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SGML (ISO 8879), or the Standard Generalized Markup Language, is the international standard for defining descriptions of structure and content in electronic documents.
XML is a simplified version of SGML; XML was designed to maintain the most useful parts of SGML.
Whereas SGML requires that structured documents reference a Document Type Definition (DTD) to be "valid," XML allows for "well-formed" data and can be delivered without a DTD. XML was designed so that SGML can be delivered, as XML, over the Web.
What does XML mean to SGML product vendors? On the technology front, SGML products should be able to read valid XML documents as they sit, as long as they are in 7-bit ASCII. To read internationalized XML documents, (for example in Japanese) SGML software will need modification to handle the ISO standard 10646 character set, and probably also a few industry-but-not-ISO standard encodings such as JIS and Big5. To write XML, SGML products are going to have to be modified to use the special XML syntax for empty elements.
On the business front, much depends on whether the Web browsers learn XML. If they do, SGML product vendors should brace for a sudden, dramatic demand for products and services from all the technology innovators who are, at the moment, striving to get their own extensions into HTML, and will (correctly) see XML as the way to make this happen. If the browsers remain tied to the fixed set of HTML tags, then XML will simply be an easy on-ramp to SGML, important probably more because the spec is short and simple than because of its technical characteristics. This will probably still generate an increase in market size, but not at the insane-seeming rate that would result from the browers' adoption of XML.