Euro launches smoothly, but test for IT remains

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By Lucas Mearian

(IDG) -- European Union banks are reporting that the conversion to the new euro currency has so far gone smoothly. But experts say that the real test is ahead for accounting systems, databases, spreadsheets and back-end business IT systems.

Although the euro has been the virtual currency in 12 of the 15 European Union countries since 1999, the actual physical conversion to the new money didn't take place until January 1. Those adopting the currency include Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. Those still on the sidelines are: Britain, Denmark and Sweden.

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Europay International, the leading European electronic payments group representing MasterCard International Inc., Eurocard, Cirrus, Maestro and Eurocheque brands, said automated teller machine (ATM) and debit card withdrawals hit record levels in the first 24 hours after the euro's release.

Electronic authorizations through Waterloo, Belgium-based Europay were up 30 percent over the same period last year, and two thirds of those transactions were ATM withdrawals. Some ATM systems ran out of money; others were simply overwhelmed by the number of requests. For example, 2,600 ATMs in Austria went down for an hour Wednesday due to a systems overload.

But, said Europay spokeswoman Cheryllyn Humphreys, "When you consider the scale of the changeover, this has gone remarkably well."

Besides longer lines at cash registers due to conversion issues, there were some early signs of IT hiccups in the retail sector.

Noel Hepworth, euro project director for the European Federation of Accountants, an industry trade group in Brussels, said that some point-of-sale systems in large retail stores aren't properly converting the euro.

"Also, the European Commission pointed out in their own press release that there's a heavy demand for [business] conversion kits and in some countries they've run out. They point to that as a positive thing because of good demand. I would say that shows a bottleneck," Hepworth said.

While the physical cash changeover seems to be flowing, the true test for businesses will come during the next few months when several boundary events take place.

Nick Allen, an analyst at AMR Research Inc.'s London office, said software will be sorely tested in the next three months as businesses begin making out financial reports to the marketplace as well as for local federal governments.

"The biggest risk in information systems is data pollution," Allen said. "I think that a good proportion of companies will have some degree of data pollution because it's so difficult to make sure everything you own has been converted correctly. Think of the tens of thousands of spreadsheets there are. Look at all the legacy data bases going back five, 10 or more years."

Other industry experts say many euro zone businesses haven't yet even converted back-end systems to the new currency. According to Hepworth, almost a third have yet to modify accounting and payroll systems for the euro.

"A euro zone company has to be able to draw up their payroll in euros for the month of January," Hepworth said. "If they've not converted their payroll systems, you must do it manually. Can you imagine doing your payroll manually?"

Payroll and accounting systems must also be tied into back-end systems, and back-end systems must be able to communicate with creditors and banks using the euro.

"If you send a bank a money transfer in local currency, you'll be rejected," Hepworth said.

Sarwar A. Kashmeri, CEO of ebizChronicle.com in New York, said procrastination by small- to midsize companies in the conversion will create supply-chain issues.

"So the exchange of electronic payments or invoices, that kind of information that takes place with smaller suppliers, will be a bone of contention if those smaller companies are not prepared," Kashmeri said.

Kashmeri also pointed to problems related to the fact that some retail systems must now deal with euro increments or decimal points.

"This is especially of concern in countries where they've not previously had currencies with cents. Spain has never had a decimal point or fractions or cents. All of a sudden, all their cash registers have to be reporting [to back-end systems] and printing decimal points in cents," Kashmeri said. "We're talking about databases and software that can handle the databases."

European authorities had planned for a six-month transition period -- from January through June -- when both euros and national currencies could be used, but that grace period was trimmed to February 28. That, said Hepworth, has added to the confusion around when everyone must deal only in euros.

The first counterfeit euro note was also found last week -- a 50-euro note.

"This is a good time to be a note forger because people are not familiar with it yet. I think it's certainly a risk," said Allen.