Showdown in Eurotown

Global IT industry set to inherit euro conversion problems

At the start of 2002, the European Union (EU) achieved another unification milestone with its fairly smooth transition to the euro. Having a single currency across most of Europe presents new e-commerce, marketing, and cost-saving opportunities. However, EU companies and firms doing business with the EU still face challenges incorporating the euro into supply chains and back-end IT systems and handling multicurrency issues.

On Jan. 1, 2002, 12 EU nations converted en masse to the euro by introducing new euro bills and coins and putting legacy currencies on the fast track to oblivion. (The EU recently changed the cutoff date for using legacy national currencies from June 2002 to Feb. 28, 2002.) EU member nations Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain are now using the euro, while Denmark, Sweden, and the United Kingdom are not. (Switzerland is not an EU member.)

Despite glitches with bank ATMs and point-of-sale terminals, the conversion went well. However, some industry observers have concerns about how euro conversions will fare in IT systems in companies outside the EU and in small- and midsize enterprises (SME) inside the EU. Several studies have concluded that SMEs and certain industry sectors are lagging behind in euro preparations.

A survey conducted for the European Federation of Accountants by the European Central Bank's Europartnership UK Ltd. consulting group found that while 90 percent of banking and finance companies rated their euro preparedness as high, that number dropped steeply in other industries. Fewer than 30 percent of IT companies rated their euro preparations highly, while about 50 percent of companies in energy, insurance, consumer goods, and manufacturing did so.

In a January 2002 update to the survey, Europartnership CEO John Shuttleworth said companies inside and outside the eurozone can expect IT problems on multiple fronts, including degraded data quality from rushed, last-minute conversion efforts, data converted improperly because of decimals and other mathematical issues, and information lost when data is imported from incompatible data collection devices (such as card readers, meters, vending machines, and other equipment).

Even large, euro-compliant enterprises could have supply-chain problems if their smaller, cross-industry trading partners are not up to speed. A recent AMR Research Inc. alert concluded that close to 40 percent of SME suppliers have not finished converting to the euro, which has been available for electronic transactions since 1999. AMR analyst David Boulanger said that only 8 percent of General Motors Europe (GME)'s dealers and Tier 2 and 3 suppliers trade with euros.

GME plans to help suppliers process euro transactions. However, some supply chains may slow down when large enterprises refuse transactions or temporarily revert to paper-based transactions, according to Boulanger, who advised IT professionals to get familiar "with test scripts because euro compliance aftershocks will be a major issue in 2002."

Euro problems could also pop up when reporting systems access infrequently used legacy data from spreadsheets and other applications that fell through the cracks during conversion projects. According to Deloitte & Touche, companies will also have to retain data about obsolete currencies long past the time when the euro takes over, especially in the financial services sector.

— Claudia Willen

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