Carriers Worry about XML Fragmentation

XML may be powerful, easy to work with, and could change business transactions forever, but even with XML standards being developed in many industries—including ACORD's standards for insurance—the rapid adoption may lead to XML fragmentation as many companies are developing first and checking standards later.

With all of the XML hype, it is no wonder that many companies—such as MetLife, Fidelity, Reuters and FedEx—have already launched enterprise-wide XML initiatives. But since many standards are not finalized, and many executives "can't afford to wait" as business pressures mount, it is important to take a closer look at how XML is being used.

"Because XML is so easy to develop and so easy to change later on, it tends to foster an attitude where businesses are deploying now and waiting for the full set of standards later," says David Wroe, co-founder ofSwingtide, Inc. (Portsmouth, NH), an XML software company, and former senior vice president and CTO at CNA. "Companies feel that is safe because it is so easy to change later on."

And even with the ACORD (Pearl River, NY) XML standards, which Wroe describes as "very strong," rapid development may lead to fragmentation. "One of XML's strengths is it is so easy to work with," Wroe adds. "It may allow people to be overly creative. There can be semantic fragmentation that can start to cut back on capability."

Susan Ousey, senior vice president, ACORD, adds, "You can enable a lot of applications very quickly with XML. But there could be fragmentation in the corporate XML infrastructure. Companies need to find a way to take advantage of XML as a developing technology and at the same time build and manage it so there are no problems down the road."

Matt Josefowicz, senior analyst at Celent Communications (New York), says that although developing with proprietary XML standards could be a problem, he has not seen "mass proprietary" XML development in insurance. "When carriers started developing with XML a few years ago, there was some concern about proprietary work," Josefowicz says. But since most carriers are now using ACORD XML specifications, the problem isn't as great.

In fact, he urges companies that are developing XML applications to present their results to ACORD to avoid the possibility of fragmentation in the future. "If an insurer develops something that is not currently part of the XML standard, it should share the results with ACORD," Josefowicz adds.

Execs Search for XML ROI

To address some of the concerns in insurance, ACORD's Ousey recently attended the Lighthouse Council Summit, an event sponsored by Swingtide, where leaders from AON Corp., Chubb Corp., MetLife and Northwestern Mutual Insurance, among others, gathered to discuss issues related to developing with XML.

The attendees concluded that although there is a definite ROI case for using XML, there were come concerns. The attendees worried about the future interoperability of XML, security and compliance and performance measurement activity between/among XML services, according to Swingtide's Wroe.

Wroe says attendees were very concerned with evaluating XML projects for ROI. "Most of the attendees are either already using or are in the early stages of adopting XML," Wroe says. "Many are concerned about monitoring traction."

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio