But XML's flexibility has some downsides. Such a "Swiss army knife" technology can lead organizations into vain efforts to do too much too fast, thinking they can solve all their compatibility problems with a single initiative. "XML will not solve all your problems. It just provides a foundation for interactions between systems," says Jackson He, senior e-business architect for Intel Corp.'s eBusiness Solutions Lab.
Worse, organizations wanting to conduct routine XML transactions with industry trading partners either have to make up the definitions for such interactions on a partner-by-partner basis, or use one of the nascent industry-based XML specifications. Among the most advanced: the electronics industry's RosettaNet specifications; the Financial Information Exchange Markup Language, or FIXML, for the financial services industry; and those from ACORDthe Association for Cooperative Operations Research and Developmentfor the insurance industry.
According to RosettaNet, all its more than 100 board member companies have implemented XML exchanges with at least one supply chain partner, and most have implemented several. The largest companies, such as IBM, Intel, Compaq Computer Corp., Cisco Systems Inc. and Sony Corp., have automated many of their large supply chain relationships. Intel, IBM and a few others have gone a step further and automated exchanges with medium-size companies. By the end of 2001, Intel had 50 supply chain relationships in place out of a possible 1,000. But few RosettaNet members have started using XML with small companies with $25 million a year or less in revenuesprimarily because adoption is not cheap, and many smaller firms simply can't afford to be early adopters.
To compensate for such problems, RosettaNet leaders are developing the standards, both internal and external, to help the little guys catch up. "We're taking steps to drive these standards ever deeper into the high-technology supply chain," says Mary Schoonmaker, vice president of marketing and strategic development for RosettaNet. With each extension to more kinds of companies, she adds, the cost of implementing automated data exchange goes down as organizations reuse the same XML components over the Internet.
Despite the increased use of such enterprise-wise standards in certain industries, many supply chain partners will need to be carried kicking and screaming into an XML world. Adoption of XML standards has already followed the pattern of EDI 20 years ago: The "800-pound gorilla" organizations at the centers of industry-specific supply chainsCitigroup Inc.'s Travelers and The Hartford Financial Services Group in insurance, Intel and IBM in electronics, and United Airlines Inc. and American Airlines Inc. in air travel, for examplemust jump on the bandwagon to kick-start adoption. Intel was one of the first to implement RosettaNet specs in the electronics parts industry. Terry Spires, manager of Intel's Industry Solutions Group for automating partnership relations, said that by taking that first step, his company gave its many partners in the electronics industry the confidence that XML would be standardized. Adopting XML is still expensive, he says, and many companies want to see a dominant figure move before they commit their own resources.
In financial services, the picture is murkier. Plenty of financial service providers have implemented XML. But too many companies are trying to be the first to gain a competitive advantage with XML-based systems, and then force their own standards on their partners. The result: confusion, acrimony and duplication of effort, says Ron Schmelzer, founder and senior analyst with XML market researcher ZapThink LLC. In some cases, notes Gartner analyst Mary Knox, the service provider is still using an internal XML system that doesn't jibe with the industry standard it has adopted externally. And it's critical for companies in financial services to solve those problems. "The consequences of not getting there by 2003 means you, as a financial service provider, will have slower response times to customers, you'll be slower to market with new products, and you'll have less ability to work with new partners," Knox says.
Even if the switch to XML generates consensus on specifications inside the industry, that still leaves the task of getting industries to talk to one another. Newport News Shipbuilding, for example, will integrate its data internally and with suppliers by upgrading its enterprise resource planning system. But there's no XML standard for shipbuilders, so the company will have no way to communicate with banks and insurers, notes Kenny Roberts, manager of Newport News Shipbuilding's information technology business unit, Naptheon. XML-based communication with suppliers would lead to "greater reliability of parts and equipment delivered to the shipyard and better tracking of resources in building a ship," says Roberts. But converting just part of the process would mean falling back on paper processes to deal with other parties. The result: "No speed up, no effect on the delivery date," he notes.
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