Web services represent a substantial development in the
enterprise computing market. Vendors large and small are betting
that this emerging technology trend will take hold, enable new
possibilities for e-businessand reinvigorate enterprise
software spending. Do web services truly represent a dramatic
shift in how companies will engineer their business processes,
or are they simply the latest flavor of the technology
industry's beloved "new new thing?"
In answering this question, this memo will:
- Provide context for the developing landscape,
- Explain the business value behind web services, and
- Look ahead to emerging challenges and areas of opportunity.
Author's note: This essay assumes that the reader is generally
familiar with the basic concepts and technologies behind web
services (e.g. SOAP, UDDI, WSDL, XML, etc.). For an introduction
to these ideas, please see The Stencil Group's recent article,
"Defining Web Services."
Web Services and the "New New Thing" Rap
Software vendors see tremendous opportunity for their businesses
by providing "web services" solutions, but in their haste to
spark a new market and accelerate demand, they also have created
substantial confusion. Some of this confusion is normal for an
emerging technologyit is no secret that marketing new
technology requires an educational sell.
However, much of the confusion derives from the vendors'
emphasizing different aspects of the same basic framework. In
particular, the major vendors' presenceHP, IBM, Microsoft,
Oracle, and Sunhelps to raise awareness, but they all are
driven to defend their existing franchise. Each has an agenda to
advance. While each talks about "web services," the approach and
benefit differs. HP pushes their existing hardware and
developing software businesses, IBM emphasizes middleware and
connectivity, Microsoft touts benefits for consumers and small
business, Oracle sees extending its e-business suite, and Sun
paints a picture of network-connected hardware devices. By
addressing similar topics in different voices, they have
succeeded in exciting the market but have also left many
listeners confused about what, exactly, web services are.
Some may wonder if this confusion really indicates that
charlatans are at work, commanding us to ignore the man behind
the curtain. Before web services will succeed, the model will
encounter extensive skepticism as the "New New Thing," simply a
technology fad designed to continue the cycle of hype,
investment, and disappointment. Indeed, in the aftermath of
1999-2000's B2B explosion, enterprise customers and venture
investors will be justifiably suspicious about web services and
its new new crown. Web services' advocates will even amplify
this skepticism by acclaiming web services as the silver bullet
that solves every IT and e-business problem, not to mention
curing the common cold.
Web Services' E-Business Context
Web services sit at the intersection of many trends in business
and information technology (see Figure 1, "Drivers of Web
Services Adoption," below). During the past decade, technology
has marshaled internal operational processes to ever-increasing
efficiency and has changed the way customers interact with most
businesses. Large corporations have simultaneously merged with
former competitors while outsourcing non-core operational
activities. In IT departments, too, the model has shifted from
in-house development and single-vendor, homogeneous approaches
to a best of breed and heterogeneous approach. Meanwhile,
billions of dollars have been invested in enterprise and
e-business software, the Internet became ubiquitous, and XML
became a standard for describing and transferring data.
Figure 1: Drivers of Web Services Adoption
These contextual forces have created the opportunity for web
services, a model of e-business integration in which discrete
tasks within e-business processes are distributed widely
throughout an organization and among its trading partners on top
of a clearly-defined, standards-based infrastructure. (Please
see "Defining Web Services" for a more explicit definition of
the technology behind web services.)
Web Services Adoption
Although momentum clearly is building, web services are
fundamentally still a promising technology, not a packaged
business application. Indeed, we expect that while web services
will begin making immediate inroads into individual e-business
initiatives, CIOs will require at least twelve months to
evaluate the pros and cons of the technology before web services
are implemented in a major way (see Figure 2, Beating the New
New Thing Rap?" below).
Figure 2: Beating the "New New Thing" Rap?
Ultimately, the positives will outweigh the negatives, and web
services will succeedbut not before more than one pundit
has declared web services to be a flop. So many of the factors
driving web services adoption will also distort perception of
its success; Cringely's Law the observation that
technology changes far less in the short term than we expect,
but that it has a far greater impact in the long term than we
realizewill certainly apply to web services (as it has to
XML and even to the web itself).
