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Hope or Hype?

December 2002 Issue

You know that Web services have hit the big time when business-technology guru John Hagel III identifies them as key to the future of the enterprise. But is it big-time impact or big-time hype? Hagel's previous manifestos about online communities of interest and infomediation were seen as breakthrough works during the dot-com boom, but both turned out to be more wishful thinking than hard reality as the business-to-consumer and business-to-business Web industries headed south.
Dan Ruby
Editorial Director
[email protected]

So is Out of the Box: Strategies for Achieving Profits Today and Growth Tomorrow through Web Services (Harvard Business School Press, 217 pages, $29.95) another case of inflated expectations? Of course, we can't know for sure how the technology will play out in the real world, but there are good reasons to think that this time Hagel is onto something more permanent.

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Hagel's book is not aimed at the technologists who read this magazine, but it is important to you because it is the Web services book that your CEO will be reading. He argues that Web services technology will enable a fundamental change in the structure of enterprises from the top-down, mechanistic model that we know today—the "box" referenced in the title—to a more organic form in which businesses readily adapt to changing conditions. Web services are the catalyst for breaking out of the box, he says.

That's as much true for the way that Web services are implemented as for their inherent potential. Rather than having to rip and replace existing systems to take advantage of Web services, Hagel outlines a three-stage migration path in which companies first integrate existing functionality to cut operating costs, then leverage core competencies to generate new revenue, and finally create long-term growth by transforming the structure of the enterprise.

Most of Hagel's examples of near-term opportunities involve business-to-business functions such as procurement and customer service—so-called edge applications that he thinks will be implemented before core enterprise functions. But the experience of implementers has been that the type of dynamic service discovery needed for such applications is not likely to be embraced by early adopters. Instead, many other experts believe that the important early applications have to do with integrating disparate systems inside the enterprise, and that the edge opportunities will develop later.

Part of what will drive the market to Web services, Hagel says, is support from enterprise software vendors for the new model. But while software suppliers are moving cautiously to support Web services, they are also concerned with protecting their market positions, which raises the question of the relation between Web services and application service providers (ASPs). Hagel contends that the ASP model failed because of the monolithic nature of the applications, whereas modular services are a better candidate for third-party clearinghouses.

One of the book's most interesting concepts is the notion of the service grid, a layer of enabling infrastructure required to support commercial services. The service grid has several important components, including the actual transport and delivery of services, translation servers to promote shared meanings, and technology to support payment and provisioning of services. Today, says Hagel, this layer is in a nascent form and will need to take shape before the Web services model becomes a reality.

Hagel is not a complete Pollyanna about the potential of Web services, recognizing that fragmentation of standards and protocols, failure of the service grid to emerge, and lack of industry consensus on semantics and shared meaning could retard the progress of Web services or cause them to fail as a technology force. Each of these outcomes is entirely possible because of market competition and lack of trust, and thus are deserving of fuller treatment than Hagel gives to them.

That they get just passing mention is too bad because it leaves readers wondering whether Hagel's latest technology interest could face the same fate as his earlier ones. Overall, Hagel's book provides a clear road map to the future impact of Web services in the enterprise, but one that may not adequately anticipate likely twists in the road.

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