How Money Talks

xBRL will make the retrieval and manipulation of financial data much easier -- eventually. Also: spending on technology projects falls, and IBM hop...
Scott Leibs and Alix StuartOctober 1, 2001

Time to learn another acronym. Later this month, a new version of xBRL, a subset of the XML Internet language intended to standardize how financial data is shared among Web-based applications, will be released. Leading makers of accounting software say they will incorporate xBRL-tagging capabilities into their products by the end of the year. This will go a long way toward transforming xBRL from a promising concept to a useful reality, but experts caution it will be several years before the code reaches its full potential. Until then, companies that want to exchange and analyze financial data over the Internet must continue to rekey or repackage much of it.

To date, only Morgan Stanley Dean Witter has filed xBRL-tagged data with the Securities and Exchange Commission, having filed its February 10-K in xBRL format as a one-time pilot project. Given that the firm filed nearly 2,000 documents with the SEC last year, it’s not surprising that it is adopting xBRL cautiously.

Ditto for Fidelity Investments, which is looking into possible applications of xBRL but has yet to file an xBRL-coded document. On the receiving end, financial statement analysts like Moody’s and Bank of America say they are readying internal systems so that they can pull in and analyze xBRL documents. For investors, Edgar Online already has xBRL-tagged documents from more than 80 companies in its repository as a result of a research project, and is eagerly seeking more. “This is an opportunity for companies to show they are truly investor-friendly,” says Liv Watson, director of xBRL at Edgar.

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Adopting new technology is rarely easy, but companies have plenty of incentives. Today, a company rekeys data into separate reports for bankers, the SEC, and other constituencies. If all those reports were sent via the Web in xBRL, they could be pulled from a single meta-report. And since each item, such as net income, would need to be entered and tagged only once, the chance of typographical or other errors would be greatly reduced.

Despite those advantages, most firms are likely to take a wait-and- see approach. “At this point, there’s no great advantage in using xBRL,” says Miklos Vasarhelyi, an accounting professor at Rutgers Graduate School of Management. “You need a critical mass of users and analytical tools to make the data really useful.”

The good news is that software vendors want to make the xBRL tagging of financial data as painless for finance departments as possible. “The user has to know literally nothing about xBRL, except how to point and click on appropriate tags,” says Rob Blake, director of product strategies at FRX Software, a wholly owned subsidiary of The Microsoft/Great Plains Business Solutions division. FRX’s next release, slated for the end of the year, will let users tag data with version 1.0 xBRL code in a single step, he says. Efforts are also under way to perfect a tool that can retroactively convert text-based data into xBRL. Companies can try it out at bin/demo/online/

Some international government officials, especially Singapore’s, are looking to make xBRL mandatory for public companies within the next two years. Such requirements are much less likely in the United States, however. “We do support the idea of a standard for reporting financial data, and are carefully watching xBRL evolve,” says SEC spokesman John Heine. “However, until it becomes widely accepted and there are [sufficient] products on the market, it would be premature for us to endorse xBRL.”


And You Thought Y2K Was Grim

Pity the CIOs who report to CFOs these days; they must not be relishing the Monday morning meeting. In its fourth annual survey devoted to technology issues, Financial Executives International (FEI) uncovered a bleak picture of reduced ambitions, confused direction, and general stagnation.

Even E-business, which has seemed relatively immune to spending cutbacks, was found to have lost some of its luster. Last year, “determining the appropriate use of E-commerce” was the top priority among the hundreds of senior- level financial executives who responded to the survey. This year, that mission drops to number seven, usurped by “identifying the appropriate level of technology investment.”

Fair enough. E-commerce requires investment, and times are tight. Besides, it may be that companies have moved so aggressively to develop their E-commerce strategies that many believe they have, in fact, determined the appropriate use.

Whether the priority is to determine the right E-commerce investment or the right technology investment overall, companies seem hard-pressed to quantify it after the fact: 58 percent say they don’t effectively measure returns on technology investments.

Jerry Boltin, national practice director for business intelligence at Computer Sciences Corp., says that while companies may not be confident in their ability to measure the ROI of technology projects, they are putting all discretionary spending through various forms of formal analysis. “It may not be as sure as buying a bond at 7 percent,” he says, “but it does reflect a desire to make sure that every dollar counts.”

Those dollars are currently in shorter supply, as 41 percent of the respondents said they feel “significantly constrained” when it comes to buying or developing new applications. Short-term earnings goals, staff resource limitations, and the need to spend on maintenance and infrastructure were the top reasons cited for the constraint. That’s on a par with the most recent figures from Morgan Stanley Dean Witter, which polls approximately 200 CIOs each month on their technology spending plans. In August, MSDW found that Windows upgrades on desktop computers and servers were the top priorities, with E-commerce initiatives tying for third place with network upgrades and a move to the latest version of Microsoft Office software.

