RISK NO. 5: No evidence yet for enterprise ROI.
MITIGATION: Think long term.
While evidence is emerging that companies already have realised benefits from their investments in Web services, enterprise-level ROI is still largely theoretical. Leading organisations currently report their gains in terms of the time and money saved on application development, says Cap Gemini's Lochan. Such savings can be impressive - the US Navy lopped more than $US8 million a year from the cost to manage just one operation planning application as a Web service, and can now develop new applications in a few months instead of years. The Navy also reports improvements in strategic processes such as mission planning due to Web services that, for instance, enable the aggregation and centralisation of mission-critical weather reports.
While it's taken a year and a half to whittle 100,000 applications down to 6000 Web services, Shephard anticipates it will take several more years to reach her ultimate goal of a few hundred Web services. Because technological change is driven by fundamental changes in how the Navy operates, the business value of Web services is dependent on how commanders execute their mandates to collaborate more closely. Getting top Navy leaders to buy into the potential of Web services was one of Shephard's biggest challenges. "We may have disagreements [now] about whether a particular effort takes advantage of Web services in the best way possible, but we're not arguing about whether [Web services] is pertinent to the US Navy," she says.
Wells Fargo's Wood notes that "it's difficult to have short-term metrics" for Web services. Wells Fargo doesn't even maintain a separate budget for its Web services investments, instead incorporating them into its IT architecture budget. At the corporate level, Wood looks for ROI in the progress made toward sharing customer information among different business units and improvements in levels of service provided to customers. When it comes to specific projects, Peltz says he'll keep investments under control by developing new services in short, iterative cycles rather than sinking a lot of money into big projects. And he'll tackle first the projects that customers want the most - services like event messaging (customised notifications about payments received or other financial events) and payment transactions.
Becoming an early adopter of Web services is not an easy road. "Most cultural change programs fail. Most strategic change programs fail. Most large IT programs fail or underperform," says Motorola's Desai. "Aggressively adopting Web services at the enterprise level is all three combined. So the most critical decision is to see how not doing this can be competitively dangerous."
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