BUSINESS CASE STUDY
Prepared by: B00378922
1. What is the business value of XML for companies like Fidelity?
Fidelity investments, is a $11 billion financial major and the largest mutual fund
company in the United States , . With the growth of the internet and web based
systems, the company, like many other organizations of its kind, had to deploy a range of
middleware applications like Sybase Enterprise Connect and BEA Tuxedo , to integrate
the web interface to its back end legacy systems. When XML emerged, Fidelity initially
planned to have a similar architecture to interface XML applications with its back end
systems. This would have created another layer to its existing array of data integration
servers and applications. However, Fidelity took a bold decision here to embark upon a
standardization drive to make all of its corporate data XML compatible. This would mean
that employees and customers have access to quicker (owing to a simpler interface) and
standardized data, regardless of where the data resides.
Implementing a uniform standard drastically reduces the complexity of its systems,
making them easier and cheaper to maintain, in addition to opening up opportunities to
freely exchange data with other organizations which have embraced this industry
standard. The business value of such an implementation is multi-fold, giving it a
considerable edge over competition in cost, services offered and scalability of systems:
Cost: The primary objective of implementing a unified standard was to
eliminate the numerous applications residing for the purpose of data
translation. The successful implementation of XML will see lesser number of
interfaces between the web interface systems and the back end mainframes,
cutting costs on Hardware and Software maintenance and upgrades. The
migration has already saved the company millions of dollars in infrastructural
and development costs , since there are fewer proprietary translation
systems that have to be developed for the communication amongst the
company’s many systems. Additionally, there are indirect cost benefits such
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as freeing programmers who were earlier tied up with the development of
interfaces to more important business functions. Also, a shift away from the
traditional approach of developing proprietary protocols to an open standard
means that lesser investment is called for in terms of training and development
of new recruits. XML expertise will be easier to obtain from the market over
training freshers with the company’s existing proprietary messaging
Value proposition: Minimising the middle tier in application integration
implies that there are fewer layers between applications serving them faster to
customers and employees than competition. This is particularly evident in
time critical applications like Online trading where Fidelity has displaced
Schwab winning the highest rating in customer satisfaction amongst online
trading firms  (source: J.D. Power & Associates).
A potential chance also exists in implementing a single “sign on”, once all
system can communicate with each other in a common protocol. This will
save its customers and employees the trouble of separately logging into each
of it systems, making its front end systems more user friendly, increasing
productivity for its employees on one hand and improving customer
relationships and an opportunity to increase its customer base on the other.
Competitive Edge: Fidelity has the “First mover” advantage over competition
in implementing XML.
“Fidelity is years ahead of other companies in leveraging XML to standardize
corporate data What they've done will take the mainstream five years to do and
the conservative companies 10 years. What they've done will take the mainstream
five years to do and the conservative companies 10 years” (source: Roy Schulte,
Gartner Group) .
Fidelity has the opportunity to leverage this edge to its advantage since all
indications point towards XML being the language of communication systems.
The major factor hindering industry bigwigs from jumping into the bandwagon is
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the high cost of implementation which will take a hit on the immediate quarter’s
earning’s even it proves beneficial in the long run. Fidelity being a privately
traded firm can focus on its long term strategies and does not have to worry about
pleasing its share holders. With this advantage, Fidelity can be comfortably
placed by the time competition catches up with it, which is for most companies
happening in a phased manner .
Enhanced Vendor relationships: The open architecture of XML will enable
Fidelity to exchange data with vendors without having to rely on propriety
access methods. An emerging concept called “Portlets” can be used to send
and receive corporate data easily, making the Vendor Management system
seamlessly integrate with the rest of the enterprise .
What are the business risks posed by the use of a new language like
Despite the promise that XML holds, as with any other emerging technology, there are
risks associated with implementing new technologies, those related to security, loop holes
and general teething troubles. In addition, XML, because of its open architecture and text
based communication, has its own share of risks which can be exploited unless existing
security software systems are appropriately geared up to meet these. Some of the critical
Huge investment: Fidelity is betting big on its XML venture. It spends 24% of
its Gross revenue on IT . This at a time, when organizations are cutting back
on IT spending. While it’s optimism is credible given its clean track record,
XML being a new technology, has no prior success stories making Fidelity the
scapegoat in the industry.
