Project Management

Factors for calculating the ROI of Web services

Determining ROI is imperative to proving a project's worth, but several factors must be analyzed during the process. Find out which factors you should consider and why.


There are various factors (e.g., costs and expenses, technical and business benefits) that must be considered when calculating ROI for Web services. The relevance and importance of each of these factors greatly varies from company to company, application to application and implementation to implementation. But, if you consider all factors in totality, you can get a good idea about your Web services' ROI. Use the factors I discuss here to plug in to the formulas I presented in my previous article "Road map to higher ROI for Web services."

Costs and expenses
There are different costs and expenses associated with the usage of SOA-based Web services. Here, I'll outline the six factors you should consider when planning costs and expenses for your Web services.

Factor 1: Hardware requirements
Determine the hardware requirements in developing an application based on SOA-based Web services. Explore whether the usage of Web services will allow you to reduce the new hardware required and squeeze the most value out of your existing and new hardware

Factor 2: Software requirements
It's critical to determine the right Web services solution to meet your Web services usage goals. Software costs probably will be one of the biggest expenses. But this expense can be significantly lowered if existing assets in the form of application servers and integration brokers are used for your Web services as well.

Factor 3: Network bandwidth requirements
The use of XML-based standards in Web services implies that the data is exchanged using XML messages. XML messages can be very large—in some cases, five to 10 times their corresponding EDI and SWIFT messages. So there may be a need to overhaul both the internal and external network bandwidth with the usage of Web services.

Factor 4: Monitoring tools
The usage of Web services, especially external services, requires a certain trust in its quality. Your company will need to invest in monitoring tools that can check the quality, design time performance, run-time performance, and health of your Web services and application as a whole.

Factor 5: Training requirements
Training your IT staff on Web services technologies will be a big investment. Account for the total cost of training developers, architects, project managers, and system and network administrators on Web services technologies and supporting tools and servers.

Factor 6: Operational costs and vendor consulting
In any software project life cycle, there will be several operational tasks, processes, and associated expenses; Web services-based projects are no different. You may need to bring in external vendors or consultants at different points or throughout the software development cycle.

Technical benefits
The technical benefits that SOA-based Web services have to offer can be direct and tangible or intangible and indirect. Let's look at these benefits in greater detail.

Factor 7: Software development automation
We are still far from the point where applications will be purely orchestration of Web services, but you should still find out if the use of Web services within a given project will help you achieve software development automation. Analyze how much your company will save in the development life cycles of these projects.

Factor 8: Streamlining of middleware technology
Once Web services technology matures, it will help streamline the now rampantly diverse middleware technology in companies of all sizes. Estimate the reduction in hardware- and software-related expenses resulting from such streamlined middleware technology.

Factor 9: Usage of standards-based integration
Every company—irrespective of the size and sector—builds and maintains multiple proprietary interfaces to integrate internal and external systems. Estimate the total savings in terms of proprietary interfaces that you'll avoid building, deploying, and maintaining, if you use Web services.

Factor 10: Integration with applications and business process management
Estimate the total savings resulting from the use of a platform-neutral application integration technology, and determine the savings in terms of automating and orchestrating business processes as Web services.

Factor 11: End of silos of software code leading to reusability
In any organization, it is easy to find isolated groups within the IT department. There isn't much interaction within these groups, which can lead to the development and maintenance of duplicate code and applications. Calculate the savings (e.g., hardware, software, and personnel related) that would result from eliminating the redundancy through the usage of Web services that will expose systems in a standard way.

Business benefits
In this section, we will discuss the business benefits that SOA-based Web services have to offer. This includes end-user productivity, collaboration, and improving customer service.

Factor 12: End-user productivity
Though there is no direct formula for calculating increase or decrease in end-user productivity, try to measure factors such as the reduction in the amount of human intervention required by building applications using Web services, the overall improvement in response time, and the availability and usability of Web services-based applications when they are deployed to the end users.

Factor 13: Participation in dynamic business
Web services technology promises to provide businesses the ability to participate in dynamic business relationships. Estimate the number of new business relationships and determine the percentage increase in your business revenues due to new, dynamic business relationships resulting from the usage of Web services.

Factor 14: Collaborative business activities
SOA-based Web services can truly bring the vision of collaborative commerce to reality. Quantitatively calculate the cost efficiency resulting through collaborative commerce enabled by Web services. Also, measure the cost savings as a result of increased interenterprise visibility in the whole supply chain.

Factor 15: Better and cheaper customer service
Both user-centric and application-centric Web services can play a major role in customizing a range of product packages suited for each customer's specifications and can make it cheaper and faster to deliver. This can be achieved by bundling together Web services targeted for each such product. Measure the increase in revenue generated by targeting the marketing of products and services for each customer and the cost savings that results from automated customer services performed using Web services technology.

Add other benefits to your list
While this list of factors is extensive, it's not necessarily complete. There may be other direct and indirect benefits for the usage of Web services, such as faster time to market, increased process efficiency, and increased efficiency through business process automation, that should also be accounted for in your ROI calculation.

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