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Smaller firms to fuel explosion of Web services

Midsize and small businesses will drive a tenfold spike in spending on Web services software in the next four years, IDC analysts predict. But caution has so far kept the sharp climb from starting.

Spending on Web services software is expected to rise tenfold to $11 billion worldwide in 2008, as adoption of the technology moves from large corporations to midsize and small companies, according to a report released Tuesday by IDC.

The familiar urge to cut costs and address integration problems will drive the increase, according to the report. However, adoption of the software to create a services-oriented architecture has yet to really take off.

"To date, companies have moved cautiously, but by the time 2005 and 2006 hit, it will really ramp up," said Sandra Rogers, IDC's Web services software and integration director. "Right now, large, high-end companies have adopted the technology, but it will start to filter into the mainstream."

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Many companies are still assessing when and how to use Web services. The standards-based Internet middleware lets software components--such as business applications, databases and security technologies--share information with greater ease. As companies redesign their technology foundation to a services-oriented architecture, they want to improve the interoperability of their technology.

"A lot of companies want to extend their existing systems," Rogers said.

For example, a company may want to consolidate multiple versions of its order entry screen to a single screen integrated with other Web-based systems. A company may use Web services software to help extract information from legacy systems to transfer into new systems.

Last year, spending on Web services software stood at $1.1 billion worldwide, according to the report. IDC expects it to reach $4.9 billion by late 2005 and climb to $11 billion by 2008.

IDC expects the penetration rate of large, North American companies using some level of Web services technology to escalate greatly over the next six years. About 97 percent of large North American companies will have adopted some level of Web services technology by 2010, compared with 14 percent anticipated by the end of this year, Rogers predicted.

"Right now, the end goal is to repurpose the information and simplify the environment," Rogers said. The stumbling block many smaller firms are facing is how to control various levels of information access--especially for outside parties--as data moves more freely among systems. "That is why companies are still moving cautiously. Right now, third parties are accessing things (only) in a trusted environment."