Web Services Show Promise, but How Much?

By Clint Boulton

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As the tide of Web services hype continues to ebb and flow, two major research firms this week published bullish studies on the extensively-covered sector. IDC claimed the market for Web services will top $21 billion by 2007, while rival Gartner's Dataquest unit surveyed what products are making the biggest splashes in the enterprise.

But two smaller research firms, ZapThink.com and Redmonk aren't necessarily in agreement with information the larger firms are offering. They feel the monetary estimates may be conservative and that other vendors will add choice to the market.

In its "U.S. Web Services Market Analysis, 2002" report, IDC claimed Web services will epitomize the fabric of computing in the next 10 years, with an estimated market opportunity of $21 billion though 2007, topping off at $27 billion by 2010 -- in the U.S. alone. While most people think of applications when the buzz phrase Web services is thrown out, this includes software, services, and hardware opportunities.

Anthony Picardi, Ph.D., senior vice president of Global Software at IDC, said his company's forecast shows that Web services opportunities will be distributed unevenly among vendors.

"The software opportunity will peak first in 2007 and then decline as customers build out their platforms," Picardi said. "The hardware opportunity will follow in 2009 and then professional services in 2011. It is important for vendors in each of these segments to understand the current market trends and adoption rates in order to take the appropriate actions that will ensure future success."

The IDC report also found that 5 percent of U.S. enterprises will have completed Web services projects, with 80 percent having some projects in motion, by 2008. The fastest growth is anticipated to come from large manufacturing- and services-oriented outfits, although the market will be dominated by small enterprises as they become adopters by 2007.

ZapThink Senior Analyst Ronald Schmelzer, whose company analyzes XML and Web services technologies exclusively, respectfully disagreed with the approach of the IDC and Gartner reports with respect to Web services.

"Trying to quantify "Web Services" abstractly is akin to trying to quantify the market for "client-server" or "object orientation." They are missing the point. If you truly buy into the notion that Web Services will be an underlying technology that powers service-oriented applications and point-to-point integration solutions, then there is no concept of a separate "market" for Web Services. Rather, Web Services becomes part and parcel of many existing and emerging markets."

Schmelzer agreed, however, that Web services will generate a tremendous amount of financial possibilities -- perhaps even more than IDC has allowed for.

"The $21 billion number is a figure that might be off by as much as two to three times in size, but it definitely illustrates the promise that Web Services holds for a wide range of markets," Schmelzer said.

Redmonk Analyst Stephen O'Grady agreed with IDC's finding that Web services is enjoying momentum and holds many opportunities. Standards development and momentum, he said, has a big hand in this.

"People have focused on the lack of adoption between enterprises, but they're overlooking some of the great work that's being done inside organizations," O'Grady said. He said certain schemas, standards and languages are gaining traction over others. "XML over SOAP and WSDL descriptions are seemingly everywhere these days, and UDDI as an internal registry is a concept that's found some buyers," O'Grady said. "But we'd agree that adoption landscape is varied from vendor to vendor.

Schmelzer had additional issues with the IDC report.

"Vendors and end-users that are looking to size up the opportunity for Web Services should first look to the application of Web Services they are envisioning, not some abstract notion of broad Web Services applicability," Schmelzer said. "Surely, there is opportunity for a wide range of application, service, and infrastructure categories... and an even larger number of opportunities to implement Web Services and SOAs [service-oriented architectures] that have yet to even be imagined. So, while the IDC report gives a good effort to understand the impact of Web Services, the approach of trying to quantify and time the opportunity is at best an educated guess, and at worse a black art."Gartner's Dataquest unveiled its own study, "Systems Integrators and Users Advance Web Services Use in 2002," on the white-hot topic this week. But unlike IDC's broad financial possibilities, the research firm focused on what vendor platforms are most popular, based on a survey of 44 consulting and system integration vendors in North America.

What did the outfit find? Only that Microsoft .Net, IBM WebSphere and Oracle are the three leading Web services products they plan to support.

Michele Cantara, principal analyst for Gartner Dataquest's IT Services group, said .Net was targeted by 58 percent of system integrators as one of the top three Web services products to ramp up delivery capability, with 40 percent tabbing WebSphere and 31 percent citing Oracle as one of their top three Web services products.

