Report: Firms Cut Costs with Web Services, but Neglect Other Benefits

Only 16 percent of U.S. companies will use Web services technology — software that allows application to application collaboration over the Internet — in the next year to discover and interact with new business partners online, according to research released Thursday by Jupiter Media Metrix.

“Despite the enormous potential of Web services to transform the landscape of the software industry, the technology will find its early uses in the humdrum role of tying together an enterprise’s internal applications,” Jupiter Media Metrix research director and senior analyst David Schatsky said.

While only a small number of companies will use Web services software for Internet transactions, a Jupiter survey revealed that 60 percent of companies expect to use Web technology for internal applications, such as retrieving customer information from a customer relationship management (CRM) system or passing a transaction from a front-office system to a back-office system.

Inside Job

The report, “Web Services: Invest Today for Cost Savings, not Flashy Business Models,” indicated that the ballyhooed Web services revolution will not begin to affect companies’ broader business decisions for another 18 to 24 months.

However, Jupiter analysts expect Web services software to be a valuable driver for cutting internal applications costs in the interim.

“Visions of companies dynamically ‘discovering’ and collaborating with suppliers and partners through Internet-facilitated interactions is still within reach,” Schatsky said, “but the most realistic opportunities for companies over the next 18-24 months is to use the Web services software for cutting costs.”

Finding New Business

Forty-four percent of companies surveyed by Jupiter want to use Web services technology to find new revenue opportunities.

Jupiter said that companies hoping to do so need to experiment with the technology to “ensure they are current and able to exploit it when a business rationale becomes apparent.”

The New York City-based research firm added that 46 percent of companies are currently implementing this tactic.

Cost Savings

Although only a fraction of companies will be using Web services software to find new business partners, Jupiter said that within the next year, 53 percent will deploy the technology for interaction with existing suppliers and partners.

Potential applications include credit-card transaction authorization and credit checks.

“Much of the activity in the evolution of Web services will and should take place below the radar of most business managers for the next 18 months or so,” Schatsky said. “But business managers, who are increasingly involved in application vendor selection, should become aware of the increasing role that Web services will have in the selection and deployment of enterprise applications.”

Jupiter predicted that by late 2002, enterprise application vendors will begin to incorporate Web services architecture into their applications.

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