something under 100 people are being asked if they will agree to stay for at least five years, at the end of which they will receive an (undisclosed) bonus. 'We have tried hard to identify some resources we particularly don't want to lose. We are short of people who are knowledgeable about our own systems, some of which are 30 years old.' Whitmarsh claims that the scheme was under consideration anyway, but that the need has been sharpened by the requirements for millennium and European Monetary Union (EMU) preparation.

EMU may or may not prove as big an IT headache as the year 2000. Much depends, of course, on whether it happens, and when. If a European single currency is to be created, IT systems - especially in banks - will have to be adapted. 'In the past few months, pretty much all the banks have kicked off their EMU impact assessment,' says Andersen Consulting's Cantwell.

Many of the programs that will need to be adjusted are those being overhauled for the year 2000 but, he says, 'It is considered too dangerous to do both things at once'. Because of the uncertainty about the timing and form of EMU, a number of German banks have taken out options on the skills they may need, paying computer services groups an upfront sum to guarantee the availability of skills. It is unclear, however, what will happen if the skills are simply not available.

And what of the post-2000 future? Will HR managers be able to sit back and relax as demand for IT skills suddenly collapses? Although it did in 1971 after decimalisation, Coombes does not believe history will repeat itself because the people who have been working on the year 2000 projects will have plenty of catching up to do. 'Everything is going on hold until the millennium issue is sorted,' he says. 'Then the past few years' backlog will have to be dealt with.'.

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