They called it Web services, and at first it didn’t go over well with corporations weary of dot-com hype and empty buzzwords.
And oh, how the buzzwords flew: Web services was a catchall for a dizzying array of technology-boom by-products, such as BPM (business process management), EAI (enterprise application integration), EII (enterprise information integration), SOAP (simple object access protocol) and XML (extensible markup language). “To be honest, vendors didn’t do a great job getting their messages across,” concedes Steve Craggs, European vice chairman of the Integration Consortium, an association of providers and users of EAI and other Web-era systems-integration technologies.
Over the past year vendors have found their voice. Web services revenues are flowing to the tune of $950 million in 2004 and are projected to rise to $6.2 billion in 2008, according to Palo Alto, Californiabased research firm Radicati Group.
What changed? Systems providers and consultants figured out how to define and package the services as relatively cheap, easy-to-deploy computing utilities. This struck a responsive chord in the budget-squeezed financial industry. Web-based programming standards like XML are ideal for the systems-integration projects that have become top priorities on Wall Street: Serious money can be saved by linking old and new systems, extending the life of the old. Financial firms have also warmed up to Web services for new initiatives in grid computing, a technique for linking underutilized processors into a large-capacity network.
The Integration Consortium’s Craggs, a former IBM executive who heads London-based Saint Consulting, which he founded in 1999, believes financial companies’ emphasis on cost-cutting and efficiency has sparked further advances in the technology -- and yet another acronym: SOA, for service-oriented architecture.
SOAs treat software applications as services: components or reusable parts that can be accessed as needed from any part of a connected enterprise. “You have more flexibility and can develop processes more quickly, and that means you can be more competitive in delivering products to the market,” explains Craggs.
The big banks testing the SOA waters have been loath to make their plans public, fearing they’ll tip off competitors. But vendors championing the idea say acceptance is already widespread. “We’re seeing firms reorient around SOA for cost and time savings,” says John Knightly, director of financial services industry marketing for Silicon Valley Web services pioneer BEA Systems.
The New York Board of Trade began phasing in a new clearing system last month, using BEA to interconnect 39 clearing members, 800 floor traders and thousands of investor clients. NYBOT expects to realize “ease-of-use and timing benefits that can ultimately translate to competitive advantage,” says David Sternberg, the exchange’s director of clearing technology.
Stephen Neal, director of financial services at Bedford, Massachusettsbased Sonic Software Corp., says that several top institutions are applying the company’s Enterprise Service Bus SOA. Still a work in progress, SOA won’t cure everything, adds Neal: “You may not want to use it where high performance is critical, such as in VWAP [value-weighted average price] trading.”
But technologists are working on that, too. Citing an unnamed equity shop running up to $7 billion in daily trades on an SOA, Christopher Keene, the CEO of San Mateo, Californiabased Persistence Software, says it’s “ready for prime time and ideal for high-performance trading.” That may help explain why Sonic’s parent, Progress Software Corp., agreed in September to buy Persistence for $16 million.
SOA is so compelling, says consultant Craggs, that buyers don’t need operational perfection to justify it. “It may not get me everything that fully configured EAI does, but if it costs me $40,000, or only one tenth as much, then it’s interesting,” says Craggs. “It puts downward pressure on prices and strikes at complexity, and that may be quite good enough.”
