Strategic Web Services Costs Will Far Exceed Today’s Vendor Hype, Forrester Calculates
Firms spend little on Web services today — but 84 percent plan to spend more in 2003, according to new research by Forrester Research (Nasdaq: FORR). Significantly, Forrester believes that European firms will invest upwards of 2.5 million euros to implement strategic Web services, blowing away the 200,000-euro price tag hyped by vendors. To discover the reality of Web services, Forrester surveyed 70 European executives from IT, marketing, and general management at its April 2002 Leadership Forum.
“Spend on Web services today is low — 66 percent of firms spend less than 1 percent of IT budgets on Web services or don’t know their level of spending — but 84 percent of execs will increase spend in 2003,” said Forrester Analyst David Metcalfe. “Almost 60 percent of interviewees intend to use Web services for internal integration during 2003, but they won’t stop there: 54 percent plan to engage other firms’ Web services, and 51 percent will offer Web services to third parties. During 2003, execs plan to use Web services throughout the enterprise, not just for a single process. CRM tops the list of priorities, with 57 percent of execs planning usage. Also, 66 percent believe Web services will trigger process redesign by 2004. Significantly, 64 percent expect that by 2005, wide availability of Web services will enable firms to rapidly enter new markets.”
Despite their high expectations, execs involved in Forrester’s research are realistic about Web services’ limitations. The fact that Web services enable firms to build XML interfaces for back-end apps, thus exposing the port on the public Internet with an HTTP address, strikes fear into European execs — respondents view security as the most significant barrier to using Web services. Also, 40 percent stated that budget holders will reject Web services projects from a fear of investing in unproven technology. Cash limits hinder 36 percent of respondents’ Web services investment, and 34 percent point to technology immaturity as a barrier to using Web services.
Barriers aside, Web services tempt execs with the mouthwatering prospect of extracting value from prior software investments — without needing to license an integration server costing upward of €350,000. And as firms implement a broader range of projects using Web services technologies, execs will understand that this enabling infrastructure will be used in every size of IT project. But Forrester reveals that low-cost licenses will not translate into cheap IT projects: The true cost of strategic Web services projects will soar 10 times higher than entry-level projects due to consulting spend and staff time — forcing firms to reassess low-cost investment plans.
“In 2003, firms will use Web services to pick the low-hanging fruit: tactical IT projects for which inexpensive SOAP integration generates a positive ROI,” Metcalfe added. “But from 2004, firms will apply Web services technologies to all IT projects, not just tactical fixes. Integration costs will fall significantly, but project costs for strategic implementations will remain high as execs struggle with business process design and optimization over time.”
For the report “Web Services’ True Costs Revealed,” Forrester surveyed 70 European executives from IT, marketing, and general management at its April 2002 Leadership Forum in Amsterdam.