Challenges of Adopting Web Services - IEEE Computer Society

Proceedings of the 38th Hawaii International Conference on System Sciences - 2005

Challenges of Adopting Web Services: Experiences from the Financial Industry Andrew P. Ciganek, Marc N. Haines, William (Dave) Haseman School of Business Administration, University of Wisconsin-Milwaukee [email protected], [email protected], [email protected] Abstract Despite the many expected benefits of Web services technology, some organizations are hesitating to adopt Web services on a larger scale and across their organizational boundaries. This article presents the findings from an exploratory study in the financial industry investigating the key factors preventing or slowing down the adoption of Web services technology, why these factors influence the adoption process, and what changes need to occur to promote Web services adoption. The findings are analyzed and discussed in the context of existing theories related to IS adoption and diffusion. The results suggest that the role of Web services is currently limited largely due to environmental factors, while XML based messaging is commonplace in the financial industry. The adoption of Web services is likely to substantially increase once some major players in the industry as well as IT vendors make them their key integration mechanism.

1. Introduction According to information provided in industry publications and surveys, Web services technology is embraced by a substantial number of organizations and is expected to play a pivotal role in information systems (IS) development and integration [5, 14]. While many organizations are experimenting with Web services technology, it has arguably not been as widely adopted for major applications on a larger scale, as some of its proponents have suggested [26]. This article explores the challenges of Web services adoption based on the experiences of four firms in the financial industry. Several barriers to the adoption of Web services have been identified based on our literature review, including limited returns on investment, lack of employee skill and senior management support, nonstandard application interfaces of large standard applications (i.e., SAP, Siebel), a lack of mature technical standards, and security issues [6]. What is not very clear is which specific challenges these barriers as well as others present for firms within the financial industry. The main objectives of this research are to identify key challenges of adopting Web services in the financial

industry and to understand why and how they influence the adoption of this technology. We will next present a literature review for this research, which will be the basis for our conceptual model. The methodology employed during this research will then be detailed followed by a description of the participating organizations and an overview of key issues that emerged. A discussion of several interesting findings from this research is then presented and compared to results from the existing literature on IS adoption, particularly the Perceived Characteristics of Innovating (PCI) beliefs constructs [23] and the network externalities effect [15]. We then conclude this research with a summary of our findings accompanied by the limitations and future work.

2. Literature review 2.1 Innovation adoption research The adoption of new information technology (IT) has been widely researched in the past and several models have been established to explain adoption decisions and processes. For instance, Moore and Benbasat [23] developed the PCI belief constructs to measure the perceptions of adopting an IT innovation. PCI builds on Roger’s [25] work of the diffusion of innovations, which incorporates five characteristics as antecedents to any adoption decision: relative advantage, compatibility, complexity, trialability, and observability. PCI incorporates three of those constructs, relative advantage, compatibility, and trialability, and adds ease-of-use, visibility, image, result demonstrability, and voluntariness. Another widely used model that addresses an individual’s technology adoption decision is the Technology Acceptance Model (TAM) [8]. Perceived usefulness and perceived ease-of-use are the critical antecedents in this model. Studies of innovation have primarily focused on two different contexts, organizational and individual adoption [10] and it has been found that the determinants of innovation adoption vary depending on the context. Kwon and Zmud [18] identified five broad categories of variables that influence the adoption of an innovation: innovation, environmental, organizational, task, and individual characteristics. Premkumar et al. [24] use these

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five categories in their research to examine the determinants of EDI adoption in the transportation industry. This study focused on the organizational level adoption of EDI and found only three categories to be relevant in this context: innovation, environmental, and organizational. The findings indicated that external environmental factors were instrumental in motivating firms to adopt EDI. In a study examining the adoption of electronic billing, Au and Kauffman [1] focused on network externalities that play a significant role in influencing the decision of firms and consumers to adopt a technology. Network externalities are helpful in explaining the influence of environmental factors on the adoption decision and the phenomenon of the “chicken and egg” dilemma.

the widespread adoption of this technology. For many organizations, the immaturity of some Web services related standards, particularly in the areas of process management and security, is a key concern. In some cases, such as reliable messaging, the issue is not the absence of technical solutions and proposed standards, but the availability of one commonly accepted standard [16]. For example, the WS-I has only recently (May 2004) provided a draft for a basic security profile based on WSSecurity, which has the potential to become a more commonly accepted standard for Web services security [2]. According to a Gartner analyst, about 95% of Web services being done today are internal between singlevendor systems, while external Web services are singlepartner in nature as a means to address security [26].

