Given the current economic climate it is now more necessary than ever to ensure that business strategy is based on strong principles and workable technology that will not create yet another bottomless money-pit. Thus, any new model that offers a way forward without the need for massive infrastructure changes must be looked at carefully.
Primarily, there is the economic or budgetary pressure to consider. The cost of IT that is consumed internally has reached an unsupportable level. This spend is currently estimated to be $2 trillion worldwide and is in part fuelled by the need for vendors to grow their revenue streams.
Vendors can no longer maintain their growth by selling directly into businesses - there is simply not enough resource available. Similarly, businesses can no longer support such a level of internal spend that has no strong measure of return on investment.
The ways that resources are allocated and revenue streams are generated needs to be scrutinised. To maintain revenue stream and growth businesses will have to externalise some of their spend and vendors will need to provide the solutions for enabling this externalisation.consider outsourcing
This required externalisation falls into two specific and synergistic areas: Web services and outsourcing. Although outsourcing might be considered to be a prime target for resource externalisation, it fails on several counts; most notable of which is the passing over of control of core business functionality to a third party.
This issue of core business functionality is central to implementing Web services.
Organisations can no longer embed core functionality within technology systems, it needs to be stored where it can be managed easily.
During the Year 2000 shake-out, organisations began to understand that their core business processes were locked away within legacy systems. Although organisations were able to isolate these processes, it concerned only one area: date-related code.
Organisations must learn lessons from their Y2K work. All business processes should be isolated so companies can rediscover exactly what makes the business work. The next step is to consider which processes can be turned into in-house Web services, which can be better taken on from another provider and which Web services are best outsourced.
An undertaking of this nature is no trivial task, but those organisations that recognise this the earliest will gain the competitive advantage and be better placed to reduce costs.
Even if Web services fail to take off immediately, the work will not have been wasted. It is imperative that businesses understand their core processes, regardless of what technology model may come along in the future.
I believe, however, that the way forward is the Web services model. To that end the discovery and fragmentation of processes will be an important first stage. This belief in Web services is, in part, driven by the way that vendors are increasingly working together to make this happen.
Further, Web services will bring to fruition the promises that were attached to component-based development: the public exchange model and business process management. This is not to say that these areas will not continue to exist in isolation, but Web services could be seen as a kind of middleware, which glues together the separate parts.
A shift towards a Web services business model will also affect the integration market, and the integration strategy of each and every business. As processes are discovered and fragmented, so businesses will start to view everything in a new light. Application functionality that supports activities will replace applications that support processes, and it is at this juncture that the whole integration roadmap is thrown into disarray. There is no point in tying applications together if the applications per se will no longer exist, or will serve no purpose. Integrating a CRM solution into an ERP solution, for example, is an archaic view of business and technology structure.
Those systems that contain processes too valuable to externalise and which contain activities that will remain static in their execution can be most effectively integrated in a tightly-coupled manner. Everything else, even if it is kept in-house, will accept the looser-coupling associated with Web services.
It is now up to the business leaders to study Web services closely, as it will impact directly on the cost of integration that is most likely currently being undertaken. The danger with current integration is that it can bury processes deeper into technology, which is the opposite of what will be required.
Although there are still several concerns about Web services, the ones that are most often voiced concern SLAs and security. With the former, there is no doubt that a dichotomy will exist between what a service provider feels able to offer and the expectation of a service consumer. There is no easy answer, but it is effectively no different than agreeing terms and conditions of any service-based delivery.
Security is a far more contentious issue, and again has no quick-fix solution. However, businesses must separate security and privacy. While the former can be considered to be a problem with a technology solution, the latter relies more on procedural implementation of rules that have to follow legal constraints.
Regardless of the uptake of service-based delivery, this model should come under close scrutiny by technical implementors and business strategists alike.
Martin Butler is one of the world's foremost thought leaders on technology and strategy. He is the chairman and founder of the Butler Group, one of Europe's leading analyst groups.