Companies across various industries are implementing Web services pilot projects. These projects are demonstrating how Web services make integration with other enterprise applications simpler, faster, more productive and more cost-effective. As this technology matures and adoption becomes widespread, Web services will lower the cost and time associated with integration and enhance the value of existing IT investments.

The Challenge of Enterprise Integration

For any enterprise to fully realize the value of an enterprise application, it must develop integrations with an array of other software applications that can reside within or outside a company's firewall. This has always created a costly and time-consuming IT challenge, which ultimately becomes a significant business challenge as well. It has led the business world to look toward the concept of Web services: software components that use open, XML-based standards to communicate among software applications. (For a more in-depth definition, please see the sidebar: Defining Web Services.) McKinsey & Co. estimates Web services can cut the time and money needed for systems integration – the largest IT expense – by up to 20 percent.1

The reason for this estimate is clear. Consider that for each new application introduced into an IT environment today, companies must develop custom integration solutions – a process that can cost hundreds of thousands, or even millions, of dollars. If companies could dramatically reduce custom development efforts through the use of open standards such as Web services – and if companies could reuse their integration components – they could quickly and easily add new applications into the existing infrastructure. This would allow them to substantially reduce time and costs, lower the total cost of ownership and achieve return on investment (ROI) more quickly. They could then redirect valuable IT resources to more revenue-enhancing opportunities, as well as derive greater value from their existing IT investments.

In addition, according to Dan'l Lewin, Microsoft's corporate vice president of the Platform Strategy Group, "At the application level [Web services will create] a preference for best-of-breed products where a customer will be able to swap in the application with the best functionality."2

With Web services, companies will possess an end-to-end, integrated delivery process – without the expense and complexity of tightly coupled application integrations.

Process-Level Integration Minus the Costly, Tightly Coupled APIs

Large, service-based organizations – including internal IT departments, professional service providers and service divisions of companies – need to effectively manage constantly changing, people-driven initiatives. Enhancing the efficiency and quality of these initiatives can result in millions of dollars of increased revenue or cost savings by optimizing billable utilization, increasing budgetary control and accountability, and realizing better alignment with strategic goals.

To best achieve its goals, software applications must interoperate with a wide variety of enterprise software applications from ERP, CRM and HR systems to corporate portals and desktop applications.

Until now, companies have addressed enterprise application integration with connectors that use files and relational data. Web services, however, enhance the power of software applications by enabling process-level integration. Put simply, rather than transferring only data between different systems, process-level integration means that the necessary pieces of the system automatically communicate and react to each other in real time so that all the pieces function more efficiently and work from one consistent point of view. This process-level integration provides substantial support for the increased productivity and quality that all businesses seek.

Unfortunately, in most cases today, such integration can only be achieved with expensive to use, tightly coupled, custom-coded application program interfaces (APIs) that can cost hundreds of thousands of dollars per integration; and, in most cases, the organization must bear these costs before any of the operational or financial benefits of the new application are realized. Because open standards and protocols reduce the need for this custom coding, Web services facilitate process-level integration at considerably less cost and institutional effort.

In addition, Web services are reusable. As underlying architectures evolve, the Web services will not have to be changed substantially to interact with architectural changes. This simplifies the process and increases the lifetime value of software application investments.

Defining Web Services

Web services encompass an emerging set of protocols and standards – in particular, simple object access protocol (SOAP), Web services description language (WSDL) and universal description, discovery and integration (UDDI) – that enable developers to build standard interfaces to existing and new systems. These "open" standards cut integration time by reducing the need for custom coding during application integration; their reusability cuts development time.

More specifically, a Web service is a self-contained software component that uses one or more of the following technologies – SOAP, WSDL and UDDI. This component performs a unique service and describes itself so that other software can determine what it does and how to invoke the service. Once the service is performed, the Web service can then send the results back to the requesting application.

Two Scenarios: Web Services and Process-Level Integration

Perhaps the best way to describe the value of Web services is by example. What follows are two likely scenarios for either revenue-based or cost-based service delivery-focused organizations.

Revenue-Based Scenario: Revenue-based enterprises such as professional services organizations typically use software to facilitate a strategically sound and efficient process from the successful pursuit of a business opportunity through the final accounting after the bill has been paid. In the IT environment, the business process flow might look something like this:

  • A customer relationship management (CRM) or sales force automation (SFA) system designates a just-closed sale as "won."
  • A service delivery application creates a project and allocates resources, including the formation of a project team and the likely integration with a human resources application.
  • The accounting system creates an associated project to facilitate proper billing, track payments and, ultimately, book the sale as revenue.

Even this relatively simple business flow creates interoperability among four or five feature-rich applications, with the integration process possibly tying up an IT department for months. Then, when the CIO decides one of the existing applications needs to be replaced or, even worse, the company undergoes a merger, another set of custom, tightly coupled integrations must be created.
With Web services, the introduction of a new piece of enterprise software can be accomplished quickly and with relatively little expense through a loosely coupled integration that employs open standards and protocols, including SOAP and WSDL. The ability to reuse the Web services as the environment changes translates into lower total cost of ownership for companies.