2.2 Web services

2.3 Financial industry

We define Web services as a software system designed to support interoperable machine-to-machine interaction over a network with an interface described in a machine-processable format (specifically WSDL). Other systems interact with Web services in a manner prescribed by its description using SOAP messages, typically conveyed using HTTP with an XML serialization in conjunction with other Web-related standards. This definition is based on the specification of the World Wide Web Consortium (W3C) [11]. It is important to note that we clearly distinguish Web services from other forms of XML-based messaging that do not employ WSDL descriptions and the SOAP messaging protocol. Web services technology has received a significant amount of attention in trade publications and more recently in the academic literature. Several articles and surveys indicate that Web services have gained substantial traction and are being implemented [5, 14]. Key benefits that are frequently associated with Web services are that they offer easier and cheaper connectivity [12], can be leveraged to create a more flexible IT infrastructure, and possibly generate new revenue streams [13]. Web services, therefore, may impact software development and the nature of IT jobs [7], as well as how IT and businesses operate. The proponents of Web services believe that this technology will be more widely adopted than previous attempts of component-based distributed computing (i.e., CORBA, DCOM), largely due to its universal and self-describing nature and the broad support by major IT vendors [19]. On the other hand, organizations appear to still face significant challenges adopting this technology. To date, a high level of adoption of Web services is not commonplace [26]. Using Moore’s technology adoption life cycle [22], Web services appear to not have crossed the chasm, the time before a technology’s highest adoption rate, and reached a majority of organizations for

The exchange of financial and other sensitive information is a core activity for organizations in the financial industry and the reliability of this exchange is a key concern. Organizations consequently tend to act conservatively and will only adopt a new technology when it has proven to be sufficiently secure. Rarely are financial institutions taking part in the early phases, initiation, early adoption, or even early majority, of the adoption life cycle. In addition, financial institutions have to comply with many regulations regarding the exchange of financial and other information that put increasing pressure on protection and security [17]. On the other hand, there are several incentives for the adoption of Web services in the financial industry. For example, regulations such as BASEL2 have forced companies to increase information processing capabilities to trace financial transactions [17]. Increasing customer expectations may also have an impact. Financial institutions in the past have traditionally had limited hours, however, many customers today expect 24/7 availability of real-time financial services and a much richer portfolio of services that can be distributed across several financial service providers. Furthermore, the financial services market is rife with mergers, often leaving institutions with a glut of mismatched IT infrastructures [21]. Thus, the financial industry offers both substantial barriers and strong incentives for the adoption of Web services. Further examination into the financial industry is necessary to determine the true impact that these barriers and incentives will have. Limited proof-ofconcept pilot implementations involving Web services technology are being undertaken at some financial organizations, such as at Bank of America and Wachovia Securities, but the overall acceptance of Web services is gradual [4]. XML messaging, while mostly within an organization’s firewall and based on “pre-Web services”

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proprietary protocols, is much more widely used as examples such as MetLife illustrate [20].

3. Conceptual model This study attempts to identify key factors that are challenges for the adoption of Web services in the financial industry. We apply conceptual models from the existing literature to organize and discuss the factors that emerge from the case evidence. To organize these factors, we apply a modified model of the five broad categories of factors influencing the adoption of innovation identified by Kwon and Zmud [18]: innovation, organizational, environmental, task, and individual (see Figure 1). Web services technology is part of the IT infrastructure that facilitates the creation and operation of end-user applications. Accordingly, it may be used for multiple purposes and tasks. We argue that the adoption of Web services is primarily determined at the organizational level and, therefore, individual level factors as well as task specific factors are not highly relevant in this context. This is consistent with the approach taken in prior research, such as the examination of EDI technology adoption by Premkumar et al. [24]. We will subsequently apply key antecedents of the adoption of PCI [23] as well as the concept of network externalities [15] to the remaining three categories: innovation, organizational, environmental. We do not employ TAM as a model to explain our findings due to its primary focus on the individual’s technology adoption decision, which has little relevance in the context of Web services adoption. Innovation (Web services)

The model depicted in Figure 1 was used to frame our thinking and organize the findings of this study. This research, however, was designed as an exploratory study and is open to unanticipated findings. A key reason for choosing participants from the financial industry was the consideration that organizations in this industry have both strong incentives to embrace Web services technologies and characteristics that provide substantial obstacles to adopting this technology, as outlined in the literature review.

