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Session No. AD248
The Euro is Here and
it Means Business!
Michael G. McKenna
Globalization Strategist
Global Products Group
Sybase, Inc.
[email protected]
One European Economy
» ECU has already been around a while
» Economic potential comparable to U.S.
» New index currency, like U.S. Dollar
» Stability built in as part of Euro Member State
Policy
» One of the largest Government Bond Markets
in the World
» Expected increase in efficiency and GDP
» Intra-European trade becomes “domestic” instead
of “foreign”
World GDP: euro vs U.S. and Japan
40%
30%
20%
10%
0%
Euro
U.S.A.
Japan
Population: euro vs U.S. and Japan
400
300
200
100
0
Euro
U.S.A.
Japan
Share of World Trade
25%
20%
15%
10%
5%
0%
Euro
U.S.A.
Japan
Export: GDP Ratio
12%
10%
8%
6%
4%
2%
0%
Euro
U.S.A.
Japan
Foreign Exchange Reserve ($B)
350
300
250
200
150
100
50
0
Euro
U.S.A.
Japan
World’s Currency Holdings
80%
Yen
60%
40%
European
currencies
20%
19
73
19
83
19
95
0%
US dollar
euro Time Line
» Before 1999 : ECU
» 3 Year Transition Period
» Started January 1, 1999,
» Conversion rates fixed
1 euro = 1 ECU
» Multiple Currencies in Transition Period
» National Currency Unit (NCU)
» euro Currency Unit
» Payments in either - no obligation
Euro Time Line (2)
» euro only in 2002
» January 1, 2002 - euro Notes & Coins introduced
» Local currency still legal
» All payments must be in euros
» July 1, 2002 - National Currencies withdrawn
» A few of these will go away ....
Euro Exchange Rates
1 EUR = 40.3399 BEF
Belgian franc
= 1.95583 DEM
German mark
= 166.386 ESP
Spanish peseta
= 6.55957 FRF
French franc
= .787564 IEP
Irish punt
= 1936.27 ITL
Italian lire
= 40.3399 LUF
Luxembourg franc
= 2.20371 NLG
Dutch guilder
= 13.7603 ATS
Austrian schilling
= 200.482 PTE
Portuguese escudos
= 5.94573 FIM
Finnish mark
Accounting Systems
» Preference for Invoicing in Home currency
» National Currency
» euro
» Others?
» Currency Conversion
» Triangulation
» Rounding Errors
Legal and Administration Issues
» Adherence to Time Line
» Credit must be issued in euro if due after Jan. 1,
2002
» Hedge Funds
» Elimination of exchange rate risk between
participating countries
» Liability due to conversion errors
» e.g., ItLira to/from euro to/from DEM
Don’t’ forget to change currency denomination!
Euro Currency Display
How to display the euro?
»
Updated fonts
»
»
»
»
»
GIF files (e.g., in HTML)
»
Text: International
Currency Code: EUR
Unicode: U+20AC
ISO 8859-15: 0xA4
Adobe: new fonts
Windows CodePages: 0x80
1250: Eastern European
1252: Western European
1253: Greek
1254: Turkish
1257: Baltic
1255: Hebrew
1256: Arabic
1258: Vietnamese
874: Thai
1251: Cyrillic (0x88)
System Conversion
» Big Bang Approach
» Use existing system
» Convert all data at once
» Parallel Approach
» Maintain data in NCU and euro
» Phased Approach
» Convert interfaces one at a time
» New Systems Approach
» Just start over!
Demo - Big Bang Approach
» Change all currency to euro with Control
Panel
» Convert all data
» Use system in euros
Conversion Strategies
Assessment
Reengineering
Testing
Changeover
Assessment
» At the Enterprise Level:
» Decide on the business strategy
» Decide on the transitional strategy
» Determine the impact on IT systems and decide on
a timetable
» At the IT Planning Level
» Determine impact on IT systems.
» Create change specifications for IT systems.
» Plan the detailed assessment, re-engineering,
testing and changeover strategy.
