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Web services can be a means of generating revenue

IDC predicts a boom in spending on software supporting Web services, but that doesn't mean they can't lead to a future cash flow.

Enterprises are expected to open their wallets during the next four years and spend 10 times the money they are today on software that supports Web services. That doesn't mean, however, that Web services cannot be used as a means of generating revenue.

"Web services are not a business model, but they can facilitate interactions with customers, partners and suppliers so companies can become more efficient and then perhaps generate revenue from those relationships," said Sandra Rogers, research director of Web services and integration software at IDC in Framingham, Mass.

Rogers said most enterprises are still focused on reducing costs and have not yet begun asking IT shops to generate revenue. But that tide may be shifting.

Rogers authored a report released this week that predicts spending on applications, development and deployment tools, security and management software that supports Web services will soar to $11 billion by 2008. By comparison, companies spent $1.1 billion in 2003.

Primarily, companies are using XML-based services built on Web services specifications to integrate legacy applications with new technology. The resulting efficiency is driving companies to seriously look at service-oriented architectures (SOA), which enable code reuse so services can be accessed by disparate systems.

"A lot of what's happened during the last two years stems from a desire to extend existing systems and make the tactical needs of integration happen," Rogers said. "People are trying to figure out how to use Web services where they can gain savings or reusability. Expertise is building in the meantime."

Rogers' report points out that companies are moving cautiously today with live proof-of-concept Web services operating in test environments or providing internal services. Few have extended those services across the firewall. As the calendar gets closer to 2008, more large companies will have Web services in production and, as standards sort themselves out further, smaller companies will begin leveraging Web services as well, making them almost mainstream.

"Companies are saving money by reducing costs, but generating more money based on quicker time-to-market and the flexibility they gain by doing SO," Rogers said.

SOA based on Web services specifications is the first stage of an implementation that eventually leads to integration. Once a design principle is in place, investments then move into acquiring and deploying the necessary infrastructure and management software.

Rogers said the conservatism around Web services stems from a lack of initial understanding and a muddled standards environment. Many also rely on vendor uptake of technology before making a commitment, or need to see best practices rise out of actual use cases before taking the next step.

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