4. Methodology This study employs a multiple case research strategy to explore the adoption of Web services technology. This strategy was chosen because the adoption of Web services is a contemporary event that can be observed in a real-life context and for the specific context of Web services, little prior academic research has been published. This research addresses not only which factors influence the adoption of Web services, but also how and why these factors play a role. Based on recommendations made by Yin [27] as well as Benbasat et al. [3], the case research strategy is suitable for the exploration of Web services adoption.

4.1 Research design In this study it was important to gain an understanding of how the adoption of Web services is approached in organizations. A goal was to elicit a variety of approaches and challenges. Therefore, we decided to use a multiplecase design rather than focusing on a single case. Multiple case designs further allow for cross-case analyses, which force the investigator to look beyond initial impressions and see evidence through multiple perspectives [9].

4.2 Case and participant selection Adoption of innovation (Web services)

Organizational

Environmental

Task Do not apply to Web services Individual

Figure 1. Categories of factors

To provide some control and avoid substantial differences that exist between organizations in different industries, we focused only on organizations from the financial industry. All of the organizations are major national financial services providers in the United States. While the selection of participating organizations was limited by availability, we obtained four cases which provide us with contrasting results from organizations with varying levels of Web services adoption, thus allowing for or theoretical replication [27]. For each case a minimum of two participants were selected based on the recommendations of our contact person. At least one individual had technical expertise with respect to designing and implementing Web services technology (i.e., IS analyst) and at least one had managerial responsibility for the Web services projects and a broader business perspective (i.e., vice-president of

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information systems). In total, we interviewed nine individuals in four participating organizations during the spring of 2004.

4.3 Data collection The interviews lasted on average 45 minutes. All but three interviews were conducted face-to-face. The three interviews with organization C were conducted by phone. The interview processes was guided by a semi-structured interview guide. This guide contained eight open-ended questions and was used by interviewers to ensure that all relevant areas of interest were consistently addressed in the interviews. The questions elicited the organizational and IT background, the perspective and involvement of the interviewee, current Web services initiatives, expected benefits, the key challenges, long term solutions and temporary workarounds, as well as key lessons learned in dealing with Web services technology. Each interview was recorded and transcribed. The researchers then created summaries of the transcripts and provided the participants with an opportunity to make corrections, such as adding important details or removing sensitive information. In addition, a brief description for each case was produced, which are summarized in the case evidence (section 5).

4.4 Data analysis The basis for the data analysis was the revised summaries of the interview transcripts. Each summary was interpreted and coded by each of the three researchers independently. Two general analysis strategies are available in case research. The first is to rely on theoretical propositions, the second is to develop a case description [27]. The latter is more suitable for in-depth single case studies. In this study, a theoretical proposition approach was taken and the researchers entered the analysis with preconceived constructs. Several potential factors and categorizations were identified prior to the analysis based on the literature review (i.e., security concerns, immature standards, etc.). While some theoretical constructs were known a-priori, the nature of their relationship with adoption was not known and the possibility for additional factors of influence was left open. The findings from the indvidual cases are consolidated and presented in the cross-case analysis below (section 6).

5. Case evidence Interviews were conducted with four organizations from the financial industry. All four organizations compete in a national or international marketplace. Their Web services exposure ranged from several years of

development and use to those considering use in the future. Table 1 provides a comparison of the organizations interviewed. The following is a brief summary of each of the organizations that were interviewed and their specific views related to the challenges in adopting Web services.

