Online Data Bridges into the Future

“It’s no coincidence that Web Services have been one of the most hotly debated IT topics of the past few months. Their flexibility and openness gives them the potential to develop into a universal, open integration tool for business,” writes Anke Hoffmann, senior consultant with the META Group, in the introduction to a study carried out in 2003 looking at the implementation of Web Service technologies in user companies.

Standards improve integration

This appraisal is undisputed among market research experts, giving rise to predictions that Web Services will continue to grow rapidly in future. US market research company IDC for example estimates a global market volume of US Dollars eleven billion by 2008 (US Dollars 1.1 billion in 2002). According to META Group, 18 percent of German companies have already implemented Web Services in specific or pilot projects. In addition, a survey conducted by technology and management consultant Capgemini found that 30 percent of German companies have already developed a strategy for using the new technology, and 25 percent consider Web Services an important or very important topic. Pragmatic, increasingly differentiated Web Services will dramatically change the market for Web Services by 2006, with standards- and service-oriented applications being the catalysts in this development, forecasts Gartner analyst Whit Andrews in a note. Studies by Forrester (2002), Gartner (2003) and the META Group (2003/2004) all predict that security will play a key role in the future success of Web Services.
Web Services’ technical appeal lies in being able to quickly and easily exchange data via standards such as SOAP (Simple Object Access Protocol), WSDL (Web Services Description Language) and UDDI (Universal Description, Discovery and Integration). “However, the basic idea behind Web Services is more important than the technical details,” explains Dr. Thorsten Wichmann, founder and managing director of business research institute Berlecon Research. “Web Services helps software programs to make some of their functions available to other software programs via a standardized interface. This makes it easier to integrate different programs, reducing integration costs. This is an interesting proposition for SMBs in the face of global competition,” concludes Wichmann.

Web Services conquer the SMB market

The topic of Web Services has now arrived at SMBs, as confirmed by B2B information service’s “IT und Mittelstand 2003 (IT and SMBs 2003)” survey. “Core components of e-business such as Web applications and Web Services are among the key topics of the year,” the report says. Projects to integrate partners, customers and suppliers in their own business workflows are all well up on SMBs’ agenda. This fact is confirmed by the recent META Group study ‘Web Services Deployment Trends’. “In the course of the study we found that not only large companies, but also more and more smaller firms with sales of less than US Dollar 100 million have significantly increased their interest and their budget for Web Services projects,” reports Eduard Stupening, Senior Director Consulting at META Group Deutschland.
There are many reasons for introducing Web Services technologies. Most importantly, companies want to become more agile and flexible in order to react more quickly to rapidly changing market conditions. “Instead of dealing with internal, heterogeneous infrastructures, SMBs have to adjust to the systems of their suppliers, customers, field staff and partners,” contends Ronald Schmelzer, founder and head analyst at Web Services-specialized US business consultants Zap Think. The smaller the company, the more important external integration becomes, is Zap Think’s explanation of SMBs’ increased interest in Web Services technologies. Alongside optimizing data exchange with external parties, Berlecon Managing Director Dr. Thorsten Wichmann also sees significant potential when it comes to internal integration. “Web Services technologies provide SMBs with a basis for interlinking isolated solutions in their IT infrastructure. This integration can for example eliminate duplicated data entry, and speed up processes, since all data exchange is electronic,” says Wichmann, describing the advantages.

Services for a flexible IT architecture

Uniform standards for data exchange which are not dependent on which systems companies use internally are a prerequisite in this respect. Service-Oriented Architecture (SOA), which, incidentally, Gartner considers one of the most important IT trends for 2004, provides the platform for this, enabling previously monolithic applications to be split into functional components (“services”) which can be combined in different ways and allowing business processes to be carried out almost in real time. “SOA is a comprehensive architecture concept for corporate IT. All applications make their functionality available to other applications in the form of services,” says Thorsten Wichmann, visualizing the principle. “Of course, smaller SMBs would rarely see a need to construct an SOA in their company, since they often deploy pre-integrated complete solutions. In order to safeguard their investment for the future, however, SMBs would be well advised to make sure their solutions can later be integrated into an SOA,” the Berlecon Managing Director continues.
Alongside overall collaboration, the advantages include the integration of business process between customers and suppliers via the Internet, optimization of the added value chain (Supply Chain Management, SCM) and long-term customer relationships (Customer Relationship Management, CRM). According to Gartner Vice President David Smith, Service-Oriented Architectures will be fully established by 2007.
An integration and application platform such as SAP NetWeaver, which, for example, forms the basis of mySAP ERP, provides the foundation for comprehensive services-based business applications. This makes it easier to integrate people, information and business processes from different technological and organizational backgrounds. SMBs in particular can use SAP NetWeaver to design more efficient internal business processes, communicate more quickly and flexibly with suppliers and customers, and make better use of existing systems. This reduces the Total Cost of Ownership for the systems and the corresponding processes.

Better, faster, cheaper

SMBs in particular are going to see integrated networking – which enables collaborative commerce – becoming indispensable in years to come. For a few years, companies have been increasing their efforts to focus on their core business and outsource other added value components to external suppliers. Examples of this can be seen in the German automotive industry. According to information from the German Automobile Industry Association (VDA), manufacturing depth fell from just under 40 percent in 1995 to 25 percent in 2003. This is evidence of how manufacturers have redefined their core business and outsourced the development and production of components to external, mainly SMB, suppliers and service providers. Such trends create new growth opportunities for SMBs, with flexible integration of their corporate IT into the manufacturers’ processes forming a strategic factor for success.
Other reasons include increasing levels of transactions in the B2B sector, market demand, and the necessity of integrating internal business applications and reducing IT costs. Web Services can help SMBs to speed up their business processes while at the same time improving their service portfolio vis-à-vis customers and partners. Web Services do not just make an important contribution toward cutting costs, they also make it easier to integrate external companies. The advantages are obvious, for example, when an SMB supplier to the automotive industry can use Web Services to automate logistics and catalog information, enabling it to be exchanged cost-effectively with customers and partners. The latter can then easily incorporate the information into their own systems. Customer and partner inquiries can be responded to more quickly, reducing processing and transaction costs. Forrester analyst Ted Schadler concludes that “Web Services ultimately make customer and supplier relations better, faster and cheaper.”

Further information:

General: (Organization for the Advancement of Structured Information Standards),, (information portal on Web Services), (Web Services Interoperability Organization), (World Wide Web Consortium),
Studies: (“Basic Report Integration with Web Services — Concept, Case Studies and Assessment”),,,,, (IT und Mittelstand 2003 – IT and SMBs 2003),
SAP AG:, , ,

Dr. Andreas Schaffry
Dr. Andreas Schaffry