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Jupiter forecasts uphill battle for Web services customers, vendors

A new report from Jupiter Research suggests companies that implement Web services should expect rifts between executives and IT staffs, while Web services vendors will struggle to make money and may face an industry consolidation in 12 to 18 months.

Momentum in the Web services industry may be stronger than ever, but a sobering report from Jupiter Research suggests that vendors will be hard-pressed to reap profits, while companies that implement Web services should prepare for trying power struggles between executives and IT staffs.

The upcoming report, "Web Services: Gauging the Impact on Business Alignment with IT," states that even though 82% of the 403 U.S. companies surveyed by Jupiter have deployed a Web service in some form, most are only pilot programs.

David Schatsky, a vice president and research director with New York-based Jupiter Research and the report's author, said that because customers are only "dipping their toes in the water" and not investing heavily, that means trouble for Web services-specific vendors.

"If you look at the large players," including Microsoft Corp., IBM Corp. and Sun Microsystems Inc., said Schatsky, "they're enhancing their existing product lines for Web services, so it's going to fuel the perpetual software upgrade cycle, but it's not going to represent a separate revenue stream for these [other] companies."

For those reasons, Schatsky said, an industry-wide consolidation among small and mid-sized vendors is likely within the next 12 to 18 months. One vendor niche that may be spared, however, is Web services management.

He said that major vendors have yet to develop comprehensive management strategies, meaning there are still opportunities for lesser-known companies like AmberPoint Inc., Infravio Inc., and Talking Blocks Inc. to fill in the gaps.

Vendors won't be the only ones facing struggles thanks to Web services. The report suggests that companies that implement these services may have to cope with strained relationships between executives and technologists.

Schatsky said such a scenario might become common in larger enterprises because each camp will fear Web services provide the other with more power.

For example, because Web services emphasize the creation of reusable software components, an IT staff may feel its job security is threatened as a company's technology portfolio becomes more streamlined and the need for custom development decreases.

Conversely, as corporate profits begin to rely on the success of Web services being used by partners and customers, executives may feel that their own success is tied to business processes that fall exclusively in the realm of IT departments. So when problems arise with a Web service that impact the bottom line, it could be difficult for executives to know who should be held accountable.

"It's one thing to develop a software module that's used by an application only," said Schatsky, "but it's another thing entirely to create a service that's robust enough to be used by a potentially unknown number of applications. That's a higher bar for availability and reliability and that's going to be managed by IT," not an executive.

Despite the gloomy findings, Jupiter projects that Web services will permeate all levels of enterprise software stacks within three to five years, resulting in what Schatsky called a "dramatic transformation."

"A services-oriented enterprise architecture will think in terms of a services bus, or a single source that applications connect with to consume and provide services," he said. "The inner workings will be transparent to the end users [and] interactivity will take place according to standard Web services protocols and paradigms."

Jupiter's report will be available on its Web site beginning Oct. 6. Pricing information was not available at press time.


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