5.1 Organization A The first organization has Web services applications that have been operational for over a year. They are primarily a provider as opposed to a consumer of these Web services. The organization has a large number of mainframe computers (two major vendors) and historically provided user interfaces to applications on these systems using the 3270 “green screens”. The organization processes a large volume of transactions in which response time and throughput is very important. Their second generation of systems involved the development of a series of more than a dozen separate web applications. These web applications were supported by servers that interfaced with the legacy mainframe systems and allowed the end users to have a graphical user interface. Each of these systems was developed independently and did not follow a standard architecture. They were developed using the Java language, however they pre-date the finalization of EJB’s. They also did not use XML for their data formats. The third generation of these systems is currently under construction. The plan is to convert all of these existing applications to Web services. Three of these applications have already been converted and two more will be online by the end of the year. The organization is using IBM Websphere as the server and the development tool is Websphere Studio Application Developer (WSAD). These systems all pass XML messages, which use the industry standards (IFX and OFX) when possible, and use the Web services standards WSDL and SOAP. Their primary motivation to move towards Web services was to provide a standard platform for development, provide a method for integration of the various systems, and support their desire to reuse code. In the future, they plan to offer Web services to customers as an alternative access method to their systems.

5.2 Organization B The second organization has many applications in production that employ “pre-Web services” XML-based messaging, but has a limited adoption of actual Web services. This organization runs a large number of IBM mainframes with legacy applications as well as a number of servers to provide access to this data. The organization is primarily a J2EE shop. Thin clients are developed with WebSphere and Struts. There are also some rich client applications that have been developed in Visual Basic,

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Table 1. Company characteristics Organization A

Organization B

Organization C

Organization D

Primary product

Deliver data and services

Manage and deliver data

Size of IT department Hardware

Medium 2 Types of mainframes Windows servers Sun Solaris servers 5

Large IBM mainframes Sun Solaris Windows servers 1

Develop financial applications for license and ASP use Medium Sun Solaris IBM AIX servers

Provide business-tobusiness communications Small IBM Mainframes Unix servers

0

0

Web services standard

Web services like XML IBM MQ Series Custom protocol J2EE .NET Rich clients VB and C++ IBM WebSphere Studio Application Developer Struts IBM WebSphere

XML-based

XML-based IBM MQ Series

J2EE

J2EE

Eclipse Oracle tools

Bea Web Logic

IBM WebSphere Bea Web Logic Apache

Bea Web Logic

Current number of Web services applications Current development architecture

Software Development Platform

J2EE

Development tools

IBM WebSphere Studio Application Developer

Application server

IBM WebSphere

Web server

Apache

Apache IIS

C++ and more recently in the Microsoft .NET platform. Prior to the introduction of Web services, the organization developed their own standard for formatting XML messages similar to SOAP and used IBM MQ Series for messaging. They considered this “home grown” architecture to be service-oriented. They only use this XML messaging approach within their own firewalls because of security concerns. As the number of .NET applications grows, the likelihood of seeing more Web services applications will increase, since it would be difficult to move them to the MQ Series approach. The current approach being used to provide a service-oriented architecture is meeting the needs of this organization and would only be replaced by Web services if they saw the demand for this functionality from the various external vendors they interface with. They view themselves as being primarily a provider of services.

5.3 Organization C The third organization both operates as an application service provider and licenses the financial software they develop. Their software is written using the J2EE standard using the Eclipse development tool as well as Oracle development tools and runs on WebSphere application servers in the Sun Solaris and IBM AIX environments. All the messaging between these EJBs and the servlets that support the graphical user interface use a

Apache

proprietary format which is based upon XML and includes the necessary remote procedure calls. While some standards exist such as OFX and IFX, they do not provide all the data required in some of their existing applications. While the architectural structure would be easy to convert to the Web services model, at this point the cost of conversion does not appear to outweigh its benefits. They view themselves as both providers and users of services. The real driver for change will be when their customers or partners start demanding standard Web services functionality.

5.4 Organization D The fourth organization’s primary role is to serve as the facilitator of business-to-business communications between consumers and vendors. The vendors represent significant players in the financial industry and they exert a great deal of influence over the protocols by which communication takes place. The development platform is J2EE and the development environment is Eclipse. The applications run on UNIX servers using the BEA Web Logic application servers and the Apache Web server. Most of the messages are sent in XML and since there are no adequate industry standards, each of the vendors requires their own proprietary format. The transport protocol used is primarily MQ Series with some using HTTP or FTP. The organization does not currently have any Web services applications. They are both consumers

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and providers of services. While they see a number of benefits related to Web services, they are delivering what their vendors require. If their vendors or consumers were to require Web services, they would meet those requirements.

6. Cross case analysis The data analysis of these four cases led to a number of key themes that emerged from the evidence. The following analysis presents the key themes across the four cases and relates the factors influencing the adoption of Web services to the antecedents of adoption of PCI [23], organized by the three categories of adoption factors.

