Demand for web services technology is rising, as businesses use the technology for integration projects, and react to the need for greater agility and increased integration between business applications.

The Gartner Group says that sales of web services-enabled software products and related

services will grow from $61 billion to $316 billion between 2003 and 2007. Of this total revenue, $45 billion is expected from web services-enabled products, while $271 billion is expected to go to IT professional services for web services projects.

According to Gartner, the increasing popularity of integration products means that demand for web services will extend beyond the largest suppliers to many of the smaller ones.

It is not all rosy, however. According to research group AMR, which recently published a field study of 350 companies on web services, 40% of organisations have not deployed web services in their organisation and have no plans to do so. Of those that have, 73% have fewer than five web services projects in production.

AMR found that almost two-thirds of the organisations it surveyed currently spend less than $100,000 a year per annum on web services. In this tough economy, a good return on investment (ROI) is generally seen as a prerequisite for project approval, but not, it seems, for web services. Most companies do not currently perform an ROI analysis on web services, AMR found. Of those that do, the most prevalent reasons cited for expectations not being met were ‘reduction of personnel’ (roughly 18%), ‘reduction of cost of integration’ and ‘elimination of data entry’ (over 16%). AMR believes that unresolved standards and technology ownership issues are slowing down adoption of web services. The emergence of a clear market leader would help, it believes.

Meanwhile, in the related market of application deployment software, which increasingly means application servers, research by IDC has shown that sales grew 4.4% in 2003 to reach just over $7 billion in software licence revenues. According to the report, sales of application deployment

software, which were $6.7 billion in 2002, will reach $8.5 billion by 2004. This is despite rapidly falling prices and forecasts of commoditisation in the application server market.

IDC expects worldwide application deployment software to grew at a compound annual growth rate (CAGR) of over 4% per annum until 2008. There was no change in the order of top ranking suppliers. IBM (with Websphere) continues to lead the pack with a 35.6% market share, followed by BEA (WebLogic) with 11.5% and Oracle (Oracle Application Server) with 5.9%.

IDC says that two main factors are driving the growth of application deployment software: first, companies are migrating to heterogeneous computer environments; and second, that professional developers are moving towards more fully functional platforms.

Over the forecast period, predicts IDC, suppliers which offer integrated services – such as combining application, web and integration servers and the like with user-friendly toolsets and frameworks – will stand to benefit most.