Chief executives of UK companies that have any dealings whatsoever with the rest of Europe must be called to action now to ensure their computer systems can cope with trading in euros and to make sure they understand the full business ramifications of Economic and Monetary Union. According to software giants Microsoft Corp and SAP AG, there is still a chronic lack of awareness among UK companies about the extent to which Economic and Monetary Union will affect their business even though the UK will not be in the first round of EMU in 1999. Recent Gartner Group figures show that some two-thirds of UK companies have done nothing so far to prepare for EMU, and many of those do not even have any plans to do so. Mark Taylor, Microsoft’s director of consulting warns that if anywhere in a company’s supply chain they deal with a European company, then they will have to ready their computer systems to cope. Germany’s Siemens AG is one of several major European companies that has committed to trading in the euro from January 1 1999. The company, itself a customer of SAP, has some 16,000 suppliers in the UK, and according to SAP UK’s euro implementation manager Peter Robertshaw, while it will not force its suppliers to trade in euros internally, it will insist that they quote prices to it in euros, and that they take the risk of their own currency fluctuations on themselves. Robertshaw says this will save Siemens tens of millions of dollars in currency hedging. One of the common misconceptions about the changes required to systems to accommodate the euro is that it is no different from normal multiple currency trading. However, due to European Union laws on triangulation during the first couple of years of EMU, companies are obliged to convert through the euro and out again – there will be no exchange rate from sterling to French francs, the transaction will convert sterling to euro and euro to francs, and systems will effectively have to cope with three values instead of two. Nick Crosby, a senior consultant at Price Waterhouse’s management consulting practice accepts that many companies are in denial over EMU, especially since it coincides with the Year 2000, and companies are already over-stretched with having to fix Year 2000 dates. He accepts also, that there may have been a time a couple of years ago, when it would have been sensible for European politicians to have considered postponing EMU until well after the Year 2000. However, he says there is absolutely no evidence of them wavering at all in their commitment to going ahead in 1999, and therefore UK companies have to get on and do something now. Even more so than with Year 2000 problems, EMU is not a technical issue to be simply pushed over to the IT department. Trading in euros has major marketing implications, for example pricing issues. Companies often price items at 3.99 pounds instead of 4.00 pounds, as a psychological ploy to make the product appear cheaper. Translated directly into euros, the price may not make any marketing sense at all, so the company will have to decide whether to change the price, or perhaps the size of the product, all of which are business rather than technology issues. Then it needs to look at pricing throughout Europe, where it may to date manage different pricing in different currencies. Will it unify pricing policy in the light of a single currency? Crosby reckons there are major business benefits to be gained from trading in the euro, which will simplify a company’s internal systems and reduce exposure to floating currency rates. A small company that decides to convert its systems now to be euro-ready could win itself a major advantage, he says, especially with the pervasiveness of the internet. A small company up on the web that sells itself as euro-ready, will appear to the world as a substantial, serious and forward-looking company, says Crosby. Both SAP and Microsoft feel they are currently evangelizing the issue not so much to make profit out of the situation, but because the UK government is itself not doing enough to make businesses aware. SAP’s Robertshaw says the company is doing EMU work free for its existing customers, and while he admits the company is gaining a lot of business through Year 2000 and EMU with companies simply migrating off legacy systems to get round the problem, he maintains that for SAP, EMU and Year 2000 compliance are a given, therefore businesses can forget them as issues and get on with new developments and new business. Eventually, Taylor, Crosby and Robertshaw agree, external factors will force UK companies into action. One of those will be businesses in the Far East and in the US looking to invest in Europe. They say these companies will want to invest euros and trade in euros, and whether the UK is in or out, its companies will have to be accounted for as part of the rest of Europe. Also, many suppliers are waiting for their major customers to force the issue, and insist they trade between themselves in euros. The message to chief executives is: Don’t wait to be forced. Act now.
