ROI for Web services remains elusive

Although Web services are still in their infancy, a few trends have already begun to emerge. Among them: cost-justifying projects to senior management remains difficult, as IT managers struggle to find effective and consistent approaches to quantify their payback, according to attendees at a Software & Information Industry Association conference here yesterday.

Still, pioneering practitioners and industry experts say one way to help prove the value of these integration efforts is to develop "lightweight" Web services pilot projects that quickly and clearly demonstrate the potential payback for more expensive companywide initiatives.

"Find some pain and relieve it," said John Radko, chief architect of global technology operations at Global eXchange Services Inc., a Bethesda, Md.-based spinoff of General Electric Co. that provides electronic data interchange services to retailers, suppliers and other companies. Radko also suggested making a business case for a Web services project that can attack "an area of intense investment," such as an expensive enterprise resource planning (ERP) initiative "that typically doesn't generate the returns that are expected."

Projects that can help a company generate improved returns on a high-priced ERP initiative "are the types of numbers that executives watch," Radko said.

A shortage of best practices for Web services is another reason why IT managers should consider going after bite-size implementations that can demonstrate solid returns, said David Pawloski, a product director at Alpharetta, Ga.-based Flamenco Networks.

Web services are network-based software applications that have been developed to interact with other applications using Internet-standard technologies and connections to perform business processes.

Given current IT spending constraints and an unwillingness among senior executives to invest in expensive, long-term IT/business projects, technology managers likely face an uphill battle in arguing the value of Web services projects to top brass -- especially since companywide Web services initiatives are expected to take three to five years to roll out and begin generating demonstrable returns.

"If you [propose] a Web services project to a CEO, he'll probably say, 'I've heard this before [in terms of the expected payback] with CASE tools. I've heard this with the Internet. I've heard this from object-oriented programming,'" said James Adamczyk, chief technology architect for Accenture Ltd.'s global financial services market unit.

Moreover, trying to measure the return on investment of an internal Web services project "is a lot different" from trying to gauge the returns of a customer- or supplier-facing Web services initiative, said Bill Whyman, president of The Precursor Group, a Washington-based research firm. That's primarily because internal Web services efforts are aimed at integrating disparate software applications to streamline a company's business processes, whereas an external project might be designed to improve customer service, flatten the supply chain or create new business models and revenue streams, he said.

Would-be adopters face other challenges, including a lack of unifying standards, the immaturity of security and transaction support as well as a shortage of experienced professionals in this space.

"There are a lot of people out there who think they are [Web services] experts who don't know anything," said Brian Reed, vice president of market strategy at DataDirect Technologies Inc. in Rockville, Md..

ROI isn't the only driver behind Web services efforts. Some leading adopters in financial services and health care are embracing Web services projects because they are being driven by industry-specific regulations such as straight-through processing and the Health Insurance Portability and Accountability Act, respectively, to streamline business processes and information flow, said Bob Zurek, vice president of advanced technologies at Westboro, Mass.-based Ascential Software Corp.

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