The IT business is in big trouble. Oracle, the world’s second-largest software company, last month pushed already nervy tech stocks even further down when it said the long-awaited third-quarter user-led purchasing revival looks like being postponed until next year. According to market watcher IDC, sales of servers dropped an unprecedented 14.5% in the second quarter, mainly due to lack of interest from corporate buyers in the US and Japan.
How long ago the boom times of Y2K and dot-commery seem now. What would really help would be another big trend that could sweep organisations into an orgy of new equipment and services purchasing. And you may not be totally surprised to learn that the industry has a candidate in the wings – primed and ready for your chequebook. Step forward the new next big thing: web services.
Web services is meant to be a cost-effective means of getting computers and computer applications to talk and share data. This was the goal that many firms failed to achieve when implementing million dollar electronic data interchange systems in the recent past.
“The new curve will be about working outside your company and making transactions, not just content exchange, work over the net. Yes, it’s early days, but already in the UK we’re working with early adopters,” says Andy Mulholland, chief technology officer at Cap Gemini Ernst & Young, which is engaged in web services work at clients such as Diageo.
If Mulholland and other web services proselytes are right, then web services are something every type of organisation will need to take a stance on.
In June, Forrester Research said 66% of companies currently spend less than 1% of their IT budgets on web services, and a mere 5% use them. However, 84% of those surveyed will commit more in 2003 (based on interviews of 70 European company leaders), spending an average of EUR2.5m per project.
But what FDs don’t want is another spending binge that will result in “shelfware” (software that is never used or fully implemented) or expensive systems that end up failing to provide clear return on investment. Yet the technology industry isn’t helping. The jargon is even more alien than usual this time: XML (extensible mark-up language), WSDL (web services description language), SOAP (simple object access protocol) and UDDI (universal description, discovery and integration) are, alas, all key phrases. Interfaces are somehow being “exposed” and there is talk of business outside the company walls (whatever that is).
Then there’s the behaviour of suppliers. Web services are all about harmonisation and collaboration, and, for a while, things seemed to be going surprisingly smoothly in the area of standards. A promising cross-industry body, the Web Services Interoperability group, or WS-I, was set up earlier this year. Then Microsoft insisted rival Sun Microsystems could not play an equal role, leading to the ludicrous situation that, although 100 big companies have signed up, Sun won’t until it gets its own board seat.
IBM is trying to get a compromise agreed, but it’s not a good sign.
Not that there’s any shortage of vendors or experts who are saying ignore web services at your peril. “FDs should be asking themselves not what the cost of doing this is, but what is the cost of not doing it,” says Simon Holloway, business solutions manager Northern Europe for Sun’s Sun One software arm.
“It’s going to be very hard competing with fully connected companies if you’re not connected yourself,” says Joyti Bannerjee, chief executive of UK consultant MyBusiness.Net.
“You will save money by mainly using cheap web browsers instead of expensive fat clients,” says Arthur Parker, European president of business intelligence vendor Sagent.
“Don’t bet your company on it right now, but expect to be doing an awful lot of web services work in the next 18 months,” says Ian Doyle, senior architect with BEA, one of the biggest of all web services companies.
But they would say that, wouldn’t they? Analysts agree that things could be better. “It’s a very fledgling technology, with no proven or well-tested business case,” says Massimo Pezzini, a vice president and research director for Gartner Group. “In many ways it’s still a solution looking for a problem.
The standards we have today are basic, especially in security and transactions. There is also the prospect of a standards war between Sun and Microsoft.”
Indeed, Norman Green, vice president of finance for Oracle UK, Ireland and South Africa, goes so far as to say that, even though his company is a web services proponent, he is very dubious about the technology.
“This is very much in its infancy, and lots of issues need to be sorted out if it’s going to take off. We don’t see much of a fit as yet, especially given the issues of security and trust. Putting business transactions in the hands of someone you don’t know much about is not something we’d do. We’re following this market and there is serious potential going forwards, but it’s a VHS versus Betamax situation just now.”
However, web services is still not an area that can be ignored. There’s as little sense in completely ignoring web services as there is in devoting 100% of your company’s technology budget to it. There are four main reasons.
To some extent everyone will do something like this. Remember when you authorised the setting up of the company web site? That made your company’s marketing message visible to the world. What web services will do is make, to as much of an extent as you care to allow, your company’s business processes and transactions visible, too. That’s likely to happen, slowly and cautiously, sure, but this is really fancy EDI (electronic data interchange), and what’s wrong with that? “We’ve started to see clusters of companies and industries begin to look at how they can start sharing information around very simple, early-days standards,” says Mulholland. Not doing anything at all could leave you behind needlessly.
Secondly, web services could save you money. The business case is still being hammered out, but IT companies have wasted our money for too long making systems that can’t speak to each other – finally they say they want to stop. “There’s real frustration, even among software vendors, at the lack of return on many IT projects, and there’s a sense of collective responsibility that this needs to stop. Web services will help get better interoperability and vendors really want to implement this idea faithfully,’ says Peter Bell, business strategy manager for Microsoft.Net in the UK.
For now, you can start small, make your mistakes, and spot what adds value. Don’t allow your IT director to go mad, in other words. “If my IT director came to me and said he wanted to re-invent the business totally on web services I’d get rid of him,” says Bannerjee. “But getting two systems talking to each other inside your company, that’s fine.”
Even as much of a sceptic as Pezzini says: “Start small on a business process that is well understood inside your company and look at how integrating that better could help.”
“This seems to be the only effective way of disseminating important company information to a wide audience,” says Parker.
“No company can do business today without computers; this is as non-specific a way as we can figure out to let computers talk to each other without human intervention,” says Doyle.
All that FDs really need to know about web services is they have a long way to go, so there’s no need to get excited. But they are also a genuinely promising technology that is worth a cautious dabble by your IT department.
THE EARLY ADOPTERS
There are few UK web services success stories as yet. UK firms believed to be working on such projects include Hitachi Europe (with Sun) and Marks & Spencer (Microsoft). Financial Director spoke to two pioneers: City shipping industry service provider LevelSeas, and the Belfast-based Ecommerce Development Centre of bank HBoS.
LevelSeas has rolled out a few simple but effective web services with BEA already, according to head of development Simon Harris. “It’s helping us out on internal integration,” he says. Harris started with a simple email-based service to let users in different partner companies using Outlook, Notes or other software share data more easily. Next up are complex systems to do with voyage management and bulk vessel transfer. “This hides a lot of complexity from the users,” he says.
Dermot Grimley is head of HBoS’s recently established technical site in Northern Ireland. He stresses that his 30-strong team is tasked with being very technologically aggressive, and he has deliberately chosen Microsoft.Net as an advanced environment as a result. However, he notes that, while web services are a part of .Net, he did not choose it for that reason. “We are working on a big corporate banking project with a long-term timeframe and wanted a bleeding-edge deployment environment,” he says. “Web services was not one of the key criteria for that choice, but it may be a future enhancement we’d look at.”
Grimley also has advice for those considering the the technology. “Web services could be important for your internal IT staff, who will see it as a key area to work in – so investing now could therefore save you time and money in terms of ensuring staff and skill base going forward,” he says.