InformationWeek

For Web application developers at large companies, XML is rapidly becoming a universal means of translating data passed over the Internet between different applications because it's self-describing. That means an XML message contains not only the data being passed to another system, but also a universal description of that data. Another application without a custom-data translator can open the message and decipher its contents based solely on what it has received in that message.

Without XML, linking enterprise applications from different vendors is often complex and time-consuming. Developers have to write custom code that translates each application's data format into the other's format and vice versa. XML lets both applications share that information without a lot of custom coding. That's likely to mean massive time savings and a standardized means of communicating among all applications. Over time--Microsoft will phase in its initiatives during the next two years--XML will become the lingua franca of virtually all Web-connected applications.

Early XML development is already under way, and benefits are already being realized. Application service provider Applicast in Menlo Park, Calif., used an XML-based tool to link front-and back-office applications, including those from Siebel Systems Inc. and SAP. "It's going to allow connections between different enterprises," says Andy Sayare, Applicast's VP of technical marketing. "If you're a vendor with a manufacturing partner, you want to check inventory with that manufacturer. We can build an XML query that goes out and checks that."

Even better, XML doesn't make existing interenterprise applications such as electronic data interchange systems obsolete, but it can help reduce the cost of maintaining interfaces between those systems. "For a large company that's spending millions per year keeping up its EDI infrastructure, XML could save money," says Nathaniel Palmer, an analyst with the Delphi Group, an E-business consulting firm.

"It speeds up the [application] specification process because it's text, and it's also easy to debug because it's human-readable," says Philip Carey, chief technology officer of Bluetrain.com in Walnut Creek, Calif., an ASP and developer of Internet-based groupware called Passport. More than that, XML eliminates a lot of custom code written to let each application read another's format: Just create an XML parser and you're in business.

New York investment bank J.P. Morgan & Co. recently began using a form of XML, called the Financial Products Markup Language or FpML, to trade in derivatives. The program was co-developed by J.P. Morgan and PricewaterhouseCoopers over five months in spring 1999 and was released as a working draft specification in August. FpML is a business-to-business technology that lets financial service companies trade derivatives using a standardized language to describe the trades. For example, in order to hedge the stock market, large investors might buy interest-rate futures, a form of derivative. However, those sophisticated trades were transmitted using fax machines. "Derivatives are very computer-intensive, but the way they're communicated back and forth is very manual," says Brian Lynn, VP and derivatives architect at J.P. Morgan. A consortium of investment banks--including Bank of America, Chase Manhattan Bank, Citigroup, Concordia Net, Credit Suisse First Boston, Deutsche Bank, Fuji Capital Markets, and Morgan Stanley Dean Witter--are working on FpML-based trading software for interest-rate derivatives that they can all use.

Because derivatives are highly customized, the industry previously shied away from computerizing trading for fear that the software would be obsolete before it was completed. With XML, each trade can carry its own definition, and the software will stay current because all that needs to change is the XML schema, a custom definition of the data format to be used for derivatives trading. The derivative-trading software, dubbed SwapsWire, is expected to be ready in the fourth quarter.

However, since the work began last year before XML schemas were clearly defined, the FpML 1.0 specification will use a form of data definition known as Data Type Definition. DTD is a portion of a much earlier specification upon which HTML, XML, and other Web standards are based. Version 2.0 of FpML will likely support schemas. J.P. Morgan has already simulated trades of large derivatives portfolios between software programs.

E-commerce transactions are a good application for XML. When one application wants to communicate with another, it packages a message that contains the data to be sent as well as a definition of exactly what each piece represents. A second application can read and understand this data by examining the definition and then interpreting it. For instance, the definition in an XML message may designate that the first element is a customer's name, and the second is that customer's outstanding balance. The information could be passed by a vendor's billing system to the customer's bank bill payment system. Everything in the message is text and can be read by another computer or a human, making it relatively easy for developers to debug if there are problems.

XML can also be key to providing a good customer experience in business-to-consumer Web applications. At Central Carolina Bank in Durham, N.C., for example, a new online financial portal uses XML to provide timely and useful information to customers.

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