CIO — Oil giant Royal Dutch Shell is doing it. So are financial services company Merrill Lynch and travel technology company Galileo International. Those corporate heavyweights are experimenting with Web services, an emerging approach to application development that promises to save time and money by changing the way companies build and use software.

Web services, a major new trend in standards-based software technology, is made up of pieces of custom-developed code that lets two or more Web-based applications talk to each other. Those services can pull a single piece of data (such as a stock quote) or an entire business process (such as checking a customer’s credit and giving him a credit score). Down the road, advocates say, Web services will allow organizations to integrate and reuse software that they or others have already built. Instead of owning and maintaining all their own hardware and software, companies will buy IT systems as services provided over the Internet. The hope is that through the use of Web services, the blood, sweat and tears now involved in systems integration will dissipate, leaving both companies and consumers better able to use and exchange a wide range of capabilities and information over the Internet.

Web services can help companies integrate disparate systems for less money than traditional methods. EDI has helped companies exchange data for years, but it lacks flexibility and is costly to maintain. And where an enterprise application integration package can run into the hundreds of thousands of dollars, Web services that can meet comparable business goals can be built for tens of thousands of dollars.

Adding to the momentum: Top technology vendors, including BEA Systems, IBM, Microsoft, Oracle and Sun, have agreed to support a set of standard software technologies that spell out how different computer systems should interact with each other?an unusual level of cooperation. In addition to the data exchange standard XML, three new standards?simple object access protocol (SOAP); Web services description language (WSDL); and universal description, discovery and integration (UDDI)?let Web services talk to one another. So far, companies experimenting with Web services have been focusing on XML and SOAP and are still examining uses for UDDI and WSDL, which will allow them to advertise their Web services in online directories.

Web services doesn’t come without drawbacks. For the moment, most companies are keeping their Web services projects behind company firewalls because of lingering network security and reliability concerns. Other technology and business questions also remain unanswered: How will organizations make sure that the company delivering a Web service will keep the service up and running reliably? Who will be held accountable if a Web services rollout fails?

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