Clear as Day

XBRL greases the information supply chain

IE Index PeopleSoft Inc. & SAP AG Judging by decent financial results from Q3 2002, SAP and PeopleSoft are weathering the dismal IT spending conditions rather well. EMC Corp. & Sun Microsystems Inc. Significant October layoffs will go a long way toward reducing expenses, but when will revenues return? There's still no light at the end of the tunnel for IT capital spending. BI Vendors The business performance of Cognos Inc., ProClarity Corp., Business Objects SA, and Crystal Decisions continues to make software companies in other IT segments look bad. Wait until the spigot really turns on in late 2003. INDEX LEGEND HOT — On the upswing NOT — Possible trouble ahead STATUS QUO — No change

Technology didn't prevent the failure of Enron, but it could have made it easier for investors and regulators to see trouble spots in the company's financials. Developed by members of the accounting and software industries, the eXtensible Business Reporting Language (XBRL; www.xbrl.org) is a fast-maturing specification that aims to automate the business information supply chain and make it more transparent at the same time.

Although not specifically designed to prevent fraud, XBRL documents are based on an XML format that makes it easy for software applications to read and display financial facts — thus making it easier for investors and regulators to interpret the results and catch potential inconsistencies. The format also saves time in the reporting process, leading to cost reductions for companies that adopt it.

"Ninety percent of the effort for a financial process, like a loan approval, is spent on putting the data in the right format," explains Rob Blake, group program manager of finance and administration IT for Microsoft. "Only 10 percent of the effort is spent on actual analysis," he adds. One of the goals of XBRL is to change these percentages so that less time is spent on formatting the data — a task better suited for a predefined stylesheet than a human being.

If a specification's backers are any indication of its future success, then XBRL may soon reach its goal. More than 170 corporations have joined the XBRL Steering Committee, the group that oversees the specification — a good sign that technologists may soon be called upon to support XBRL within their organizations.

"This is technology making business more efficient," says David vun Kannon, co-chair of the XBRL Specification Working Group and senior manager at KPMG LLP. "It'll be up to insightful CTOs and CIOs to help companies adopt this."

XBRL is powerful, but like all technologies, it has its limitations. For instance, the specification won't keep executives from trying to break the law. "It's a technical specification, not a magic wand," cautions vun Kannon. "The benefit is that XBRL makes it very clear what a company is reporting. And that's one less rug to sweep things under.

— Amit Asaravala

Amit Asaravala is an independent journalist based in San Francisco. Formerly, he was founding editor of New Architect magazine and editor-in-chief of Web Techniques.

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