Software's Top 10 2005 Trends: #1 XML

XML, eXtensible Markup Language, is everywhere.  It serves as the foundation for just about every data exchange and interface standard created in the past 5 years.  It is imbedded into the core of just about every application that has been built in the last few years.  And it is at the heart of almost every significant trend in the software industry from Service Oriented Architectures, to Message Aware Networking, to Composite Applications, to Data Abstraction.

For all its importance though, XML has always played second fiddle to HTML.  However 2005 may well be remembered as the year in which XML eclipses HTML in terms of overall importance to the web.   That’s because XML is now the de facto language of machines-to-machine interaction on the web and such interaction is exploding thanks to adoption of web services and the proliferation of web-capable devices.

In some respects XML is not very impressive.  On its face, it is a highly simplistic and very expensive way to represent data structures and interfaces.  However the last decade’s massive improvement in raw compute power has made XML a much less expensive technology and its simplicity has allowed legions of HTML programmers to easily graduate to the supposedly more complex world of data and service representations.

Now XML is evolving to the point where many new XML-based standards seek to embed within XML aspects previously only associated with complied code, such as business logic and state.   In this way XML messages are now becoming free standing bits of code and integral parts of applications.  In essence, XML messages are becoming software.

For software VCs, XML does not present many direct investment opportunities, but rather colors almost every opportunity they look at.  The existence of a universal machine-to-machine interface and data standard has huge implications for everything from middleware, to databases, to applications.  Of course at some point there will be something better than XML created, there always is, and that may create a whole new set of investment opportunities, but until then software VCs that invest without a deep understanding of the context, benefits and drawbacks of XML are shooting in the dark.

For a complete list of Software's Top 10 2005 trends click here.