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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& Coins introduced » Local currency still legal » All payments must be in euros » July 1, 2002 - National Currencies withdrawn » A few of these will go away ....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