The FEI survey did find one area ripe for more spending: outsourcing. That’s consistent with CFO magazine’s own survey results, which found that companies are interested in a wide range of emerging options in this arena. The FEI survey anticipates double-digit growth in several forms of outsourcing, notably IT, production, and human resources.

— Scott Leibs


Finance executives rank their top IT issues.

  2001 2000 1999
Identifying the appropriate level of technology investment 61.2% 56.4% 60.0%
Prioritizing technology investments 55.3% 47.4% 73.3%
Identifying how IT can improve or influence business processes 53.3% 53.3% 53.3%
Establishing/maintaining effective dialogue between IT and users 53.1% 49.2% 46.7%
Using technology to drive business change 39.7% NA NA
Upgrading/replacing legacy systems 39.4% 48.3% 46.7%
Determining appropriate use of E- commerce 13.3% 58.4% 32.4%


How companies describe their involvement with E- commerce.

  2001 2000 1999
Conducting a significant amount of business (>50%) via EC 8.4% 4.2% 6.2%
Conducting a moderate amount of business (20-50%)   via EC 14.4% 14.4% 17.7%
Piloting EC applicatons on a small scale (<20%) 40.3% 51.5% 32.4%
Not currently involved but considering it 27.1% 24.0% 31.4%
No involvement and have no plans for it 9.8% 5.2% 12.3%

Source:  FEI/CSC


Is Grid a Lock?

Big Iron appears ready to give way to Big Pipe. Over the past few months, IBM has unveiled several iterations of its “Grid” computing architecture, a system that tackles complex problems by harnessing the processing power of many computers connected by a high-speed network.

Sound familiar? Arpanet and NSFnet, forebears of today’s Internet, were designed in just that way and for just that purpose. This time around, the computers are more powerful and the bandwidth vastly wider, but the concept remains the same. And, just as those early networks began by serving a small, highly technical audience and evolved to meet the needs of computer users worldwide, Grid computing will soon move from a specialized core constituency to a broad base of corporate customers. Such are the hopes at IBM and several of its partners, at any rate, which argue that companies can benefit either by building their own Grids or by renting time on massive Grids operated by IBM.

In dividing a computing task across a network of machines, Grid computing also revives the concept of parallel processing, which was widely viewed as the future of supercomputing in the late 1980s and early ’90s. Deciding just how to parse the workload among many processors has long been a thorny software challenge, one that Grid computing addresses with a layer of middleware developed by Globus, a nationwide consortium of academic and research institutions. The Globus tool kit determines the requirements of a computational task and decides where and how to run it. John Patrick, vice president of Internet technology at IBM, says that in many cases, a researcher using the Grid won’t even know where the data resides, let alone exactly how a particular job is being processed.

Indeed, who could keep track? The Grid being built for the National Science Foundation (at a cost of $53 million) will perform 13.6 trillion calculations per second, making it 1,000 times faster than IBM’s chess-playing Deep Blue. Such power will no doubt come in handy for genetic research, weather modeling, and other traditional supercomputing tasks, but where does that leave, say, a bumper manufacturer? Wes Kaplow, the chief technology officer for the government services arm of Qwest Communications International Inc., says that companies in the pharmaceutical, energy, and auto industries have an immediate need for the Grid’s capabilities.

Most companies, however, do not, but IBM is positioning the Grid as not just a supercomputer but a computing power plant that could operate like a utility, dispensing its services as needed. Some companies, Patrick says, will rearchitect their own computers into a Grid, maximizing investments in storage, software, and processors. That is likely to be expensive. A more common scenario may be that companies will buy a range of computing services from massive Grids operated by IBM. In fact, the company has already linked its own research centers into a Grid, and plans to extend that effort to virtually all of its internal computing resources. As an outsourcing powerhouse, IBM’s Global Services unit is a logical candidate to rearchitect itself around a Grid and sell every computing function imaginable as a service (so-called E-sourcing).

Patrick says he’s confident that Grid computing will become a part of corporate computing within two years, winning business not only through economies of scale but because it is designed to tackle any workload, thus sparing companies the unpredictable performance of the Internet. Although E-business has lost some momentum, there is no doubt that companies have become extremely dependent on Internet connections to transmit data and run applications, and many have already learned that such reliance makes them vulnerable to traffic jams. Grid computing, with its massive pipelines and self-managing software, can, in theory, easily meet any demands placed on it.

Today, Qwest’s Kaplow is quick to admit that “you don’t need a 10-gigabit pipe to connect two Pentium PCs.” And early adopters will face the steep price tags that always greet those on the leading edge. But IBM vows to take Grid computing from the esoteric ranks of supercomputing to the mainstream of corporate IT as fast as an $88.4 billion company can. –S.L.