From the October 2010 issue of Treasury & Risk magazine

Microsoft Marches to XML

The software giant calls on its banks with a detailed timeline for moving to strictly standardized and more detailed reporting.

With its technology smarts, vast global banking network and deep treasury staff, $62.5 billion Microsoft regularly helps define state-of-the-art treasury operations. So when treasury called eight of Microsoft's primary banks to its Redmond, Wash., campus for an intensive two-day workshop in March, participants got a glimpse of the future. It's called XML. At the workshop, "we went through our strategy for partnering with banks to migrate our electronic communication to XML," says George Zinn, treasurer and corporate vice president at Microsoft. "We worked out a technology road map in detail, including all the data fields. And we got agreement on how all of us would use those fields."

Microsoft hopes to free itself from dealing with diverse proprietary bank reporting formats. The goal is to get all communication in messages that are strictly standardized and consistent, regardless of the bank. The software giant also expects its reports to be enriched with useful data about payments that today's formats can't carry, explains Anita Prasad, general manager for treasury capital management.

Microsoft, with several hundred bank accounts at more than 80 banks, is deep into a project to switch bank statements to the new ISO 20022 XML bank reporting format by February, reports Christy Barwick, a senior manager in treasury who is overseeing the project.

"We've already achieved visibility of 99% of our cash globally, but it is coming in a variety of proprietary bank reporting formats," Prasad says. "We want to move to a technology that is consistent across all banks, so we can reduce our IT expenses, simplify our infrastructure by using one channel for all banks, get a more reliable platform, receive more detailed reports, and not have to deal with individual bank upgrades," she explains.

"We'll not only be receiving everything in one standardized format, XML, but we'll be getting it all through our SWIFT connection," Prasad adds. A few other corporations are shifting to XML but continue to get messages through proprietary bank channels, she notes. "We'll be using one format and one pipe."

In addition to standardization, XML offers greater detail. "We'll be getting more detail in the traditional fields, but also getting new fields," Barwick reports. More remittance detail should lead to more auto-posting for incoming payments and also make reconciliation more automatic, she explains. Straight-through processing will increase.

Until now, banks have had more information about payments than they were able to convey efficiently. XML will unlock that previously inaccessible data and allow treasuries to use it, notes Jim Wills, senior business manager for the banking initiatives team at SWIFT Americas, who has worked with Microsoft on the project.

Treasurers need to know where the money is, and they get that information from bank reports. Using bank proprietary reporting is easy when a company has one bank, or even two or three. But when a company has close to a hundred banks scattered across different countries and with different reporting standards, as Microsoft has, it wants a more standardized, automated process, Wills explains.

The SWIFT MT formats Microsoft currently uses for bank reporting work fine, he says. "They are like analog TVs. They do the job," he says. "But the new XML messages represent the next generation, like digital, high-definition TVs. They do the job a little better, in this case by carrying more detailed information."

When XML-formatted reports arrive at Microsoft via SWIFT, they will be fed through two Microsoft middleware products, BizTalk and the Accelerator for SWIFT, which will translate the XML data into the iDoc format used by Microsoft's SAP system. Once the information is downloaded into SAP, it will automatically apply payments and populate report fields, Prasad explains. "It's all there, ready to use, when we walk in in the morning," she says.

When it comes to bank communication, Microsoft can only be as good as its partner banks. Zinn says those partners are engaging in a healthy dialogue and investing in technology.

"In the past six to nine months, banks have become more receptive to providing the services we want in XML formats," he says. "For a couple of years, corporate treasury staffs have been saying that they want a single platform for all banking services, but banks had not reached a tipping point in terms of customers asking for these enhancements. Now they are ready and offering solutions."

The challenge is to make sure that banks agree to the fields Microsoft requires and all use identical XML formats when populating those fields, says Todd Geiger, director of solutions management at Microsoft, who is heading the IT aspects of the project. The plan is to start with a couple of banks and then build out to the rest. After that, Microsoft will expand to messages other than bank reporting. "Once all our banks are onboard, we'll start using XML to do wires through SWIFT," Geiger says.

Microsoft will use both XML and SWIFT MT messages for wires. "There are nuances around the messages," Prasad explains. MT provides more rapid availability for time-sensitive wires. XML will be less speedy but less expensive. "With XML, we hope wire pricing will approach ACH pricing," she says. "We'll do all our trade settlements in XML."

Microsoft is also looking into using electronic bank account management (eBAM) XML messages and the SWIFT Exceptions and Inquiries (E&I) message set.

While details about message formats are the stuff of nerdy treasury operations, Microsoft's XML project has the attention of top management, Zinn reports. "It's definitely on the radar of our CFO," he says. "The additional fields and the greater detail within fields will make our cash flow forecasts more accurate. That's strategic. When the credit crisis hit, we had a payroll account in a bank in Iceland that froze its accounts, and we had to scramble to find another way to meet payroll. Preventing that is strategic."

SWIFT provides global standardization around messages between banks and corporates, and now XML is making those messages a lot more detailed, says SWIFT's Wills. "Granularity is the new standard, and Microsoft is at the forefront in bringing this innovation."

He notes that Microsoft is part of the Common Global Implementation (CGI) initiative, a group of companies and banks working to ensure a consistent approach to implementing new standards. "It's so easy for individual players to introduce small deviations or exceptions," Wills says. "The role of CGI is to make sure everyone interprets the standards in exactly the same way." And that, he insists, "is a really big deal."


Advertisement. Closing in 15 seconds.