In his blog, “Where are the experts?”, Dan Roberts says: “adoption of XBRL is entering a new phase, with the number of jurisdictions growing and the number of projects and mandates expanding almost by the month.” (Mandates?) Notwithstanding this, he says that there are not many XBRL experts. But more importantly, there is little demand for such expertise. Until there is greater demand, I believe that there will be no (or little) need for certification. Indeed a certification process at this time might very well be counter-productive.
I believe that in large measure, the need for experts should be obviated by sophisticated XBRL-enabled software. Few software developers currently involved in financial or business reporting have XBRL-enabled their software. So my question becomes: “Where is the software?”. Software developers claim that they cannot develop the software because, without a mandate, they have neither assured customers once the software is developed and/or because they have no risk capital. So the question moves along: “Where are the VCs?”
I have seen only one VC at an XBRL conference (Philadelphia), and the representative asked the same question. The VC was not impressed that his confreres were not present. I believe that they did not invest because they believed that the market was not ready for “prime time”. Even now, when the market is closer to being ready, there are few, if any, investors looking to invest in XBRL-enabled software because they believe that it is the next great thing.
Software developers, who have XBRL-enabled their software, like those doing call report software for sending reports to the FDIC, were required to do so. They did save money on support, but that would not have been sufficient to do the work without a mandate. The same will happen in the UK. If XBRL-enabling software is part of the price of entry, those who remain in the field will do so.
The question is not how to motivate those who are already convinced and go to XBRL conferences. It is not how to get more XBRL experts, who would still have little XBRL work to do. It is how to convince governments and regulators to mandate XBRL. In the XBRL (and SBR) communities, we claim that using XBRL is so valuable, it should be a no-brainer. Yet if it’s such a no-brainer, why is it so difficult? And why are investors not investing in companies who want to make a business from XBRL software development?
Why should it be a no brainer? Look at the FDIC call-report project. Even though they came to XBRL early, before XBRL 2.1 was issued, before the formula linkbase, before rendering and inline XBRL, they have saved a great deal of time and money, for themselves, for the call report software developers, for the banks who report to them. Other government departments and regulators should do the same, especially if they collaborate and work together.
Look at the argument Harm-Jan van Burg and Paul Madden make for SBR. For minimal incremental additional costs for the XBRL portion, the burden of compliance for business alone should be reduced by several orders of magnitude. Yet, there is no rush to SBR and using (and mandating) XBRL for use by governments and regulators. If it’s such a no-brainer, why not? Why do the influential among us not go to the World Bank and the IMF to get them to push XBRL and SBR in the projects that they finance?
Many of us like saying that we have market-driven economies. But marketers know that we have to create that market. And many markets are created by mandates. Would we have tax software if production of tax returns was no mandated?
The most innovative and flexible software developers are often small and medium sized companies, and although some are members of XII, few if any are represented on the ISC or the other decision-making bodies. And XII does nothing to encourage them. Not to mention individual membership.
Yes, new thinking is necessary. But let’s try to direct the new thinking
- to get investment in XBRL project development
- to use whatever influence we have to clearly support getting mandated government and regulatory projects
- to expand the decision making base by placing individuals, and small and middle-sized organizations in decision-making positions
Friday, January 8, 2010
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well this is a challenging blog. I will give my 2 cents and all as MHO.
ReplyDelete1) need for seed (VC's) has nothing to do with the topic. IF it is a market and IF we can make money they will come anyway
2) mandate or not; is also sub-needed. IF business can use it (means save money, enhance processes) they will use it
3) need for consultants; IF business /regulators will like/need it they (consultants) will do their thing
4) is it successful / a market now?
that depends on the definition. One can see many projects globally, some with low investments and easy adoption. See the well known water board (NL) close loop implementation. Up and running at low costs from scratch to operational in only 6 months. Customers happy, regulator happy.
5) what is holding us back? building complex taxonomies (means accounting rule meta data structures) takes time. Not from XBRL point of view but GAAP view. Ensuring quality of the process takes time.
Small remark; the web existed in 1968 if I am correct, when did we have our first email account?
As software vendor I can say; yes developing sophisticated xbrl technology is quite some work. That is the opportunity of the small companies.
We are not that unhappy with progress and; in many environments mandates also can annoy users and ensure they will obstruct regulators. So my advice; keep up the good work, ensure we have successful projects and let's learn more about them.
Paul Snijders