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Euro challenges IT managers

November 18, 1998
Web posted at: 7:46 PM PT

by Jeanette Borzo

(IDG) -- LAS VEGAS -- Preparing for the euro offers information technology managers challenges as well as opportunities for corporate glory, said a panel consisting of IT vendors here yesterday at Comdex/Fall '98.

Preparing IT systems to accommodate the euro -- Europe's common currency, which is set to debut in January as it kicks off a three-year phase-in period -- will force companies to rethink their European pricing strategies and should save companies money by forcing operations among national divisions to be consolidated.

At Tektronix Inc., getting ready for the euro led the company to consolidate corporate procedures such as billing into one European center, said Paul Brennan, Tektronix's director of European operations in Munich.

"We found a lot of redundancy," Brennan said. "Today we have only one financial center in Europe, and this has had a big impact on how we've prepared for the euro."

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"Before, every country had its own marketing organization," Brennan said. "With Europe becoming one market, it makes it easier for one business division to become more global."

A more-centralized market approach can also mean a more-unified pricing approach, the panel noted. Managers should also be aware that -- depending on your point of view -- the euro can add complexity or simplify product pricing.

"The biggest impact of the euro I've seen is that it's forcing companies to rethink their pricing," Brennan said. "In our measurement instruments business, where we had different mark-ups in different markets -- we had to rethink our pricing."

It's difficult for consumers to compare prices in different currencies across borders. But with 11 countries pricing products in euros, discrepancies will become more obvious.

"It will be harder in the retail side, where prices vary from country to country. With the euro, you'll have to explain why you have a different price in France and a different price in Germany, which is different from the price in Belgium," said Gaston Bastiaens, president and CEO of Belgium's Lernout & Hauspie Inc.

"But it will simplify banking practices," Brennan said, particularly as companies will no longer need to pay currency-conversion fees.

Panelists outlined ways companies can offer different prices to accommodate varying market conditions, while still presenting a unified, European price to customers.

Tektronix found, for example, that Italian customers settle invoices generally within 180 days of billing, while many Nordic country customers pay within 20 days. To compensate for this, a vendor might charge a higher price in the national currency of the slower-paying customer to compensate for its costs in waiting on payment.

To avoid the potential embarrassment of cross-border price difference once products are priced in euros, Tektronix plans to raise its prices across the board and then give customers discounts for prompt payment. The end result will be that customers will pay much the same price they paid before the euro.

Everyone doing business in Europe needs to formulate a euro strategy, the panel pointed out, whether they will use the euro within their own national boundaries or not.

"If a company will do business in the European Union, they will have no choice but to have a euro strategy," said Ian Wilson, Intel's director of Internet marketing for Europe, the Middle East and Africa. "Their customers in other countries will ask for pricing in the euro."

Brennan echoed the thought, pointing out that more than half of all European banking activity is centered in London. So, even though the U.K. won't initially adopt the euro, its countries still need a strategy to deal with the new currency.

But not everyone is prepared. "Our top 10 customers -- who make up about 23% of our European revenues -- have been working for getting ready for the euro for the last five years. Customers like Alcatel SA, Philips Corp. and Siemens AG -- they've all been driving the charge to the euro because they see it as an incredible simplification to their back-office systems."

"But on the other hand, [small and midsize enterprises] don't know anything about the euro or its implications," Brennan said. "You'd think they were Americans."

To prepare, Brennan suggested steps that companies should take.

First, assign a talented project manager. "You need a really good product manager who can handle the IT problems, cultural problems and back-room problems," he said.

"You should also keep changes to the minimum," Brennan suggested, adding that simplicity can make a euro program roll-out successful.

"Communication is really important," Brennan continued. "Banks are educating people, but Europeans are not that knowledgeable about the euro. We had to train all our employees, and we had to talk to our customers, asking for feedback on the euro. We've had to educate people across the board."

IT managers certainly have their work cut out for them. "You need consider a lot of small, hidden things," Bastiaens said. "You have to plan it well."

In addition, IT managers need to work with other corporate departments to put an effective euro strategy into place.

"The euro is not just an IT problem," Wilson cautioned.

The silver lining for IT managers is that their euro work can thrust them into a hero's spotlight. "I see it as an opportunity for the IT department to lead the company and to provide a competitive advantage," Brennan said.

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