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Reasons to use native XML features in SQL Server instead of managing your XML data in the file system would be:

(a) You need language support for query and data modification for cross-domain applications

(b) You want the server to guarantee that the data is well formed and also optionally validate your data according to XML schema

(c) You want indexing of XML data for efficient query processing and good scalability, and the use of a first-rate query optimizer

(d) All of the mentioned

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This interesting question is from Working With XML Data topic in portion Beyond Relational of SQL Server

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Right answer is (d) All of the mentioned

To elaborate: If none of these conditions is satisfied, it may be better to store your data as a non-XML, large object type, such as varchar(max) or varbinary(max).

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