Moreover, Gartner Dataquest surveyed 138 enterprises that were using or planning to use a system integrator to design or use Web services. Thirty three percent of end users are leaning toward Microsoft .Net, while 39 percent plan to use Java/J2EE. Interestingly, smaller companies favored Microsoft .Net, while larger companies favored Java 2 Enterprise Edition architectures and products. Research firm Evan Data Corp. published results to a similar study in October, predicting .NET and Java would be neck and neck a year from now.

"While larger companies tended to have established a Web services platform of choice, smaller companies were still undecided. This shows that the systems integrator does not always dictate the choice of Web services platforms, and that Web services software vendors that are not among the chosen few should look at the smaller, undecided companies where they are more likely to find opportunity for their product," said Joanne Correia, vice president for Gartner Dataquest's Software Industry Research group.

Redmonk's O'Grady said Gartner's vendor choices makes sense, albeit with a caveat.

"Gartner's vendor choices are as good as any, although it does ignore some of the smaller vendors with some great technology like Cape Clear, who have won real customers such as BT," O'Grady said. Other companies who adhere to similar Web services management goals as Cape Clear include upstarts Confluent, WestGlobal, Blue Titan, AmberPoint and Talking Blocks.

"We've actually contended for some time that despite Microsoft's surprising admission that they bungled the marketing and communications effort for .NET, it's actually got some great mindshare in the Web services arena -- this confirms that. IBM and Oracle, likewise, have parleyed their strengths in installed base and standards work to some success as well."

Again, O'Grady pointed to emerging standards.

"One last major factor to consider is that there is more to the world than the Web services stack -- Gartner may only be counting Web services in those terms, but there is real work being done around ebXML," O'Grady said. "The OASIS ebMS messaging transport is gaining some traction, industry verticals and more pertinently government purchasing departments are also beginning to mandate ebXML."

XML is the primary language used to write Web services applications. Electronic Business XML, or ebXML, takes XML a step further by letting companies communicate over the Web. It is designed to enable a global electronic marketplace in which enterprises of any size, and in any location, could safely and securely transact business through the exchange of XML-based messages.

Schmelzer said declaring leadership positions in this nascent space is premature.

"Trying to call the leaders of the Web services market at this stage is like trying to judge the Tour de France at the first stage, or a marathon in the first mile. Best practices for Web Services and services-oriented architecture (SOA) adoption have yet to be determined, and it is not entirely clear who the leaders will be come 5 years from now. While the app server vendors clearly are the 800-pound gorillas in this space, saying that app server vendors are the "Web Services leaders" would be like saying that the Web server and browser vendors were the "Web leaders" in 1995. Clearly, expenditure on Web technologies far exceeds that of just the simple Web server vendors."

But even before one can gauge financial windfalls, there are critical barriers and trends ahead, O'Grady said, which may lead to even greater market opportunities for those willing to join the race.

"We're of the opinion that the real impediments to Web services adoption are two things: security, and interoperability," O'Grady said. "The latter is being addressed via work that the WS-I (Web Services Interoperability Forum) is doing, and its recent inclusion into the J2EE spec indicates the weight it carries there. Security is a little more problematical, and until it's addressed, widespread inter-enterprise adoption is unlikely. Even given that, however, IDC's forecast looks a little conservative, as enterprises increasingly adopt it as a more effective integration mechanism. And if security and interoperability are addressed in the next year, their numbers will be way off.

To be sure, ZapThink said the market for XML and Web Services security is expected to grow from $40 million in 2001 to $4.4 billion by 2006. Factor that chunk into IDC's figures, and it adds quite a bit to the estimates.

But one thing most analysts and research firms are in agreement on, is that once Web services evolve and are assimilated into the enterprise, new challenges will emerge for the IT industry to address. This places a premium on cooperation among vendors to make interoperability happen, so that the software-as-a-service revolution doesn't bog down in a swamp of inertia.

If the firms leap those hurdles, it will likely lead to more product innovation. As for a market estimate, it's in the hands of the vendors leading it, including Microsoft, IBM and Oracle, as well as the smaller firms and a little influence from the economy thrown in for good measure.