ERP vendors race clock on euro conversion

The deutsche mark's days are numbered. So are those of the French franc, the Irish pound, and nine other national currencies, which are scheduled to disappear on Jan. 1, when the new European money, the euro, goes into cash circulation. It's a mammoth operation: some 14.5 billion brand new euro banknotes and 50 billion coins have to be made available in time, according to the European Central Bank.

Companies in the euro zone -- which includes Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain -- must complete the laborious process of converting all their financial processes to euros by the end of the year.

Some have already been doing business for months in euros, which have been legal tender in electronic form since 1999. Historical data have to be converted over as well, and even companies outside the euro zone that do a lot of business inside it -- in the U.K., for example -- may have to update their processes to handle the new currency.

All of that has ERP (enterprise resource planning) software makers scrambling to get their customers ready for the big switch over. Programmers have been readying updates and "tool kits" for the currency conversion for several years -- the single currency has been in the works since the European program for Economic and Monetary Union (EMU) was laid out in 1992.

"We've been communicating with customers for four years now about the need to come across," said Brian Gregory, Oracle Corp.'s e-business marketing director for Europe, the Middle East, and Africa. "From the release of (software version) R11, in '98, we've had a viable solution for them to come along to. ""We started in 1996," said Hans-Joachim Wurth, EMU Program Director at SAP AG. "The biggest customers have already done it. It started in the beginning of '99 with DaimlerChrysler (AG); in October of that year came Siemens (AG)."

J.D. Edwards & Co. even informed its customers by registered mail of the steps they need to take, so that they can't claim not to have been informed, said spokesman Stephan Vanberg. "It's been known for so long, that for the last one-and-one-half years euro functionality was completely taken care of in normal upgrades."

But of course, plenty of customers are still using legacy versions of software. And some users still have their heads in the sand about the euro. Some 75 percent of Oracle's customers have either "migrated" or made a plan to do so, according to Gregory. SAP says three-quarters of its 6,700 installations in the euro zone have been converted. But what about the rest?

"There's a lot of companies that have just ignored it, have left it too late, and now they're saying, 'Gosh, what have we got to do', " said Nigel Rayner, a research director at Gartner Inc. "If a company doesn't do anything about it, it's not the ERP company's fault."

"What I hear is the large accounts, the large companies, already use the euro as their home currency; but smaller accounts are still using (national currencies)," said Erik van Barneveld, program manager for financials at Baan Co. NV.

"With Y2K" -- the calendar-related software glitch that was expected to strike on Jan. 1, 2000 -- "people took no action and fortunately it worked. But we know for sure that if you take no action on the euro conversion, you'll be in trouble," he said.

It's not as simple as just pushing a button on Jan. 1, said Patrick O'Beirne, managing director of Ireland's Systems Modelling Ltd., who tests software for euro compliance on behalf of the Business Application Software Developers' Association (BASDA).

"Roughly two-thirds of companies fail the first round of tests. They simply don't convert the figures accurately; they tend to round up or down inaccurately, and fail to account for the differences that result," he said. "You end up with unbalanced amounts at the end: 100 euros on one side (of a balance sheet), 99.99 on the other. An auditor would notice that."

Automatic conversion also assumes that businesses' own financial records are perfect, he continued. One company installed and ran euro-conversion software on its books, only to get garbled results. It turned out, he said, that in past years, whenever the ledger hadn't balanced, staffers had "gone in a back door and painted over to make things look right."

"At the last count they had spent two months fixing it, and they have already passed the July deadline which they'd been aiming at," he said. "Imagine a company which comes at this problem at the end of December."

ERP vendors are offering consulting services to help customers make the switch over smoothly, a process that can take anywhere from a long weekend to several months.

"We've put in a remote consulting operation in India," said Oracle's Gregory. "We physically take their data, do the conversion, test and prove the results are correct, and then we can ship that data back to them. As an option, they can have the Indian consultant fly out and do the actual physical upgrade. We can do that process for as low as $30,000 for that upgrade."

But don't expect to be able to pick up the phone in late December and get emergency assistance.

"Companies that have left it too late will find it difficult to get resources," said Rayner, pointing out that many of Oracle's staff are busy upgrading clients to the company's 11i suite, and that SAP is focused on its MySAP.com platform. "It's not as if there's going to be a lot of consultants from the vendors sitting around."

Rayner expects systems integrators to step into the breach, offering special euro conversion services and advice. But it will cost a premium.

The experts also warn companies not to miss surprise corners of their IT infrastructure where the euro conversion will come into play. Even peripheral systems that don't come under close scrutiny -- spreadsheets used once a year for financial planning, say, or word processing documents containing price lists -- will need converting. And don't forget electronic-commerce applications.

"You have all the third-party stuff, e-commerce systems you have on your Web site designed by this hotshot dot-com company which probably isn't around anymore," O'Beirne said. "If they've designed it well, all you have to do is maintain the database, but somebody has to do go in and do that. I'm expecting to see come January lots of companies that are perfectly well able to invoice in euros, but whose Web sites are still showing deutsche marks and Irish pounds and whatever."

It's no surprise that many companies have ignored the switch over so far, given how little attention the euro is getting from the general public in the 12 affected countries, said Martin MacKay, vice president of international marketing alliances and operations at PeopleSoft Inc.

"Three or four years ago I used to do presentations about the challenge of switching the vending machines and so on across, and yet I've seen very little movement in that regard," he said.

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