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May 1, 1998
by root
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The encroaching reality of economic union in Europe will begin with the hotly contested transition to a single currency, slated to launch on January 1, 1999. Barring an 11th-hour derailment, qualifying countries for the common currency will be chosen this month, based on strict economic criteria set forth in the Maastricht treaty of 1992. To make the cut, countries must lower budget deficits to three percent of GDP while keeping debt, interest rates and inflation in check. Once chosen, the estimated 11 countries will have roughly three-and-a-half years to ready the business community before the euro takes over for good in January 2002.

Aside from the financial strain the Europeans have been undergoing to prepare for convergence--even Europe’s strongest economy, Germany, suffers from double-digit unemployment and an overburdened social welfare system--the IT implications are vast. Any information system that handles financial transactions or stores financial data will have to be modified to accept the euro. Many companies and software providers are writing code now that will allow systems to handle both currencies--the euro and the local currency--for the three-year interim period. Common currency will also affect multinationals and anyone else doing business in Europe. With the monstrous year 2000 problem already strapping resources in IS departments, companies that have not planned ahead for the euro may be in for double trouble as the millenium nears.

Because of the expense and the risk, most companies will not tackle euro conversion and year 2000 at the same time, according to Diego Lo Giudice, president and managing director of consulting firm Genesis Development Corporation, Milan. He says the IT impact of the euro will involve not just the addition of fields and rules, but converting historical data and managing interfaces with supplier and customer systems.

Just as with year 2000, the euro will create new market opportunities for the information systems industry, in both consulting and the delivery of new applications and replacement systems. "More than 75 percent of existing companies see the introduction of the euro as an opportunity to introduce substantial changes in their information systems," Lo Giudice says.

Once the euro is launched next year it could open up the flood waters for U.S. healthcare information systems providers, particularly clinical systems which have more applicability in Europe, according to Ray Falci, healthcare IS analyst with Bear Stearns, New York, Falci attributes this to both the demand for replacement systems in Europe that has been stalled until the euro is finalized, and the growing maturity of clinical systems.

Shared Medical Systems (SMS) is busy modifying its patient accounting and general ledger applications to handle the euro. SMS--the U.S. healthcare IS industry’s biggest international player in terms of overseas revenue--will provide the modifications as part of existing upgrade and service agreements with customers. Other customers will have to pay for the enhancements. The euro may help companies like SMS create a new competitive advantage.

"Many of our European competitors do not have the necessary strength and resources to undergo changes for year 2000, the euro and national government requirements," says Roger Wallhouse, business area director for SMS’ Northern Europe operations, based in the U.K. Wallhouse also perceives a big administrative advantage internally by dealing with just one currency.

However, the euro switchover will not include one of the larger European markets: the U.K. has made plans to stay out of the euro and is not expected to reconsider for the duration of newly-instated Prime Minister Tony Blair’s four-year term. Companies with significant U.K. customer bases--HBOC and Meditech--are moving cautiously. Glenn Rosenkoetter, senior VP at HBOC and director of the U.K. office, says the company has not had to address the euro yet since its European business is largely in the U.K. and focused on outsourcing and service contracts rather than product licensing--yet he hinted that euro conversion could be a bigger mess than year 2000. Meditech spokesperson Paul Berthiaume says the company has not made plans yet for euro conversion. "Our software is structured such that this impending change shouldn’t be a big deal," he says.

The advent of the euro is also expected to lower the risk and hassle of doing business in a region with multiple currencies. Siemens expects an annual savings in the double-digit million range from the elimination of hedging costs associated with currency dealings and transaction costs from cross-border payments, according to Elisabeth Rameisberger, company spokesperson in Munich. She says the company predicts conversion costs of roughly three percent of the total IS budget, but also expects major payback down the road from economic integration in Europe: "This will strengthen Siemens’ European business and provide the company with a solid foundation for further expansion in the fast-growing Asia/Pacific region, the Americas and Eastern Europe."

Polly Schneider is senior editor at Healthcare Informatics.