The recent approval of XML schemas by the World Wide Web Consortium (W3C) could prove to be an important step in improving automated B2B transactions.
Like HTML, XML is a programming language that dates back to the Web’s early days. Unlike HTML, which only addresses the manner in which data is displayed, XML defines data in a way that other software programs, such as databases, procurement systems, and inventory control applications, can understand. This allows for a degree of automation in B2B transactions that simply wouldn’t be possible if HTML was the only game in town.
For example, with XML, a software program can recognize a document as a purchase order, send the order to the manufacturer, and order a shipping system to ship the product by a specified date.
While the growing adoption of XML holds great promise for many businesses, Frank Gillette, an analyst at Forrester Research, says CFOs should understand that their firms will need to undergo massive rE-engineering projects to benefit from the technology.
This won’t be cheap.
Companies will need to retrain existing staff and hire new people who can design and implement E-business strategies, particularly for processes that have never been fully automated, such as purchase orders.
“This means sitting down with business partners and negotiating the details of how you are going to do business electronically,” says Gillette. “People haven’t done this before. Most companies are still using faxes and phones to send and receive orders.”
Still, with the new XML standards, things are bound to get better.
“This approval means that XML is now ready for prime time,” says Gillette. “It is a positive sign that things are moving forward.”
According to Gillette, in the last year companies have started to invest in B2B integration software, which allows their systems to “speak” to the systems of their business partners.
Integration software, for example, allows one company to send a message from its own SAP enterprise resource planning system, to a client’s supply chain management system. In their best and most advanced implementations, B2B networks use XML to translate messages coming from disparate applications among several enterprises.
Companies that make E-business a priority will need to invest in integration, says Wes Rischel, a Gartner analyst. “There is no real alternative way to do E-business.”
Forrester’s Gillette comments, “To take advantage of using XML to send complex messages from one company to another, companies need to spend hundreds of thousands to million of dollars on integration software and consulting services to implement it.”
Most companies are only just beginning to spend money on integration, he adds.
There may be alternatives to purchasing the integration software, such as hiring programmers to write the code that integrates disparate applications, Rischel says. But that route may be more costly.
To be sure, some businesses are already using XML capabilities, which will now get richer and more complex as the newly approved schema standards are implemented. Those companies will not have to spend extra money on schema capabilities, says Gillette, since their integration software providers will simply update installed software with the newly approved specifications.
There are far more companies that are not using XML today, says Rischel “but they are gradually moving toward this standard.”
Regardless of a company’s degree of integration, however, Gillette contends that companies within specific industries will need to join forces to develop the XML vocabularies that will define the generic transactions that are common to their industries, he says.
Gillette cautions, however, that the approval of XML and schema standards is only the beginning of a long process.
“It will take decades for companies to implement integration, hook it up to internal systems, and learn how to take advantage of it from a business point of view,” he says.
“This is going to be a marathon and we’re at mile marker number one,” Gillette adds. “We have 25 more miles to go.”