The way ahead with Web services

The huge price of duplicating the IT services that every company needs can no longer be sustained. Web services will allow...

The huge price of duplicating the IT services that every company needs can no longer be sustained. Web services will allow corporations to slash costs and devote their energies to building the systems that make their businesses competitive. Martin Butler looks forward to the coming sea-change in IT.

The stage is being set for the most significant change for 40 years in the way we use information technology, and Web services is the key enabler. For at least two decades many commentators have condemned the inefficiency of thousands of corporations around the globe duplicating the work they do when building and implementing systems. The approach we take to IT today resembles a cottage industry where skilled practitioners duplicate their efforts at great cost of the host organisation.

There are basically two camps of thought in the IT community. One says that a corporation should focus on its core competencies and leave IT to an outside body. The other says that IT is so important to a corporation that in reality the corporation is its systems.

I think the truth lies somewhere in the middle - there are some systems that add so little value that they should be invisible to the host organisation, and others that are so crucial that they should be entirely owned.

Of course this creates a problem, since to totally outsource effectively hands the systems environment over to a third party, while to split systems between outside agents and an internal department generates interface issues - and the technology available today does nothing to bridge the gap between outsourced applications and those that are developed internally. Web services is a technology that will create the bridge between them.

This is a good point to define what Web services is. First
"From the industry's perspective there is a more compelling reason for Web services to happen - if it doesn't, the growth of companies such as Oracle, Microsoft and IBM will falter in just a few years from now"
Martin Butler
of all, it is a set of standards such as SOAP and UDDI. I have no intention of explaining these, but for the purposes of this article will simply say that they allow applications distributed on the Internet to find each other and then talk to each other. These standards are very important and it is somewhat surprising to see sworn enemies such as Microsoft and Sun agreeing on them.

In reality they have to agree, because the benefits they might both get from them are potentially very large. If Web services were just about standards, the whole thing would not go very far. Technologies are needed, and both Microsoft and Sun have their own version of what Web services technologies should be. Microsoft has its .net product architecture and Sun has developed Sun One to provide a Web services architecture.

There is no telling at this point who will win, and in fact it is not all that important - since Web services will happen regardless of the technology used.

There are several very strong drivers behind the emergence of Web services technologies. We have just mentioned one - the need to be able to glue disparate applications distributed around the Internet together. From the industry's perspective there is a yet more compelling reason for Web services to happen - if it doesn't, the growth of companies such as Oracle, Microsoft and IBM will falter in just a few years from now.

Corporations around the globe are spending as much as they can afford on IT and their budgets will not stretch much further. IT spending already accounts for over half of all equipment spending, and this is at an all time historic high. If growth is to continue at a rate that justifies the high valuations placed on the big IT companies, the IT industry needs to find a new way to increase revenues and profits. Fortunately for the industry such a thing exists - and it is big.

Around two-thirds of spend on IT is associated with internal costs. This includes the armies of programmers, systems designers and systems analysts that are used to develop systems and the buildings, training, coffee machines, rent, electricity and so on that are bought to support this effort. Globally this spend is estimated to be around two trillion dollars. It is this internal spend that the IT industry has identified as the resource that will continue its growth, and Web services is a key enabling technology that will enable the top players to tap into it.

The future that Web services will enable looks something like this. A new breed of service providers will emerge offering IT resources over the Internet. Typically these will be applications that an organisation can use without having to go through the pain and expense of installing the application themselves.

What is more, these applications will be able to talk to each other using the standards embodied in Web services, and by picking out the appropriate pieces of the jigsaw puzzle businesses will be able to build the picture that suits them best. Any applications that are developed internally will also be able to communicate with applications run by service providers.

This will mean severe shrinkage in the size of IT departments, and the CIO will have to turn his or her skills to dealing with external resources. It has been estimated that the IT industry should be able to convert around 25% of current internal spend to external spend (service provision mainly) over the next 15 to 20 years. This will generate a market worth around $500bn a year - enough even for the greedy IT industry.

This should leave the CIO free to concentrate on what is most important - understanding the information needs of the enterprise and building systems that deliver competitive advantage. Everything else is simply the cost of participating in a market, and to achieve this end the CIO should use service providers to deliver the most cost-efficient solution possible - it deserves no greater attention than this.

Is this the new age of IT?
Will Web services light the way to a new future or is it just another grab at the big money by the big IT players?> >Tell us your views.


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.

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