The Real Promise of Web Services –

In today’s corporate environment, there’s a whole bunch of software just sitting there. Shelfware as we call it. Unused or at least underutilized. Waiting to be adopted by employees. Waiting to be integrated within the enterprise. Waiting to show returns for all of the money corporations have already spent purchasing it.

It’s a huge problem and one not easily solved in an economy where throwing good corporate money after bad is a mortal offense. Web services (oddly named given its tenuous connection to the Web or services) promises to help. Through an open standards architecture, one which industry groups have yet to fully agree upon, Web services should finally provide the plumbing to move data in a common language and common dialect to anyone, anywhere, on any device within the enterprise. The shelfware, along with idled “stovepipe applications,” just might find new life, new productivity and new meaning if the real promise of Web services- more integration technology than Web service-is to be delivered upon.

The opportunity is not rocket science. Integration is a common-sense issue within the technology business. Companies like Vitria, Tibco, WebMethods and CrossWorlds-referred to as enterprise application integrators (EAIs)-have offered a variety of solutions to help weave together a corporation’s often far flung web of software applications, disparate data, and multiple platforms. The goal, in addition to making software apps work better together and pay off sooner, is to push the frontier with added business functionalities such as enabling zero-latency or straight-through processing (i.e., transactional data only entered once throughout the course of a business process). While neither concept is novel, certain industries such as the airline and financial services sectors have been operating under zero latency for years, what’s important is by using various integration architectures, enterprises are able to deploy these solutions far more cost-effectively. The challenge? EAI vendor solutions are self-limiting because they are proprietary platforms opposed to the single platform, open standard approach promised by Web services.

End customers really feel the pain of not having more ubiquitous standard platforms. In a recent study of Siebel Systems customers, 61% said that after two years, they had not increased revenue enough, or even saved enough money, to cover the expense of buying, installing and maintaining the software. To put the costs in perspective, every employee using the software within an enterprise costs $18,000 per year in user training, licensing, support, fees, upgrades and the like. How does a corporation find payback? The only way is by wringing maximum use and productivity out of that software by: (1) making sure it’s implemented and integrated correctly; (2) ensuring that all the requisite data flows are tied to and from the app; (3) enabling the broadest-based access possible, e.g., multi-device, multi-platform to drive usage.

So is Siebel Systems software bad or unproductive? Absolutely not. But the value of its software is highly proportional to its level of connectivity, and in particular, to the data entering into one end of its pipe, and flowing out the other. The less integrated the enterprise at a data flow level, the less productive Siebel’s, or any other, software becomes.

It’s a concept VCs and entrepreneurs have understood for some time, yet one far more critical in today’s demanding customer environment. The open standards approach to Web services is one more way of allowing existing software greater productivity and usability. Investors and entrepreneurs must be mindful of this as they build their own next generations of software and Web Services startups. Chet Kapoor, Vice-President and General Manager of BEA Systems Integration group, outlines the problems this way: “How do you take applications integration to the next level? How do you make solutions for those of us who are not rocket scientists, and how do you generate true convergence between applications, integration, the developers and the users?”

According to Kapoor, there’s two ways to do it. Either compete with companies like BEA, which is using a standards based, user-qualified integrated systems approach to create the next generation enterprise software platform for other Web services providers to build upon. Or become a Web services business solutions provider, similar to one of our companies, San Mateo, CA-based Talaris, which sits on top of BEA’s open architecture as an “app” on top of an “app”.

In the case of Talaris, it’s an application which responded to a business problem where corporations were wasting too much time and money having their employees book their own restaurant, hotel, travel, conference room reservations and the like by having them use point-solution Web sites from multiple vendors. Talaris is a way for employees to purchase flights, audio conferences, courier services, hotels and rental cars online and also get corporate preferred prices and negotiated discounts. It is a solution which unifies an employee’s calendars, contact lists, existing point-solutions, content and devices and incorporates other capabilities such as asynchronous workflow, advanced notifications and the ability to deal with delays and cancellations. It is also a way for companies like GetThere, a Sabre company and the largest provider of online travel reservation systems for corporations, to improve its adoption rate within the enterprise by simply extending its reach through a truly integrated software platform. The more accessible GetThere becomes, the greater its opportunity to generate revenue for itself and cost savings for the end user-in this case, the corporate client.

Says Talaris CEO Patrick Grady, “Corporations spent billions of dollars in information technology areas such as application software, hardware, bandwidth, personal communications devices and online services to drive efficiencies, lower operating costs and make their employees more productive. Yet, despite these investments, corporations have reached a state of diminishing returns with regard to cost reduction and productivity.” Talaris has become one of what will hopefully be many applications to be developed for an open standards approach to Web services.

Room for Startups

Other startups, such as San Mateo, CA-based Bizgenics-a non-Charter company-are creating similar value in the Web services space by providing critical data in real-time in helping retain customers after the close of a sales contract. As Bizgenics describes it, once a sale is made sales contracts are filed away and delivering on commitments is often more art than science. BizGenics helps enterprise clients monitor, manage and optimize post-sales activities across customer, operations and distribution networks in the same way Talaris integrates the procurement of travel and reservations services in real time. Each optimizes the employees’ time and the effectiveness of other software applications already in place within various parts of the enterprise.

As Talaris and Bizgenics show, this area is ripe for new startups that take a clean sheet of paper to write new applications using Web services technology rather than trying to retrofit proprietary software. Even as Microsoft promises to rewrite its own Word, Excel and PowerPoint applications in Web services language, it still predicts that won’t happen for at least another three years.

For VCs this means new opportunities to invest in new enterprise application companies. As investors, we need to be creating companies today that take advantage of such open standards and encouraging developers to adopt the basic building blocks of Web Services already in place. As even our friends at CommerceOne and Ariba have said, if they were building an enterprise software company today, they’d build it from the ground up with an open standards approach.

Although a question mark remains as to when, or even whether, a true set of open standards for Web services will be agreed upon, this should not deter the forward movement in developing Web services applications right now. Certain agreed upon critical path building blocks including XML (extensible markup language), certain directory technologies and meta languages are already in place and can be fairly easily adapted to SunOne, .Net, or any other architecture out there.

If the field is still a moving target, it should at least be one where applications developers realize the opportunities are great. With venture capital backing, a new class of startups can be built based on open standards serving the needs of a corporate clientele unwilling to look at new technology, but a clientele more than happy to find any remaining value in what’s already sitting on the shelf.

Ravi Chiruvolu, a general partner of Charter Venture Capital, is a regular technology columnist for VCJ. If you’d like to send him feedback or ideas, email him at