6.1 Business drivers The statements made by the participants clearly indicate that their customers and suppliers are currently not requiring Web services. All of the organizations mentioned that if their business partners would require Web services technology, their organizations would find moving in that direction much easier to justify. IT vendors also play a key role. Another incentive for the adoption of Web services would be provided if major vendors of standard enterprise application packages (i.e., ERP, SCM, or CRM packages) were to adopt Web services as their main integration mechanism. In reference to the famous line, “If you build it, they will come”, one participant said that “rather than being in a mentality of ‘If we build it, they will come’ [it is] ‘If they come, we will build it’.” Relative advantage, as a key antecedent of adoption, appears to be very weak and presents a key obstacle to adoption.

6.2 Industry inertia As one senior manager put it, “Our industry is not a leading edge industry. I think we are getting a little bit more aggressive, but we probably are just barely touching fast follower.” This is consistent with the notion that organizations in this industry usually participate in the later phases of the adoption life cycle [22]. Result demonstrability, another important antecedent of adoption, has not been provided on a large scale for the financial industry. Industry inertia can therefore be considered an important obstacle to the adoption of Web services.

6.3 Security In each case security was mentioned as an important characteristic for information systems in the financial industry. Its importance has substantially increased in the last couple of years and it is viewed as an issue that needs

to be addressed soon. It was clearly perceived by all organizations that the Web services standards related to security have not matured yet. One participant stated, “Security has not yet solidified. Some solutions may come this year”. The approaches which are currently used include keeping the application behind the firewall by using virtual private networks and custom solutions for individual applications or business partners, for which the security mechanisms, such as encryption and digital signatures, are tuned to the specific requirements. Security, however, was viewed by some participants as more of a business problem rather than a technical problem. One participant pointed out that, “As an industry we need to get serious about security. … Security is not a technology problem, security is a business problem. … The reality is, we should agree on a standard and implement it.” While security issues may be attributed to the innovation, the agreement on a standard, which seems to be more important, is an environmental issue. In terms of the antecedents of adoption, the lack of mature security standards negatively affects both compatibility and easeof-use and can therefore be considered a key challenge for the adoption of Web services in the financial industry.

6.4 XML-based messaging standards The use of XML for messaging purposes was very commonplace among all the organizations, however, proprietary formats and protocols were being used instead of the standardized Web services SOAP messaging format. Organization B, for instance, had developed a very similar XML-based messaging protocol prior to the availability of SOAP. One of the participants stated, “While we are not currently using Web services, we do make extensive use of a variety of proprietary XMLbased messaging protocols and message formats”. Another participant pointed to the immaturity of the Web services messaging standards, “The fact that Web services are not fully defined yet is a reason why the adoption of Web services is taking so long. Key concerns are reliable messaging, asynchronous calls, monitoring, and security”. This suggests that the immaturity of standards around reliable messaging and other areas is slowing down Web services adoption. Again, this is mostly an environmental factor that negatively impacts the compatibility antecedent of Web services adoption.

6.5 XML-based vertical “payload” standards While some XML-based standards for formatting the payload of a message exist in the industry, each organization had developed custom formats to communicate with different business partners. One of the primary reasons given for their existing implementation was the lack of availability and maturity of vertical standards at the time of implementation and today.

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Standardization and the ability to integrate across platforms, if realized, were mentioned as key benefits.

6.6 Service-oriented architecture A service-oriented architecture (SOA) can provide the much needed agility and flexibility that allow businesses to organize as desired, not as imposed by rigid system architecture. This allows IT to truly become an enabler for the business. Web services are only one avenue to achieve a SOA. Organization B, for instance, has already implemented a SOA with other means. “We consider our current architecture using XML, IBM MQ Series and our proprietary messaging protocol to be service-oriented.” One participant encouraged organizations to be “Counting more on service-oriented architecture. Just make sure that you build up your business with components and services. […] There is other technology that is out there that can probably solve a lot of the problems you are trying to get to, even if you do not adopt true Web services.” Key benefits are derived from an SOA and the standardization of the enterprise architecture. If an internal service-oriented architecture is already in place, the change to Web services may only lead to a small incremental benefit that cannot justify the cost. In this case, the relative advantage is not substantial enough to trigger an adoption. The focus should not be on Web services, but agile applications instead [14].