During the next year, hype about web services adoption will race
ahead of reality. While growth (and expectations) are perceived
as linear, actual adoption will creep ahead until a "tipping
point" is reached, at which adoption will surge exponentially
(see Figure 3, "Web Services Market GrowthReality vs.
Figure 3: Web Services Market GrowthReality vs. Perception
Based upon past behavior and input from decision-makers today,
we anticipate that the web services tipping point will occur
12-18 months ahead, or in mid-late 2002. By then, the vendors of
hype certainly will have exposed web services as a "fraud" and
will have moved on to the next new new thing. The fact remains,
however, that following the tipping point, the impact of web
services will have far exceeded the perceived or anticipated
impact. This is similar to the adoption of XML as the lingua
franca for data exchange.
Seeing Beyond the New New Thing
Tipping points aside, investors and prospective customers
certainly should be evaluating web services in context of
previous instances of enterprise software. Given web service's
heritage, B2B e-commerce solutions represent a likely model for
comparison. While the B2B boom delivered a phonebook full of
companies promising new efficiencies, nearly every net market or
supply chain solution launched in the past two years required
major changes in business processes, human behavior, and
Given their confusion of "disruptive technologies" with
"difficult to implement software," it's clear in retrospect that
many startup B2B companies exhibited more hubris than real
impact. Truly disruptive technologies are seductively easy to
implement and deceptively restrained in their focus. Web
services fit this mold far better than B2B net markets; web
services offer incremental implementation costs with dramatic
potential for maximizing the efficiency and flexibility of
Although we are very optimistic about the long-term prospects
for web services, undeniable challenges remain the short term.
Today's greatest challenge is education; IT adopters are not
clear on what web services are and how they can create genuine
business impact. Beyond education and hype, vendors will need to
deliver practical tools, products, security, and
interoperability before adopters will deploy web services
Although the banging of the web services drum comes at a
pricethe new new hype that will emerge is due in great
part to the support of the vendors' marketing machineson
balance, Microsoft's and IBM's significant marketing efforts
will benefit the broader web services movement. IBM, in
particular, will help ease concerns at most of the Fortune 500
that web services are all show and no substance.
After the smoke clears, the bottom line is clear for web
servicesthis technology model works, decreases integration
costs, and increases flexibility. These benefits are too
tangible to ignore, and although there are many challenges to be
overcome, web services ultimately will drive a major shift in
software development, integration, and customization.
The Business Case for Web Services
To put it simply, enterprise software is purchased and
implemented either to cut costs or to help generate revenue. Web
services are able to deliver both benefits by enabling
businesses to operate much more dynamically. Web services will
allow companies to integrate and customize their existing
enterprise applications and capitalize on previous investments
in people and technology, while at the same time allowing
business people to make decisions based on business criteria.
At base, web services deliver value by reducing the time, costs,
and level of effort required to connect softwarecreate
remote procedure calls (RPCs) in programmers'
parlancewithin an organization and between trading
partners. More generally, this increased flexibility will be
manifested in three areas:
- The actual connections between data sources,
- Customization of applications, and
- The business relationships that the technology connections enable.
Web Services Address Real IT Challenges
The concepts behind web services are a logical extension of what
has been happening in the IT industry over the past decade,
namely the rise of middleware and the application server. Web
services will have a major impact on the way businesses
integrate with each other, as well as integration of internal
assets. Existing integration solutions are both rigid and
expensive. Web services promise to accomplish many of the same
objectives, but in a faster, easierand
Global 2000 companies have made substantial investments in
technology. These investments have made the typical large
business a very heterogeneous IT environment. When deploying new
software, companies cannot rip out and replace their existing
systems. Because companies must integrate existing and legacy
technical assets with the new applications, this creates
substantial complexities. These complexities are amplified by
the need to work with partners, creating projects with external,
as well as internal, integration demands.
The integration solutions to date while powerful have been
rigid, time-consuming, and expensive to deploy. This rigidity
forces some business decisions that are less than ideal. IT
departments and business managers are forced to make trade-offs
between what a company wants to do and what the technology team
can do, in the time allowed. This often leads to an overextended
Enterprise Application Integration (EAI) is the preferred method
for integration today. EAI is a one-to-one, or point-to-point,
connection between two applications or systems. It is an
excellent solution for many business requirements. However,
similar to EDI solutions, EAI solutions are very expensive to
implement. Goldman Sachs estimates that $198 billion was spent
on outsourced EAI system integration last year, with an
additional $26 billion on B2B, or inter-company, integration.
