The Euro virus - European currency conversion problem - Industry Trend or Event

Software Magazine, Oct, 1997 by Joshua M. Greenbaum

Anyone who thinks the Year 2000 problem is a pain in the back office ain't seen nothing yet. One year before the millennium bug is supposed to bring the world to a gut-wrenching halt, the process of converting to a new European currency begins. And anyone in the U.S. who thinks this doesn't affect their business, or their IT operations, has their head in the sand. The advent of the European Monetary Union, or EMU, and Europe's new currency, the Euro, will have a profound and lasting impact on the finances, logistics and business processes of an enormous number of U.S. companies.

So if you work for a company that does a significant amount of business in Europe and has just finished rewriting a ton of Cobol code for the Year 2000, the last few years were probably a big waste of time. The changes necessary for the Euro will likely mean that you'd better throw out the whole legacy mess and start over. And hurry up -- the deadlines begin January 1, 1999.

The basic criteria for worrying about the Euro is the level of overall business your company docs with Europe. This means goods and services, import and export, subsidiaries included. Most experts say that if your company's total European trade is less than 15%, you're off the hook. But if you're like many companies in industries such as energy, automotive manufacturing, shipping, high-tech, pharmaceuticals, and communications, you're on the hook. The bottom line is that approximately $200 billion of our $7 trillion GNP is sent to Europe, and another $200 billion in goods and services comes from Europe to the U.S. every year. If you're feeding at that trough, you've got a Euro problem.

To be sure, there's a lot of Euro-skeptics on both sides of the Atlantic. But most observers think it's really a question of when, not if. As one European Union official told me recently, "This isn't like Hillary trying to sell health care -- the Euro has to happen."

Let's give the Euro-boosters the benefit of the doubt for the moment and assume they're right. If the European Union sticks to its timetable, businesses and governments will have from January 1, 1999 to January 1, 2002 to convert to the Euro. The common wisdom is that major multinationals -- Germany's Daimler Benz, for instance -- will start converting early, and most state governments will convert late. For everyone else, this initially means selling to companies like Daimler Benz in Euros and paying taxes to the German government in Deutsche marks. If your financial software isn't up to keeping two sets of books and maintaining multiple price list, wages tables, and currencies, you're in trouble.

What's much trickier to understand is how business relationships will change. For example, pricing across Europe for many goods and services is expected to normalize as a result of the Euro. This means that a U.S. company that sets up a European manufacturing plant in Dublin to take advantage of the low cost of goods and wages in Ireland may want to save transportation costs by shifting to a country-by-country set-up once the difference in pricing begins to diminish.

The bottom line is that your company's financial software has to be made to adapt to the new Euro-circumstances, and your company's logistics, manufacturing, and human resources software has to be made to adapt to the new business processes and relationships that the Euro is likely to spawn. And if you're deep into a Cobol legacy system, you're probably in deep trouble: These changes won't be as "simple" as adding a couple of bytes to a few thousand date fields buried in some old code. Your company will have to re-tool its software and its business processes to take advantage of the Euro, and that's a project that could make the Year 2000 look easy.

The best thing to do is start thinking now. Do the math and see if your company qualifies, and look at your software and see if it can make the Euro grade. If you're using a packaged software product from any of the leading vendors, you're safe. Most, from SAP and PeopleSoft to J.D. Edwards, are Euro-aware. All you have to do in that case is start thinking about how you do business in Europe. It won't be easy, but you'll at least have the software that can do the job.

But if you're in legacy mode, watch out. It's the Year 2000 all over again, only harder. And, worst of all, you may have to start a whole year earlier. By the time you read this the first Euro deadline will be 14 months away. Anybody ready?