Technical limitations: The pros of XML having a simple structure is annulled
by the complexities posed in translating XML documents and the testing
effort required (source: CRN). XML is designed for simple data
communication involving small documents. How it fares with large volumes
of data that is routine in a company like Fidelity remains to be seen.
Additionally, since XML is more generic compared to the proprietary
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technologies that it is set to replace, which although complex is very good at
doing the task that it was designed for.
Security: This remains to be the single largest stumbling block in the way of
XML implementation for other organizations. Being a new technology,
security holes are not addressed completely by today’s firewalls . Since
XML uses plain text for communication, encryption is required at the
transmitting and receiving levels to maintain confidentiality of data.
Standards: XML is in its nascent stage with very limited developer support.
Standards are still being developed. Hence, at this stage Fidelity will have to
develop its own standards to go ahead with the implementation and will have
to later confirm to standards defined by international governing bodies so as to
fully harness the potential of XML. This would put an additional burden of a
future conversion although they should be minimal, thanks to the modular
structure of XML.
How would you advise a business that is considering the use of XML
in its e-business and e-commerce applications? Explain your
For a business that’s considering venturing into the XML arena, it has to weigh out the
benefits and limitations that the technology poses before giving a green signal to its
implementation team. While XML has certain advantages that make it an undeniable
replacement for existing data interchange methods, it should not be at the cost of
confidentiality of information or threatening to the stable legacy systems that most
corporate infrastructure is built upon. The need for XML varies from case to case
depending on amongst other factors, size and complexity of the existing system, type of
industry and the IT dependence of the organization. Some of the deciding factors include:
Complexity of existing systems: The benefits of migrating to XML are more
pronounced when the existing system are diverse and do not have the capability
to communicate with each other. Organizations which source all their IT
requirements from a single vendor will in most likelihood already have this and
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migrating to XML may not bring about any noticeable changes to their system
Openness to XML: Certain systems have too closed an architecture to be able to
incorporate technologies outside what they were designed to handle. This is
particularly true for legacy systems. In such cases, it would not be advisable to
migrate all interfaces to an XML platform. This would call for a phased
conversion of systems, porting systems which have an open architecture first.
True, this will not allow the organization to completely reap the benefits of XML
but such a compromise is needed to safeguard the stability of system.
Volume of data: XML is designed to handle relatively small amounts of data on a
single task web service. For systems that transact huge volumes of information in
a single go, it is recommended that restraint be exercised before going in for an
all and out migration.
Security vulnerabilities: The security aspect has to be taken into account before
deciding on a major technology overhaul. With the industry patronage, XML is
bound to grow and stabilize in time and the investment will be worthwhile.
However, if the information exchanged is highly confidential, or the system
mission critical, it would be a good idea to wait until all loopholes are addressed
and adequate developer, hardware and software support is obtained before going
in for an XML implementation.
To sum it up, the decision on adopting XML depends on the industry and varies from
organization to organization. A phased and basic implementation would be
recommended for almost any organization. Over and above that would require
careful analysis of the forces that can influence it.
XML has the power to integrate systems like no other technology has ever before.
Considering that a bulk of the IT budget is spent on system integration, the decision of
Fidelity investments to go in for a complete overhaul of their systems is commendable
and is a bold step towards increasing its competency. The budget, despite being
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enormous, is “healthy” for a company which has over a trillion dollars  (source: Wall
Street Journal) in assets. The key here is to perform a complete feasibility study of all the
existing interface systems to learn how well they can cope with the changes that XML
would bring about, including those relating to security and infancy of the technology. The
above factors not withstanding, Fidelity investments has all the controls right to exploit
the flexibility and competitiveness that XML has to offer. It also has the unique benefit of
being a privately held company, reducing its accountability to shareholders for the sake
of quarterly results which can be traded for long term benefits.
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 ZDNet News, “Fidelity's plunge into Web services”, December 3rd, 2002,
 Internet Week, “Retrofits all data for XML”, August 6th, 2001,
 CRN, “Hurdles abound in the path to XML integration”, Oct 20th, 2003,
 Forum Systems, “Forum Systems and Captus Networks Partner to Provide Web
Services Intrusion Detection and Prevention Solution”, Nov 19th, 2003,
 Wall Street Journal, “Start Leading is Fidelity’s mantra”, March, 2001,
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