Are Web services achieving return on investment (ROI)? That’s a matter of opinion, according to experts. From an application development perspective, Web services bring savings through packaged applications, component solutions, and tools, according to Eric Newcomer, CTO of Boston-based Iona Technologies.

One of the principal goals of Web services is reducing integration costs, thus increasing payoff. The strategies for increasing ROI include:

  • Taking advantage of Internet infrastructure
  • Decreasing the ROI point
  • Encouraging customers to stop using proprietary systems
  • Building systems within the firewall that pay off

Our panel discussion focuses on whether, and how, Web services achieve ROI. The panel consists of James Phillips, senior vice president of marketing and management at Actional Corporation, a Web services software provider in San Jose, CA; Peter Horan of DevX, an information site for application developers; and Richard Brock, CEO of Firstwave Technologies, a CRM software company in Atlanta. Here’s how they feel about achieving ROI on Web services.

ROI roundtable

Did you miss the first part of our Web services roundtable series? If so, you can catch it here.

Are Web services successful?
Horan: There are companies that are successful with Web services. Web services represent one of the first major technology shifts where venture-funded startups have a hard time competing. For big companies, it’s all about infrastructure and taking advantage of highly customized applications, which aren’t viewed as a venture opportunity. We’re seeing a fork in the road. We’re seeing a much faster pickup of .NET than we are of Java-based Web services, largely because Java has been adopted as the development platform of choice in larger companies.

What Web services are achieving ROI? Many companies are doing it. McAfee Security products are a good example. There is constant customer contact, which helped turn their products into a subscription service. McAfee is serving both a consumer and enterprise market. Unlike applications, Web services are efficient information streams. It points to the next generation of companies that have opted to build on what they already have in-house.

Phillips: Like any technology, Web services will bring ROI when used to solve problems. In the early days, people talked about the mouth-dropping advantages of Web services. For example, you could be driving on the highway at 4:00 p.m., while your WAP-enabled cell phone, which has been tracking you via GPS, locates a nearby Starbucks and places an order for a cappuccino because you usually stop there at that time of day. So it pulls money out of your credit card account so the coffee is waiting for you when you pull up.

But there are also practical applications of Web services technology that companies are reaping in the enterprise. If you’re considering scaling back your goals of applying the technology and addressing those applications in a step-wise manner, your odds of achieving ROI are much higher. What we’re seeing with customers who are successful in achieving ROI from Web services technology is that they initially took baby steps and avoided age-old problems of enterprise software by addressing them in a new way with Web services technology. For example, Web services technology can be used to integrate application connectivity behind the firewall, and support goals such as creating portals. Or, it can build an application for customer service representatives (CSRs) so that, when new calls come in from customers, the CSR can pull up a customer order management system and get a single view of your customers. You’re in a better position to be innovative and create new applications.

Brock: If you’re trying to get a seamless view of your customers, Web services are brilliant. In object orientation, for example, you’d have to take disparate information and bring it in as an external file, like a grid display. But if you’re developing a system that allows you to communicate with different operating systems, computers, and relational databases to get a 360-degree customer, the ROI is easy to see. In .NET, we were surprised to find that the development environment is so much more efficient than the ROI for anyone doing software development. The results are immediate. It’s just a better development environment. One ROI you need to look at is the cost to develop and deploy .NET applications significantly faster than any state-of-the-art environment. If you have a 100-percent Web service application, it’s going to be incredibly flexible, but it’s also going to have performance issues. The idea is to use Web services for any kind of external access.

Problem achieving ROI with Web services
Phillips: Timing is everything, yet companies are failing to see its importance. The emphasis on ROI has never been stronger in Web services. The companies that are achieving ROI are very focused and strategic. Their products are well-conceived and meeting market demand. Yet we are moving toward ROI slowly.

Horan: I agree. Only the technology giants are aggressively jumping on the bandwagon. One of the keys to success is whether the company is fully deployed or the product is still on the drawing board.

Phillips: While customers are being empowered with application development environments and portal creation tools that allow them to create new applications, Web services aren’t available. If I create this application that empowers my CSRs using Visual Studio.NET, I could reach back into my existing applications and assume that those applications are available via Web services. But the reality is they are not. One of the big problems customers are having is they have rich development environments, portal tools, and other application development tools that allow them to innovate, but there aren’t any Web services available. You have to start somewhere. Existing applications that don’t have Web services interfaces is the first problem that has to be overcome. We’re also finding that, as customers use Web services, they begin to deploy applications that provide Web services. Managing the connectivity between all these applications, the systems that we’re using and the systems that are providing Web services, becomes a challenge.

Horan: The biggest mistake companies make is failing to make a total commitment to Web services. You can’t jump halfway over a ditch. If you believe Web services can make a big difference in your business, and they can, then you have to put good people on the project, commit to a technology direction, and go for it. One of the challenges is that everyone wants a piece of the action. The solution is to define a project that will make a difference, but don’t over-build or under-build it. That’s the recipe for getting a good solid ROI.

Brock: There’s a lot of talk about not moving fast enough toward ROI. I think we have to be careful and move cautiously. Moving toward ROI using Web services as the catapult can be likened to adding rooms to a house. The process of expanding your house is simple when you use inexpensive materials and cheap labor, but if you do it right and use top-grade materials and seasoned craftspeople, the job will be done right and the house will last forever. Think of the development and deployment of Web services the same way. It’s an evolutionary process. I question whether it should be rushed.

What’s ahead for Web services?
Phillips: More customers will recognize that there are very tangible paybacks to these applications. As more customers recognize that, we’ll see more behind-the-firewall applications of this technology to facilitate application and portal development. As more users take advantage of Web services technology to solve pressing problems, they’ll also recognize the opportunity this technology provides to transform their business in more sophisticated ways. For example, an order management system can be directly connected to a procurement system of primary buyers.

Customers will soon overcome problems associated with taking the technology and applying it against those applications. They will see more sophisticated applications of the technology.

Horan: In the future, companies will be fully capitalizing on the cost advantages Web services offer. There’s an immediate cost reduction because you can automate the data interchange. Data can also be easily aggregated from a variety of sources. You can’t get it now because you’re constantly switching screens and databases. And, finally, you can cut your inventory costs because you can dramatically reduce your transaction costs.

Brock: The technology business is weird. Each technology generation cannibalizes the preceding one. Some of it is good, and some of it is bad. There is evolutionary technology and disruptive technology. Web services technology is evolutionary. It falls into the “best ahead” class. The technology is evolving and only gets better. That’s what I see ahead.

Tell us your views on Web services

What do you think about the challenges of achieving ROI on Web services? Do you have a question for our roundtable participants? Post a comment below or e-mail here.