As the hype surrounding Web services gains momentum, many CIOs are reacting with skepticism and concern. But Web services do offer real business benefits. By breaking down enterprise applications into shareable components-known as services-each of which performs a different task, organizations can connect applications within or across companies or enhance the functionality of existing applications. (See “Make Way for Web Services,” Emerging Technology, Oct. 15, 2001.) Web services use public standards such as XML, which allows them to provide a much lower cost and more flexible approach to connecting applications than traditional approaches like EDI or EAI. They also make it easier to coordinate business activities, especially across enterprises, leading to lower operating costs, significant savings and attractive growth options.
CIOs need to find ways to gain experience and reap some of the benefits of this new technology without exposing the enterprise to undue risk. The most promising way to do that is to keep it simple, keep it incremental, and learn, learn, learn.
Keep It Simple
Data: By focusing on specific, event-based information that directly affects the actions of the enterprise, CIOs can help to simplify their company’s approach to data sharing. For example, Dell Computer was seeking to lower the inventory in its supply chain through more focused information sharing with its partners. The company aimed to fulfill orders within five days of receipt, but it took its suppliers up to 45 days to fulfill them. Since Dell and its partners all operated on disparate systems, information sharing was very labor intensive. For this reason, Dell used to carry inventories of up to 30 hours in its factories as a buffer against unexpected disruptions in the supply chain. Rather than trying to impose a common technology platform as a means of achieving transparency across its supply chain, Dell is now using Web services to provide limited visibility through the automatic sharing of simple event acknowledgements, such as notification when a product is shipped on time. By giving Dell more timely notification of potential disruptions in supplies, this approach lets the company work around them-before they become real problems. The bottom line: Dell has been able to reduce its raw materials inventory to just three to five hours.
Protocols: The key challenge in integrating across disparate systems is getting divergent applications-not to mention divergent frameworks like CORBA and DCOM-to talk with each other. An alternative approach is to use very simple protocols such as SOAP (simple object access protocol) or FTP to just move the data from its source application, such as a manufacturer’s forecasting system, to its target application, such as a supplier’s MRP system. Once the data is at its target application, simple scripts can be crafted to insert the data into the application for use. By focusing on transferring specific data as opposed to invoking applications, it is possible to allow incompatible environments to work together.
Business processes: Dell succeeded because it worked hard to reduce its process to the lowest common denominator. It realized that much of the complexity in supply chain orchestration can be eliminated by reducing the process to a series of very simple, almost binary, communications. At the end of the day, partners need to share the information a process conveys, not the process itself.
Keep It Incremental
Business partners: Start with a limited number of well-established business partners with whom you already have strong, trust-based relationships and a deep understanding of each other’s business. Then, after some experience, you can expand the number and diversity of business partners involved. Dell started with less than a dozen vendor-managed hubs-specialized third-party logistics providers that coordinated shipments from hundreds of suppliers. As it gained experience, Dell broadened its focus to include its suppliers.
Level of specification: To manage the risks inherent in many business relationships, such as unexpected shortages in supply, companies have traditionally tried to negotiate contracts that specify in great detail the activities to be performed by each partner. But such high levels of specification can reduce flexibility to adapt to unforeseen changes in market conditions. Web services technology, on the other hand, creates the potential for more flexibility by allowing companies to establish connections across key applications much more quickly and cheaply than they would be able to using traditional options that require all participants to install expensive, proprietary and complex technology. Web services achieve these benefits by taking diverse technology platforms as a given and focusing on establishing very “light” interfaces using public standards like XML to enable communications across applications. To exploit this potential, companies need to gradually shift from high-specification approaches, such as very detailed contracts, to alternative approaches that rely on more flexible ways of achieving the desired business results, such as via incentives and selective information visibility.
Amount of value: CIOs can also manage risk by initially focusing on individual business activities that have relatively low value and then expanding over time to include higher-value ones. For example, many financial services companies are starting to use Web services to distribute content like investment analyst reports to their clients. As these companies gain more experience, they can begin to expand to higher-value (and higher-risk) ones such as the processing of client transactions.
Learn, Learn, Learn
Ultimately, the key to reducing risk and increasing business value is to learn from early experience and deepen skills in the application and operation of Web services. But learning does not happen automatically. CIOs need to design appropriate information feedback loops to support the learning process. The good news is that, by automating connections across applications, Web services technology can generate very helpful data about its own performance. By capturing such data and transforming it into useful information, CIOs can significantly accelerate the learning process. That, in turn, will help the organization address future opportunities more quickly.
Start simply, but do start-you won’t learn anything if you do nothing at all.