Everybody's Doing It

Robertson Stephens is not alone in seeing practical applications of emerging Web services technologies and tools.

"If you looked at the fortune 500 companies, many IT shops are beginning to experiment with this stuff," Governor says.

As an example of what early adopters are doing, Governor cites recent efforts by Shell Oil, British Petroleum (BP) and the Britain's Department of Trade and Industry (DTI) to apply Web services to how the oil companies relay regulatory information to the department. It's a 12-ton problem because the method of delivery now is paper. Governor said that BP estimated one joint venture to drill a new North Sea oil field generates 12 tons of paper itself. The group's Web services initiative will allow the department to request information from oil companies' IT systems on an as needed basis. Brent Sleeper, a partner in The Stencil Group, a business development and consulting services firm focused on the Web services market, also believes that many Global 2000 and Fortune 500 have at least one project started testing the waters. He estimates 50 significant projects in Web services exist today.

Usual Suspects

In some ways the list of early adopters includes the usual suspects. Analysts single out high-tech manufacturing and financial services as the top two. According to Sleeper, the distributed supply chains and tech savvy of high tech manufacturers make them a perfect target for Web services. Meanwhile, financial services firms fit the Web services' raison d'etre because they have data-rich, distributed operations that must adhere to strict regulatory and confidentiality issues.

"Confidentiality issues mean they can't share all the information between [divisions, clients and partners]," Sleeper says. "That's a great opportunity for Web services."

The reason is that financial services firms require loose coupling to preserve these boundaries. As well-defined building blocks, Web services can be tailored to provide the right information to the right recipient.

Surprise Guests

Not every early adopter has a history of test-driving new technology. Known for being traditional and technologically laggard, "the insurance industry is a surprise," Sleeper says. Web services apply to them for couple of reasons, however. One, they have data intense operations similar to the financial services industry. Two, they look at Web services as a way to leapfrog over the e-business movement they missed out on. "They are ready for an upgrade," Sleeper says. "Telecoms are in a similar boat."

The question telecommunications companies face is: how do they aggregate services from different providers and put them together for a single user base while maintaining a seamless customer experience? Sleeper mentions the average person's phone bill as an example of their integration problem. Local, long-distance and independent service providers all go on the same bill.

"If you called to complain about a charge related to a third party on that bill, you'll find out what a pain it is," Sleeper says.

Growth in Three/Four Time

Analysts point to three phases of growth for Web services. Analysts seem to agree that practical applications will largely dominate this year and next year. Companies will deploy development teams to work on a specific project, probably some form of integration, though not limited to it. In this stage, IT departments will start using protocols like SOAP and some of the software tools that are coming out around SOAP as a way to solve that short-term problem.

According to Sleeper, the market will not reach the strategic, or systematic level, suggested in the XYZ-ABC example, until the second phase kicks in.

"The inklings are starting in 2002," Sleeper says, "but blossoming towards 2004-2005."

In this stage, companies will take a much more systematic approach to deploying and managing Web services, analysts say. Michele Cantara, principal analyst for consulting and systems integration services at Gartner Dataquest, thinks strategic trading partners that know each other quite well and can identify a business process they have in common will want to use Web services as a foundation for their integration.

The third stage promises the holy grail for business integration. It conjures numerous visions of complex business interactions handled entirely by Web services that some call "frictionless commerce".

At this stage, Cantara says, companies will unlock the true dynamism inherent in Web services. In these transactions, participants and business processes that are unknown to each other would be dynamically negotiated through Web services software. Think of the Web services as intelligent business agents cutting deals online based on a set of principles written into their code.

"I think the exciting thing about Web services is that it can get us a lot closer to that idea that the e-markets did a couple of years ago," Sleeper says.

What Again is It?

For a composite definition try this: Web services employ standards-based protocols (think: HTML and HTTP) to allow programs written in different languages (think Java and Visual Basic) on different platforms (think: Unix and Windows) to communicate in their own native languages and to interoperate without be "wired" together.

To give you a clearer picture about what Web services do, consider an international phone call. Picture a Japanese executive speaking his native language, Japanese, into a telephone. On the other end of the line, an American listens intently to the Japanese executive. The American knows only one language: English. And that's all that he hears because the phone translates the Japanese speech into something he can understand. Replace the businessmen with software applications, exchange the countries they live in for platforms the software applications reside on, and swap the phone for Web services, and that example is how Web services work. At its base level, Web services let two applications talk to one another regardless of their origin.

Who Started It?

Though not alone, Microsoft made Web services possible. The Redmond, Wash.-based software giant defined the first Simple Object Access Protocol (SOAP) specification, the backbone behind Web services, but the attempt was decidedly Microsoft-centric. Userland Software, IBM and DevelopMentor joined Microsoft in refining the SOAP 1.0 specification. Their contributions resulted in an open specification aimed at the broader development and integration community. Working together with Microsoft, they created SOAP 1.1. "If you wanted to ask yourself what created Web services, what was the moment that it started," James Governor says, "it was the publication of the SOAP 1.1 specification." In April 2000, the team released the new spec. In September 2000, the W3C (World Wide Web Consortium) adopted it, and so did just about everybody else.

Major Players

"This isn't the flash in the pan. This isn't just marketing hype. This is fundamental change," Stencil Group's Sleeper says. He compares it to the shift to client/server architectures ten years ago. Sleeper's bullishness is reflected in the statements of other analysts as well. They are not alone. Many of the major software vendors have entered or will enter the Web services fray, including Microsoft, IBM, HP, Sun, Oracle and SAP to name a few.

While HP did not define the SOAP specification, they did laid much of the intellectual foundation behind Web services, according to James Governor. HP released e-Speak, its Web services product, in May 1999, really before the concept took root. Among the components included in the e-Speak suite was e-Services Village, a Web services registry that was a forerunner to the Universal Discovery Description and Integration (UDDI) specification [see sidebar].

"It just failed in its execution and didn't get the buy in from developers," Governor says.

Now that the marketplace has adopted concepts HP advocated, HP has a second chance. Espeak has evolved into HP Netaction, which now supports both SOAP and UDDI. Next up for HP will be convincing developers to buy into their tool. Given who is most likely to adopt Web services, it's possible HP's failed attempt to grab Pricewaterhouse's consulting arm could come back to haunt them, however.

In contrast to HP, IBM maintains a strong relationship with developers and has done a great deal of evangelizing to the Java community. This developer connection could be IBM's most bankable asset in the Web services arena. Big Blue's efforts to shepherd the development of standards also give them a good start. Lastly, IBM has a strong services business to support its tools and customers across platforms and programming languages.

IBM made its initial Web services toolkits available in late 2000, putting them somewhat ahead of the curve. These kits now fall under the WebSphere brand. With considerable patience, Big Blue has taken aim at the three main areas of Web services: access to information across a spectrum of users, devices, and customization options; integration and automation of business processes; and building, connecting, and managing applications.

While HP has the intellectual head start and IBM has the standards development lead (in Web services), Sun Microsystems has the most vulnerable position, according to Bob Parker, vice president and research fellow at AMR Research, a Boston-based technology research firm. He believes the company has landed itself into "processor jail" and stands most likely to lose market share to Microsoft. IBM's and HP's software tools support a variety of hardware options. By contrast, Parker says, Sun's platform hinges on the Sparc processor and the Solaris operating system. They also lack a services component to their business, something IBM to a greater degree and HP to a lesser extent have. He believes that Sun has a lot of catching up to do. The company holds one ace in its hand, however, its installed user base. Their rabid support of Sun could buy enough time to close the gap.