Pre.Millennial Tension

Grumpy finance users could be one of your biggest year 2000 problems. But treat them nicely - you're actually sitting on an upgrade goldmine, explains Simon Meredith.

The year 2000, EMU and multi-currency are the issues that are driving But treat them nicely - you're actually sitting on an upgrade goldmine, explains Simon Meredith. the accounting software market at the moment. Users are well aware of the need to act and many are taking the opportunity to upgrade their accounting systems. But don't imagine it is going to be an easy ride for you - many of them will want their upgrades provided free of charge.

EMU and multi-currency present the more straightforward opportunities.

No one saw EMU coming and we still do not know exactly when the UK is going to join. But even if we are out, an increasing number of companies will need to trade in more than one currency.

Yet few products can cope with multi-currency properly, let alone the complex exchange rate requirements of the EMU. We will have to wait for the next implementation of most packages before these features are provided across the whole system, and therein lies another issue - 32-bit Windows.

The number of complete accounting products running under 32-bit Windows can be counted on one hand. It does not make much difference to companies that will use their systems largely in isolation, but large companies with rigid IT policies and the growing band of businesses that insist on having 'integrated' systems will be looking for 32-bit functionality.

All the world's a Sage

As a result of all these issues, the situation with new products is more urgent and confused than ever before. The Sterling range from Sage continues to dominate the lower end of the market and few other products are able to make much impact. Pegasus Capital and Tas Books are the only other products of real significance. At the top end, SAP and Oracle continue to dominate the fight. Vendors such as Systems Union, Scala, Coda, Hyperion and Lawson creep into the occasional bid, but they are all vying for the medium to large-scale system.

It is in the middle ground - companies with installations of between five and 20 screens - that most of the action is taking place. Once dominated by Tetra and Multisoft, this arena is a battlefield, with contenders such as Exact and Access also fighting for business.

Sovereign estate

It is the middle ground that Sage and Pegasus are aiming to conquer.

But their respective Sovereign and Opera products have come under criticism from resellers, even though they remain the market leaders within the modular sector.

Sovereign for Windows 2 was finally released last summer, but only the financials module. Productivity modules like sales order processing and stock control will follow. Opera is established in the mid-range market as the successor to Pegasus' Senior Dos, but some resellers want to see it go further.

Tetra, meanwhile, has been enjoying a quiet revival, refocusing on its strengths and looking to the Stock Market for a cash injection to fuel growth. And Multisoft, after a reorganisation by owner Sage, is still working on a new implementation of the CS Financials system.

Behind all this, acclaimed products such as Navision, Dynamics, Pinstripe and Enterprise Exchequer are making an impression on resellers and users, all for different reasons.

The prospects for the next two years are good, especially since many companies will have to modify or buy their systems to cope with the year 2000. But at the same time, the millennium is going to be the root of much dissent.

Many users are still not aware of the year 2000 problem, says Jyoti Banerjee, managing director of accounting consultancy firm Tate Bramald. And they are going to resist change. 'A year ago I was telling the industry that it should be selling this stuff with a health warning because most people want to keep their software for five years or more,' he says.

Some vendors are offering updates via their maintenance contracts. Any Sage user who has a SageCover contract will get a year 2000 upgrade for nothing, says Sage MD Graham Wylie. Those who do not (the contract costs around #170 per annum paid directly to Sage) will need to upgrade to a current version.

As Banerjee points out, the year 2000 provides the perfect excuse to revisit the user base. 'It's an opportunity for resellers to get back in touch with people and make them aware of the situation,' he says.

Wylie promotes the positive side of the problem too. 'What we're saying is that if you're going to change your system, you might as well take the opportunity to move up and maybe move to Windows or to networking.'

Union city blues

This is also a good time to start raising awareness of EMU. According to Banerjee, less than nine per cent of UK companies can cope with monetary union already and only 30 per cent expect to be ready by the deadline.

But software vendors are holding back their EMU-compliant products.

According to one vendor, it is too soon to act on the problem. 'We have a commitment to produce a system when it is decided what the changes will be and when exactly it will happen.'

This view is hot air, argues Banerjee. 'In principle, we do know what will happen, and we know that many packages won't deal with it at the moment. I think it is time the vendors started telling us what they are going to do.'

Guy Letts, head of R&D at Sage, says that Systems Union, Sage and others are working with BASDA to try to pin down the exact requirements. There are issues to address, he says, such as the way cumulative rounding errors will be reconciled, for example when dual columns of figures are totalled.

The original base currency figures are converted to Euro figures and both columns are added up, but the totals must agree with the exchange rate figure perfectly - if there is any variation there must be a set of rules for defining the true total.

There are also local accounting issues to resolve, and a method needs to be defined to handle the single currency across all systems. BASDA is doing what it can to establish just such a set of standards.

EMU does have wide implications for accounting systems. Every transaction will have to be maintained to six decimal places and currency rules will need changing. In some cases it may be necessary to have 'dual base' currency rates to cope with the Euro and the local currency, although if you make the switch to Euro across the board overnight, you should be able to get away with using just one base.

Windows peak

Another potential edge for vendors is Windows. Few companies so far have released 32-bit Windows products. This may not be important as far as basic functionality is concerned, but the better your Windows capability, the better the impression the product will make (unless the customer wants really high-speed data entry, in which case Dos wins hands down).