Re-engineering
» Identify where currency values are:
» Screens
» Databases
» Business rule dependencies
» Enhance and update applications:
» Conversion and rounding routines
» Screen interfaces
» Database changes
» New functions and interfaces
Testing
» New test data
» Unit, regression and system tests
» Current, historical and future data scenarios
» Each scenario with a different mix of
currencies
Changeover
» Time for natural fiscal break:
» End of fiscal year
» Jan 1, 2000
» June 30, 2001
» Prepare clients with advance notice
» Keep a backup!
Dual Currency Displays
» Why
» Facilitate transition period
» P.O.S. Terminals
» Reduce confusion
» Costs
» Conversion of user displays
» Products Labels
» Reports
Dual Currency Practicalities
» Every item
» Confusing display?
» Too much data?
» Use simple, elegant design
» Bottom Line
» Only show end-result in dual display
» Cash register receipts
» Invoices, etc.
» Must show what currencies accepted for
payment
Demo - Dual Currency
» Product Order
» Select National Currency
» Display in euro and NCU
» Invoice
» Items listed in euros
» Customer profile indicates NCU
» Sub-totals in Dual Currency
Rounding Errors
» Example:
» Don’t use inverse rate:
1,000,000 NLG = 1,000,000 ÷ 2.20371 EUR = 453,780.22 EUR
with inverse rate:
1,000,000 NLG = 1,000,000 x 0.453780 EUR = 453,780.00 EUR
» Conversion/reconversion problem
» NCU  euro
;
euro  NCU
99 PTE / 200.482  0.49380... EUR  0.49 EUR
0.49 EUR * 200.482  98.23618 PTE  98 PTE
»
Problem grows with large lists
Conversion Best Practices
» Best to conduct all business in one currency
» Display for information purposes only
» Use Triangulation when converting currencies
» Add “rounding” line item to match up sums
» Conversions, if possible, should be left to the
Banking Sector
Triangulation
» Triangulation
» National currency to National currency
» NCU1 to euro to NCU2
» Use 6 significant figures for conversion rate
» Intermediate euro with maximum decimals
» Round up to nearest sub-unit of currency
SQL: http://www.sybase.com/products/global/euro
select @result =
round((@amount/@rate1*@rate2), @round)
Legacy Data Conversion
» Convert all at once
» Assess and convert
» Convert “on-the-fly”
» Use data triggers and convert only when accessed
» Add conversion flag to show status
» Don’t convert
» Leave data as is
» Convert at Application Interface
Multiple Currencies
» Multi-Currency Module (MCM)
Free download at:
http://www.sybase.com/products/global/euro
» Live feed off internet
» Tie USD, JPY, EUR, etc. Together
» Demo: e-Commerce with live local currency
conversion
References
»
SEEC, Inc., “The Euro Problem: Analysis and Approach”, White Paper,
http://www.seec.com/products/whitepaper-euro.html
»
»
»
Alejandro Moya, “IT Impact of the euro”, http://www.ispo.cec.be/y2keuro/euroit.htm
»
»
ibid., “Euro paper 23 : Recommendations for the practical aspects of the introduction of the euro ”, 1998
»
»
»
»
»
ibid., “Euro Paper 3 - The impact of the Introduction of the euro on capital markets”, 1997
European Commission, “Welcome to the Euro”, http://europe.eu.int/euro/html/entry.html
European Commission, Directorate General II, “Euro Paper 22 : The Introduction of the euro and the
Rounding of currency amounts”, 1998
ibid., “Euro Paper no.13 - Report of the expert working group on the technical and cost aspects of dual
display”, 1997
ibid., “Euro paper 1: External aspects of economic and monetary union”, 1997
Sybase, Inc., “Multi-Currency Module 1.0: Euro Converter”, http://www.sybase.com/products/global/euro
Microsoft, Inc., “Microsoft Euro Currency Resource Center”, http://www.microsoft.com/euro/
Oracle Corp., “Oracle’s Euro Solution”, http://www.oracle.com/html/euro.html