The minimum integration costs start at $1 million, but can go up
from there quickly. Gartner studies have shown that for every $1
of middleware software that is sold, a consulting firm receives
between $5 and $20 from integration work.
Software deployment is only a part of the equation for the total
cost of ownership on software. Software maintenance accounts for
60-80% of the total costs. These integration projects are
developing hard coded connections to attach two distinct end
points. If one end point changes or further customization is
required, the code may need to be modified on both ends.
There is a human cost to adopting new technology as well. This
includes having to hire consultants or train internal IT staffs
on a new application. From an allocation standpoint, integration
consumes too many resources. Gartner estimates that the average
programmer spends 65% of their time "gluing" applications
Web services reduce the level of effort required for IT
programmers to glue applications together, as well as allow less
skilled programmers to handle the new integrations. As a result,
more skilled programmers can focus on developing code and
business logic to solve more interesting problems.
Web services are built on existing and emerging technology
standards, including HTTP and XML. This bodes well for future
adoption as these standards enable much more firewall-friendly
distributed computing than previous solutions (e.g. CORBA,
DCOM). To this point, the groups driving web services have kept
a lowest common denominator focus while designing their
solution. This accent on simplicity may be the best decision
that has been made and ultimately may make the difference
between web services being another CORBA or DCOM, or it being
the next XML.
Businesses Reap Benefits
Web services will improve communications between business units,
partners and customers. Today, there are extensive resources
being applied to make sure that, internal business units and the
assets they own are integrated. Current solutions are
inefficient. If companies do not connect their internal assets,
it could hinder their ability to partner in the near future,
which could have a greater impact on the corporation's overall
ability to compete.
Businesses can extend the life of legacy applications and
programmers through web services. Businesses can take existing
legacy applications and put them into a web services "wrapper."
This makes the legacy application behave like it was a modern
piece of code. Because programmers can continue to develop
programs they know (e.g. Java, PERL, Visual Basic, etc.),
companies can extend their investment in programmers as well.
Web services allow companies to break down their existing
product offerings into smaller blocks or elements using web
services wrappers. After companies have experience leveraging
web services, they will more seriously evaluate web services as
a revenue generator opportunity. For example, a logistics
company might break down their offering into shipping, billing,
currency translation, etc. Web services would allow them to
offer any one of these components to other companies.
Web services are the next evolution in technology development.
Corporations need to integrate and customize their own
applications, as well as connect with their partners. Web
services achieve these objectives in a way that the IT
department will be very comfortable with, given the
standards-based and component nature of the technologies
see alsosidebar on web services' demonstrated value
What Comes Next for Web Services?
Web services will drive a shift in enterprise computing and
raise questions for the existing software ecosystem. The Stencil
Group projects that the initial adjustment period will be coming
to an end by mid-2002 (see Figure 4, "Web Services Adoption
Figure 4: Web Services Adoption Timeline
Companies that have made smart investments in resources and time will begin to see some positive results from their efforts. Others will have to get moving faster or risk finding themselves in the role of technology laggard. Looking ahead to this initial period of adoption, we make the following predictions:
- Web services first adopted internally. Web services will
be adopted within enterprises before moving beyond the
enterprise. When a company owns both pieces involved in the
project, it is infinitely easier to control and execute
successfully. These initial projects will involve
non-transactional scenarios, until CIOs become more
confident in web services' abilities. Once web services have
proven themselves internally, it will move to solve more
complex business and technical problems outside of the
- Information-intensive industries go first. Web services
are more likely to be adopted in information-intensive
industries, which rely heavily on partnering or channel
sales, and have aggressively deployed technology to achieve
competitive advantage in the past. The Stencil Group posits
that financial services, ISVs, insurance, telecom, and
travel will be some of the earlier industries to adopt web
- Service model implications. A services delivery model
will force a change in the way enterprise software is priced
and sold. As opposed to large, expensive and up-front price
tags, customers will pay for most service-based software
over time in a subscription or usage model. This will result
in less direct sales and a greater reliance on channel
partners to sell software at a reduced price point, as well
as a reduced cost of sale. Finally, customers' risk of being
locked-in to a software provider, are dramatically mitigated
in this model.