Cost-Based Scenario: Cost-based units – most notably corporate IT departments that provide technology leadership within an enterprise – face a slightly different business flow. They do not need to sell externally or, in many cases, bill or collect revenue; but these units do have to move from planning (from entire portfolios to multifaceted initiatives to individual projects) through execution and delivery and, finally, to quantifying and controlling the results.

Now imagine a global financial services organization with a corporate IT force of thousands of people who support a few hundred lines of business. Here, the IT manager coordinates an ever-changing array of technology projects for which he must create teams, project budgets and timelines, and prioritize the projects so that they meet the company's strategic goals. To operate efficiently, this manager must have an up-to-date view of strategic priorities, be able to evaluate risk, identify the most appropriate personnel (both internal and contractors), price the best equipment from suppliers and predict all of the resources necessary for projects of varying lengths. This implies a number of application integration points.

Suppose, for example, the sales force requests a new or upgraded SFA system and that the company uses a help desk system to keep track of such requests. In such a case, the following occurs:

  • The help desk system publishes its request for the SFA.
  • The service delivery application evaluates and prioritizes the request by drawing on data from other systems.
  • The service delivery application creates an associated project that allows the resource and project managers to initiate service delivery by selecting teams and resources.
  • The accounting system creates an associated project, allowing the CIO or other managers to track costs and control budgetary spend.

Without Web services, companies must create expensive, time-consuming custom integrations if they want to facilitate efficient process-level integration. Web services change that dynamic because the integration becomes simple, fast and cost-effective – and the Web services do not have to change as the IT systems evolve. Ongoing maintenance costs are lower as well with no client-side component to maintain or install.

Key Terms for Understanding Web Services

Application Program Interface (API) is the specific method prescribed by a computer operating system or by an application program by which a programmer writing an application program can make requests of the operating system or another application.

Enterprise JavaBeans (EJB) is an architecture for setting up program components, written in the Java programming language, that run in the server parts of a computer network that uses the client/server model. Enterprise JavaBeans offers enterprises the advantage of being able to control change at the server rather than having to update each individual computer with a client whenever a new program component is changed or added.

Simple Object Access Protocol (SOAP) is a way for a program running in one kind of operating system (such as Windows 2000) to communicate with a program in the same or another kind of an operating system (such as Linux) by using the World Wide Web's hypertext transfer protocol (HTTP) and its extensible markup language (XML) as the mechanisms for information exchange.

Universal Description, Discovery and Integration (UDDI) is an XML- based registry for businesses worldwide to list themselves on the Internet.

Web Services Description Language (WSDL) is an XML-based language used to describe the services a business offers and to provide a way for individuals and other businesses to access those services electronically. WSDL is the cornerstone of the UDDI initiative.

Extensible Markup Language (XML) is a flexible way to create common information formats and share both the format and the data on the World Wide Web, intranets and elsewhere.

Definitions provided are from Ask Jeeves, and Evolve

The Architecture

As with all Web-based technology, a Web services platform is conceptually quite simple. Requests from external applications such as those described in the previous scenario come through an integration program that employs Web services. The Web service uses WSDL to describe itself to the requesting application. The client program then creates the request and transfers it using the SOAP protocol, essentially extensible markup language (XML) over hypertext transfer protocol (HTTP). Having received the request, an application invokes whatever business logic is required to service it. The client need not understand the semantics of this processing. Responses or requests from the application simply follow the same path in reverse.

Figure 1 depicts a sample Web services platform and how it interacts with an application's existing architecture.

Figure 1: Sample Web Services Platform

Fulfilling the Promise
Web Services Enhance the Business Value of Enterprise Applications

As with HTML/HTTP, Web services represent a simple, but nonetheless powerful, technological advance. Web services facilitate essential process-level integration at a dramatically reduced cost and in much less time than the custom APIs most businesses still use today.

Software vendors are beginning to deliver on the need for Web services with the same commitment to quality that is reflected in other proven technologies. Consequently, companies will find that deploying Web services can enable them to:

  • Lower the total cost of ownership through quicker time to results, reduced implementation costs and reuse of the open standards APIs enabled by Web services.
  • Dramatically reduce the drain on IT resources for integrating and maintaining applications.
  • Create essential, process-level integration with an organization's existing applications, such as HRMS, ERP, CRM and financials.
  • Share vital business information fluidly across their entire enterprise, with the appropriate security and access built in.
  • Act on this information in real time in full view of all the people and resources that need to know.


1. Patil, Samir and Saigal, Suneel. "When Computers Learn to Talk: A Web Services Primer." The McKinsey Quarterly, 2002 Number 1. ar=1162&L2=13&L3=13. ( Editor's Note: You must register to view this article. Registration is free.)
2. "Rivals Morph Into Web Services Allies." Enterprise Critical. July 2002.

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