Charles Juniper, manager of emerging technologies at BT, discusses the likely impact of Web services technology on the financial sector.
For the last 12 months there has been much talk amongst technologist, market analysts and industry pundits about Web services. Colourful phrases such as “Web services will sound the death knell of the application” and “Web services will drive an e-business renaissance” abound. However, the hyperbole from these somewhat biased sources is now giving way to the more measured tones of the Financial Times and the Harvard Business Review. So what is the promise of Web services?
The traditional method of implementing business processes is through monolithic and often proprietary software applications. Whilst these do work, they tend to be complex and expensive to maintain and not easily amended to meet changing needs.
With a Web services approach, the organisation implements its business process by ‘bolting together’ discrete modules, each one providing some business function or fulfilling some aspect required by the overall process. These modules are linked together through a series of standardised protocol that run over an organisation’s intranet or the Internet.
But the concept of Web services extends this basic idea by allowing these modules to ‘publish’ details of the services they provide to a ‘registry’. By interrogating the registry, an organisation can discover (and use) bits of functionality it needs to build a new process or reconfigure an existing one.
Where the concept of Web services gets really interesting is when these registries are publicly available on the Internet. This leads to the possibility that an organisation can rapidly implement a new business process by integrating Web service modules both from within the company and externally. Ultimately, so the Web services visionaries tell us, organisation will be able to automatically assemble new processes using functionality that is scattered throughout the internet.
But this concept is nothing new, the idea of having modular pieces of software (or objects as they are commonly known) available to the organisation and accessed through well defined interfaces has been around in various guises for more than two decades - EDI being an early manifestation.
However, there are some significant differences this time around, that make the widespread adoption of Web services far more likely:
* firstly, the ubiquitous presence of the Internet and intranets now provides a common medium through which Web services modules can interact, both within the organisation and beyond to suppliers, partners and customers; and
* secondly, Web services are built upon established Internet standards such as HTTP and XML. These are augmented by an increasingly accepted set of new standards such as SOAP, WSDL and UDDI that are backed by all the major software players such as Microsoft, IBM, Oracle, Sun etc.
Web services is nothing more than a well-established idea that has evolved for the world of the Internet. However, whilst this may only be a technology evolution, the impact on business could be a revolution.
What does this all mean to the financial services industry?
So what are the potential benefits that Web services can bring to enterprises, particularly those operating within the finance sector?
Firstly, Web services allows organisations to interconnect software systems and applications much more quickly, and at a considerably reduced cost, compared to the traditional systems integration approach. For an industry that is based on information and strives to maximise the value of every piece of information to retain customers or streamline processes, this is of paramount importance.
In addition, a financial services organisation that adopts a Web services approach will find it far easier to reconfigure systems to meet changing market needs or integrate with other external systems. As the finance industry continues to consolidate, the ability to rapidly realise the efficiencies of bringing two organisations together and to remain an agile company will be a significant competitive advantage.
Retail finance is a highly distributed industry, relying on a complex value chain from producers, through various intermediaries to the end customers. Past attempts to streamline this chain have meet with mixed results. Extranets, whilst offering some benefit, are essentially a ‘swivel chair’ network allowing an organisation to pass information to a human operator, who then re-enters the information into their own systems. Other, more automated initiatives have failed because of the huge cost of integrating the variety of different operating systems, applications and platforms amongst the participants.
Through the use of standardised Web service, parts of an organisation can be accessed from the Internet in a controlled way. This will allow partners, suppliers or even customers to link directly to the organisations systems regardless of applications, operating systems, or hardware platforms.
Where are we now?
The promise of Web services sounds too good to be true and it will be some time before this vision can be fully delivered. However, the fundamental supporting standards are widely agreed and supported by the major players and innovative start-ups (eg Bowstreet, Cape Clear) alike. However, these standards only provide the functionality to implement basic web services architectures.
There are a number of as yet unresolved issues, such as ensuring adequate security, scalability and the management of multiple linked Web services to form complex business processes. Additional sets of standards are emerging to address these issues, but these are still evolving. It will be a number of years before they are finalised and widely supported.
Gartner Dataquest believe it will not be until 2003 that Web services technology will be sufficiently functional and proven for organisations to be confident of using it in large scale, strategic projects. However, many of the current issues facing Web services become less significant when implemented within an organisation. It is for this reason that a number of organisations such as Merrill Lynch, General Motors and Dell are investing in Web services initiatives that bring about considerable internal cost savings. This is further supported by a survey conducted by Jupiter Media Metrix in which 60% of CIO interviewed planned on using Web services within 12 months to integrate internal applications, whilst only 16% planned on using them for collaboration with new business partners.
What do you need to be doing about Web Services now?
To wait until the picture around Web services becomes clear brings its own risk, to quote a recent Gartner report:
“Businesses that ignore its potential, or decide to sit out its early stages will find themselves outpaced by rivals that take advantage of Web services to improve their agility and even to transform themselves into new kinds of enterprises.”
There are initiatives that can be undertaken now, that not only bring immediate benefits and ROI, but also allow an organisation to develop an understanding of the opportunities offered by Web services.
* Initial focus should be on tying together an organisation’s applications. This can bring immediate cost savings through reduced development time and maintenance. It also begins the process of ‘Web service enabling’ the company.
* Another beneficial early project is the development of an internal registry. As more parts of the organisation become Web service enabled, the available functionality can be held on the registry. This then allows these services to be accessed by other parts of the organisation or used to create new business processes quickly and easily.
* The next logical step is to begin to look at ways of streamlining processes between your organisation and existing partners. ‘Exposing’ certain parts of the organisation processes to partners has the potential to eliminate considerable cost for both parties as well as enhance service levels. As an example of this type of initiative, General Motor aims to halve inventory levels and working capital requirements by using Web services to streamline its supply chain – this amounts to an annual $12.5 billion cost saving, sufficient to reduce the selling price of every GM car by $1,000.
Charles Juniper is manager, Emerging Technologies with the financial services sector of BT Retail. In this role, he is responsible for identifying and bringing to market new technologies that have the potential to significantly impact the financial services sector.