- Business users and "meta-applications." The Stencil
Group is skeptical of such potential trends emerging. In
theory it sounds great, but in practice there are many
challenges. Essentially, the idea is that web services will
aggregate a wealth of components for a business user to
choose from, similar to a menu at a diner. The business user
will construct a "meta-application" from these smaller
components. To obfuscate all of the complexity behind this
menu is not an insignificant task. Although some business
users may have the skills required to execute this vision,
The Stencil Group is betting that most do not. Lastly, it
seems to require a pretty substantial change in behavior for
the business or marketing executive, which creates
- Interoperability. Although some hiccups will occur, the
value of interoperability to the major vendors is too clear
for them to risk significantly balkanized implementations.
We expect that the critical, lowest common denominator
elements of the web services stackSOAP and
WSDLwill be implemented nearly universally and
uniformly. At higher layers of business logic, however,
expect plenty of competition and a range of proprietary
extensions to the core web services functionality as vendors
look to add and reap value from a standards-based
- Dynamic binding. Companies will seek out service
providers (e.g. shipping services) on the fly through UDDI
and other directories and dynamically bind the provider's
service to their business needs. Although this will happen
in the future, companies want to do business with people
they know, trusted partners. Until companies become
comfortable with web services and there are transitive trust
mechanisms put in place, The Stencil Group does not believe
that dynamic binding will enjoy widespread success in the
Because web services significantly increase a business'
flexibility and mitigate many of the challenges traditionally
associated with IT deployment, customization and integration, we
argue that large enterprises will realize a significant,
positive impact on their technology and business operations from
web services over the next 12-24 months.
Before web services will be seen to have succeeded, however, the
technology must overcome the burden of being labeled "The New
New Thing." The drumbeat of marketing and the blue-sky optimism
that evangelists will paint around web services will amplify the
hype, as the assumed pace of adoption will streak ahead of
actual adoption in the short-term. Despite the spotlight's
glare, web services will not find a single "killer app" to
champion or announce its success, and skeptics will see web
services' slow start as a fatal stumble.
In the end, the disparity perceived between promise and adoption
will be resolved as a case of the hyped hare and the quiet
tortoise. Similar to the growth pattern exhibited by XML and
even the web itself, web services technology will grow quietly
on the way to nearly universal adoption. Web services will
succeed because they provide real answers to the e-business
challenges that companies are facing today.
We suggest the technology will overcome the hype for three
- At a technological level, web services simply work. Web
services allow businesses to integrate and customize
applications much more easily than existing solutions, and
the basic technology can be deployed incrementally by making
good use of current infrastructure. This functional appeal
will make web services very appealing to the grass roots of
developers and IT departments.
- Web services enable the mythical "agile business."
Companies who adopt web services will come significantly
closer to the ideal flexible, dynamic e-business than they
could with previous generations of enterprise technology.
While no technology can work miracles, web services will
make the promise of service-based software, B2B e-commerce,
and trading partner integration significantly more
- Web services will drive a return to core competencies.
Web services represent that all-too-rare breed of major
technology shifts that deliver the goods without requiring
the entire enterprise to stand up and march in line. Web
services will allow businesses to make decisions about
e-business based on truly strategic criteria rather than the
capabilities of a monolithic software solutionor of
the team implementing it.
The bottom line: web services will succeed. Implementation will
not be as easy as the evangelists would have us believe, but the
technology represents a significant improvement in the
operational efficiency and flexibility of e-business models and
software development as a whole. The question for vendors and
adopters is how best to manage expectations and deliver genuine,
if incremental, valuein other words, how to ride the
tortoise, not the hare.
Figure 5: Five Take-Aways
Figure 6: What to Do on Monday Morning...
IBM, "Models for Dynamic E-Business"
Microsoft, "Web Services Essentials"
TechMetrix, "The True Nature of Web Services"
Kevin Werbach, "Syndication: The Emerging Model for Business in the Internet Era"
XML Fund, "XML Fund Roadmap"
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