Hugh Scantlebury, international major accounts manager at Systems Union, says that interest in NT has been growing in higher end installations, but it is by no means an avalanche. 'In the UK and the US it is ahead of the pack in terms of acceptability, but there is still a bit of resistance, particularly at the top end, and overseas it is still behind.'

However, he says: 'Once the wave goes it will go very quickly.' Windows is going to become essential over the next few months if you want to attract new business. The need to run as a full 32-bit NT application is also going to become important in the higher reaches of the market.

The NT wave has already hit the lower end - Navision says that 99 per cent of all its systems are going in under Windows. However, it has not fully invaded our shore yet - Sage and Pegasus still sell Dos versions of their products and a high percentage of their user base has not yet switched to Windows.

According to Banerjee, 85 per cent of accounting software users have Windows on their desktop, but only 15 per cent use it as the backdrop for their accounting solutions. Wylie believes some Dos versions of Sage's software will go on selling beyond the year 2000.

Another issue is the internet. According to Scantlebury, there is a definite groundswell of interest in using thin clients as part of the accounting solution. This makes good sense. Some staff are going to be doing little else all day bar entering transactions. Those who deal with customers face to face will have to enquire about the data but never make entries or amendments. In both cases, for cost and security reasons, it makes sense to use a basic dumb or thin client workstation.

The countdown to EMU

Spring 1998

This is when all the vendors will know for sure what the rules are likely to be in each country. From this point they should be able to act decisively.

Countries that are eligible and willing to join EMU in the first phase will have to sign up at this point. To qualify, each country is supposed to have a budget deficit that is no more than three per cent of the GDP. Keen to join in the first round are France and Germany, the rest of the Benelux countries, Italy, Spain, Portugal, Austria, Ireland and Finland. It still looks unlikely that the UK will join in phase one.

1 January 1999

It will be necessary for companies with accounts, customers or suppliers in participating countries to be aware of the Euro, although to non-participating countries it will be just another currency until they join.

From 1999, the Euro will be used in the banking system and for cheque and credit card transactions, but no notes and coins will circulate on the street. This is supposed to offer businesses a choice - take up the Euro either immediately or later in the three-year transition period. Most will find they are obliged to conform to whatever the majority of their customers and suppliers are doing and their accounting software will have to be adapted to cope.

1 January 2002

By now, everyone should be participating and all systems ought to be working in full. Euro notes and coins will become legal tender in 2002, alongside existing national currencies. There will be a six-month transition period. Retailers are under no compulsion to accept both, but risk losing customers if they choose not to.

1 July 2002

In summer 2002, all the national currencies will disappear. From this date onwards, all statutory financial reporting, such as tax returns and company accounts, will have to be presented in Euros.

The year 2000 - its effects on accountancy packages

In the year 2000, several problems will arise for some accounting software, which could have devastating effects on accounting, payroll, stock control and other financial systems. Many of the problems stem from the use of only two digits to represent the year - the change of century cannot be detected. If they are left uncorrected, calculations and selections based on dates will be wrong when the millennium arrives.

Suppose you have #10,000 in a bank account in 1997. The account pays five per cent interest. If the money is drawn in 1998, the system works out that you deposited the money for one year; 98 minus 97 is 1, so the computer credits the account with one year's interest. That works out fine with the two-digit field.

But if you wait until the year 2000 to withdraw the money, the calculation goes awry. The money was deposited in 96 and withdrawn in 00; 00 minus 97 equals minus 97 years. The computer credits the account with minus 97 years at five per cent. Your closing balance will be around #80.

Software that tries to sort records by date will report records created after 2000 as being older than those created before that time. In some cases this will not matter, but it could be disastrous if, say, all records older than a certain value were deleted to save space on the disk.

Some systems will simply reject the entry of a date such as 01/01/00, which of course will be perfectly correct. And the 19 that is permanently 'hard-coded' into reports and screens will have to be removed.

Some older PCs may also have problems with two-digit firmware. The century is stored too, but the PC will not increment the date unless the system is running at midnight on 31 December 1999. If it is not, the date 01/01/2000 will appear as 01/01/ 1900 internally and when requested on the screen.

Older machines may resort to the original date when MS-Dos was initiated if they are confused by the change.

You can test this by setting the time and date to a minute before midnight 1999, turning the power off and restarting the system a minute later.

If the time has changed, you will need to be on guard if the machine is still in use in the year 2000.

The role of dealers in making sure these problems are avoided cannot be underestimated. No one can afford to ignore the year 2000 problem.

All businesses need their suppliers and customers to resolve the issue or a great deal of confusion and cost could be incurred.

It is important to act now, as the seeds of problems may yet be planted unintentionally between now and the year 2000. Some are already germinating.

For example, an insurance company which issued a five-year policy in 1995 may find the policy matures in 1900 on their systems.

Other items which stand to be affected include depreciation of fixed assets, loans and interest payments, plus long-term budgets, fixed prepayments and accruals. This is why it is important to act early.

Software vendors should be issuing software upgrades to ensure all users are immune to software-based problems. A few basic measures will help you guard against potential problems:

1 Take a full inventory of all software applications used throughout the company.

2 Perform year 2000 testing to locate potential problems. This could be as simple as changing system dates to around the turn of the century and checking that time intervals are still calculated correctly.

3 Plan ahead. Find out how the software vendors intend to deal with the problem and when.