VideoHorror stories abound about corporate unpreparedness for the Year 2000 (Y2K) computer glitch. But occurring almost simultaneously is a sister glitch-- the European Commission's (EC) introduction of a single currency--that experts predict could eclipse the Y2K problem in both time and cost. Surprisingly, however, few American companies are paying attention, never mind panicking.
"Essentially, U.S. organizations have been ignoring the euro-currency issue and concentrating instead on the Year 2000," says Capers Jones, chairman of Software Productivity Research Inc., in Burlington, Massachu-setts, "while their counterparts in Western Europe have been ignoring the Year 2000 problem and concentrating instead on the euro-currency conversion."
To be sure, European companies and European subsidiaries of American companies are being forced to pay attention to the euro. After all, the currency conversion is set to take place on January 1, 1999--a full year ahead of the Year 2000 D-day. Still, there may be another explanation for U.S. corporate nonchalance: There isn't much to be done here in the States, even for multinational firms. The reason is simple: Multinational firms based in the United States use the U.S. dollar (USD) as their base currency, and their software is almost always capable of accepting multiple currencies. Essentially, the euro will simply be added as one more currency.
"Our currency trading system in headquarters has to be modified to accept transactions in the euro. But that's easily accomplished," says Donald Henderson, Texaco's director of IT for international marketing and manufac- turing. "All of our systems that have to be changed are in Europe. It's a very big issue in Europe, especially because it's happening at the same time as the Year 2000 problem."
American subsidiaries of European companies are equally unfazed, since they also keep their books in USD and report their results to Europe in USD. "In Europe, we handle lots of currencies, and the deutsche mark is the most important currency for our intercompany accounting in Europe," says Stefan Heuser, head of cash management for Siemens Capital Corp., a subsidiary of German-based Siemens AG. "But here in the States, the base currency is the U.S. dollar, and that won't change. From an IT perspective, the euro won't be a big issue for companies whose general ledgers are in dollars."
WHO'S PANICKING?
The euro's introduction, of course, is being greeted quite differently on the other side of the pond. Generally speaking, any company's European operations will be drastically affected by the euro adoption, according to Peter Chin, vice president of euro transformation services for consulting firm Cap Gemini. "The supply chain, human resource elements, pension funds, customer communications, and tariffs will all change," he says. Moreover, he adds, "interfaces with all IT systems--manufacturing, accounting, funds transfer, and human resources--all have to be modified."
In addition, corporate treasury departments will have to review their borrowing and investment strategies, according to Evelyn Fuhrer, partner, financial services technology, at Coopers & Lybrand LLP in New York. "They will need to see if their premises are still valid," says Fuhrer. "Their old rules of thumb regarding forecasted inflation rates and interest rates may no longer be valid when multiple currencies are replaced by a single currency."
And all of that transformation will come at a heavy price. The Gartner Group, an IT advisory firm based in Stamford, Connecticut, estimates that for some European companies or subsidiaries, the cost of preparing for the euro problem can be as much as five times the cost of remediating software for the Year 2000 problem. This is because the Y2K problem is actually much simpler. Fixing this problem changes software so that it will do exactly what it's always done, except that it will continue to do it correctly after the year 00. But fixing the euro problem changes what the software actually does. What's more, it's necessary to change everything from personnel and pricing policies to vending machines.
Adding to the problem is the shortage of available programmers, since so many technical people are already committed to fixing the Y2K problem. In fact, 47 percent of European companies recently surveyed by The Gartner Group reported vacant IT positions.
Finally, companies are faced with a very short time frame for euro fixes. Theoretically, companies have a slight reprieve from the January deadline. The EC has adopted a "no-compulsion, no-prohibition" rule regarding the euro, meaning that any firm doing business in Europe is free to use either national currencies or the euro during the transition period from 1999 to 2002, at which time the local currencies will be phased out.
However, the no-compulsion, no-prohibition rule may be an illusion, according to Nick Jones, euro analyst for The Gartner Group. "Although the euro is voluntary, several big companies, including Philips Electronics NV and Siemens, have announced that they will adopt it immediately on January 1, 1999, and some are asking their suppliers to trade in euros," he says. But Siemens Capital's Heuser insists that his company is simply"offering its suppliers and clients the opportunity to use the euro, and to receive and write invoices in euros. We expect the large [European] corporations to use it fairly early," he says. "And smaller companies will feel that they have to use it, because otherwise they would be falling behind."
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