A single cross-border IT platform has long been seen as the Holy Grail of pan-European technology. Nic Evans explores the realities of how successful software companies are in providing this at the present time.

Perhaps it is not a co-incidence that many global finance system initiatives have started from US-based companies. The US is well accustomed to the benefits of having a single system and common processes from Florida to Alaska. With this come the enormous economies of scale from a single service centre covering continental operations.

However, many attempts to replicate these benefits across European operations have not delivered the same benefits. The financial services division of one manufacturer is reported to have scrapped its global systems projects, writing off many tens of millions of dollars of development. At the same time many other major projects are reportedly running years behind schedule - and over budget.

The difficulties are real. Emmanuel Gillet, chief executive of Cassiopae explains: “The European software industry has been very fragmented. No company has been of a size where it can make the initial investment to go international on its own. Large US leasing software vendors did have the advantage of working with the likes of GE and Citi to bring about the necessary investment.”

Achieving credibility

“The business case for such an investment in Europe just was not there. The domestic market in the US is 300m people, more than all the countries in Europe. In Europe it’s easier to start, because you have to think internationally very quickly if you want a return on your investment. We will see other players emerging but it won’t be in a few months – it takes years to get credibility at an international level. Players like SAP and Oracle had the opportunities, but they didn’t completely succeed. The size of the niche might not be big enough for them.”

Laurent Tabouelle, product manager for the CodiX iMX Commercial Finance solution. argues that many challenges to a genuine pan-European system lie in the area of differing cultures. “What we keep seeing, the more global clients we work with,” he stresses, “is that their operations look very different from country to country at first sight. But quite often it is because the products themselves are different. But a lot of the differences, outside of the product shape, just come from different habits and mostly different systems.”

Graham Tarrant of NetSol Technologies believes there is a dual aspect to pan-European technology. “I see the pan-European market divided into two camps,” he told Asset Finance Europe. “Firstly the mature markets of Western Europe, including the UK; and second the emerging countries. Systems today have to accommodate both camps; so two flavours of solution are required. For an emerging country, speed to market is critical, ‘implement and learn’ might be a suitable mantra, whereas an implementation in a mature market inevitably carries some legacy in business practice and deals done, all of which needs to be catered for in any new system.”

He warns: “Beyond the different approaches, all software houses will tell you that their software is multi-lingual, multi-currency and multi-jurisdictional, but I would say that some of the people who tell you this are the ones who don’t fully understand all that is involved”

Not underestimated

Michael Mayes, senior manager at CHP Consulting, is currently working on a European implementation for a major Swedish bank covering multiple lease sectors and also has experience of projects in mainland Europe, the US and Australia. He does not underestimate the problems faced in developing a pan-European technology.

“It’s a hard-problem business,” he says, “which requires significant investment in business change from each multi-national. We have seen many multi-nationals consider the need for a multi-national system and - then shy away from making the decision due to the level of business change required.”

He added: “For instance, such lessors must consider whether they aim to harmonise some, or all of their business organisation and processes. It’s also a hard technical problem which requires some ground-up thinking to engineer systems to provide the flexibility to be multi-national capable.”

So what are the benefits of a single pan-European system?

Cloned around Europe

Many of the earliest international asset finance systems were not actually based on a single system, but rather on multiple installations. An AS/400 or an installation of InfoLease (which seemed to be the system of choice for international lessors in the 1990s) would be cloned around Europe and each copy modified for the needs of each country. While this approach delivered some payback from standardisation it couldn’t achieve the main benefits.

For IT management there are significant benefits from a single system. Development changes, fixes and upgrades only need to be made to one version, so new features can be introduced much more quickly, and testing of changes is greatly reduced. Data centre and IT operation costs are greatly reduced and reliability increases with only having one system to run, even though it may be larger and more complex.

The bigger business benefits from a single international system come through the provision of shared services. While US-based operations can easily centralise customer services, there are obvious challenges in Europe, particularly from languages and wider business cultural differences.

Several international technology captive finance providers have set up European customer service centres in Dublin, including Cisco Systems Finance, Hewlett Packard and Dell, with others using “near shore” locations which have a plentiful supply of graduates with language and business skills.

Shared services

Even with distributed customer services, a single system allows centralisation or regionalisation of parts of the business, particularly the management and oversight of sales, credit, pricing, treasury, operations, asset management and risk. Shared service centres can also be set up for some back-office functions with less direct customer interaction, such as remarketing and finance. Indeed some technology funders get a strong advantage from re-marketing equipment at an international level, by shipping used equipment to developing markets with more demand for lower specification equipment.

At the touch of a button

Centralised management functions are greatly assisted by a single database for consolidated reporting, which can be run “at the touch of a button”, rather than having to run reports for each country then collecting them before consolidation. This can reduce reporting cycles from weeks - even months - to days, with some flash reports available in real time.

Tim Hricko of Oracle cites a captive finance company that rolled out a single instance to 14 countries in Europe. “It used to take them six months to get a report of their install base of assets throughout Europe - and when they did get it, they couldn't trust the accuracy. With the single instance in place, they now get a report in 30 minutes and it’s 100% accurate.” However, even with a single database this reporting is not without its challenges – such as the challenges of multiple currencies and exchange rates.

In the US, however, an accountant will find that the methods for calculating VAT on an invoice are the same as US sales tax. He will be unaware of the need for credit notes, different regulations for separate European countries, and the fact that legal penalties will occur if errors are made.

Enormous variations

Throughout Europe apparently standard business practices, such as direct debit automated collections, very enormously. In Norway and Denmark, for example, a direct debit becomes an electronic invoice – with customer confirmation required prior to payment being made. Lessors who are expecting that the single European payments area simplifies operations need only look at the European Central Banks’ Blue Book of payment and settlement systems for the Eurozone, which runs to some 460 pages.

Jouko Poranan, chief technology officer at 3 Step IT told Asset Finance Europe that similarities in the leasing market throughout Europe actually assisted acceptance of the company’s asset management system. “The concept was developed and evolved based on customer needs, which we found to be quite similar in different European markets. Thereby the concept fits well to all developed markets,” he says.

“In addition the demand for green values is increasing the demand for our services: we re-market more than 80% of the managed assets at the end of the initial lifecycle and re-use is widely accepted as the most environmentally sound way to take care of used assets. Our holistic approach to asset management services has also provided us with high customer retention levels. This, in turn, has supported our internationalisation through our multi-national customers.”