Since XML and Web services (which are written in XML) is comprised of human-readable text, many in the industry are concerned that we face an imminent performance crisis across the network. As described in this recent article in NetworldWorld Fusion, the World Wide Web Consortium (W3C) is working on new specifications that enable the binary encoding of XML within SOAP messages. The two proposed specifications include SOAP Message Transmission Optimization Mechanism (MTOM) and XML-binary Optimized Packaging (XOP). See also W3C's XML Binary Characterization Working Group public working draft of "XML Binary Characterization Properties."
As noted in previous posts, some folks predict Web services and SOA systems may come crashing down -- or at least be severely strained -- within the next year due to bloated files.