6.7 Software development Web services offer the potential for increased productivity by simplifying the development process and leveraging reuse of system components. The SOA approach of using services also provides a language that both developers and the business understand. As one participant pointed out, “Developers can start […] focusing on the business problem. And I think that that is going to have a very large effect on productivity and the value added to an organization of a software developer.” The ability to increase productivity and reduce turnaround time should have a positive impact on the adoption of Web services. Two of the four organizations have mostly technology driven pilot projects using Web services technology. Trialability, as one of the antecedents of adoption, does not seem to be an issue inhibiting the adoption of Web services.

6.8 IT skills The comments by the participants suggest that the learning curve to obtain proficient skills to implement Web services is low. While one organization indicated that training a substantial number of IT people will be necessary, others were confident that most of the concepts

and skills could be easily obtained. One participant was very optimistic noting, “Probably no new skills would be required. It is only important to become familiar with the publish/subscribe paradigm and the standards”. The organizational factor IT skills is apparently not viewed as an obstacle to the adoption of Web services. It seems that Web services are compatible with skill sets already available in the organizations.

6.9 Organizational change While Web services technology can be viewed as a potential catalyst for organizational change [13], the participants were not expecting significant organizational changes due to the introduction of Web services technology. The expected impact of Web services was seen in the reduction of transaction costs and changes in software development. One senior IT manager noted, however, that a service orientation may lead to new responsibilities for his IT unit. Applications previously owned by business units will now become a responsibility of IT because the business side is now only concerned with the services interfaces, not the integration with the back-end systems behind the scenes.

6.10 Role of the service registry (UDDI) The ability to dynamically discover Web services using registries based on the UDDI (Universal Description, Discovery and Integration) standard is a key feature of Web services. However, UDDI registries are only an optional part of Web services if the location and purpose of required Web services are known. Based on the evidence from the cases, it seems that UDDI does not play an important role. While it may be a technical reality, it appears to be business utopia in the financial industry. The interviews clearly indicate that financial organizations usually deal with a small number of established business partners with a few well defined Web services. For instance, one participant noted that consumers of Web services can, “Look it up once, they always go back to that same service. So, we don’t have a UDDI and I can’t even imagine a scenario where we really need one.” The only likely application mentioned by another participant was to use UDDI as a versioning tool. This suggests that using UDDI for dynamic Web services discovery is not likely today or the near future. As another participant suggested, “There are no blind dates in Web services.” UDDI is a part of the innovation through Web services, which currently appears to have little relevance to the organizations in the financial industry.

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7. Discussion The analysis provides a number of noteworthy findings. Indeed, some of these findings can be considered surprising, given the depiction of Web services in the literature and the claims of their popularity and prevalence in organizations today. The following is a summation of the results from the analysis organized by the three broad categories of innovation: innovation, organizational, environmental (Figure 2).

7.1 Innovation Technological issues associated to the innovation, such as visibility, complexity, and tool support, were not viewed as hindering the widespread adoption of Web services. There is no lack of visibility of Web services given its coverage in both trade and research publications. Also, the complexity of the technology does not seem to be a concern as the participants indicated that their organizations would be ready to move to Web services as soon as they were demanded. Furthermore none of the participants mentioned issues related to the tools that are used to support Web services implementations. It appears that these tools are adequate. Overall, the innovation factors pose a marginal challenge. The fact that one important aspect of Web services, the UDDI registry, seems to play no role was a surprising finding. This, however, does not pose a challenge since Web services can function without it.

7.2 Organizational Several of the factors that emerged in the analysis fall in the organizational category. This includes software development, IT skills, IT architecture, and financial justification. Financial justification appears to be an issue holding back Web services initiatives. All business level participants found it difficult to justify the cost of Web services implementations. On one hand, this is driven by a lack of perceived benefits, but perhaps also by a generally more cautious stance towards investments given the recent economic situation. On the other hand, IT skills do not appear to be an inhibitor. Although some participants acknowledged that more training and education is necessary before further pursuing Web services, they also suggested that adopting Web services would not be “a problem” and requires a “very low learning curve” among existing employees. This confidence emanated from a belief that working with Web services would not be significantly different than working with already existing technologies. It appears that Web services is compatible with existing IT skill sets.

Innovation (Web services) • Visibility • Complexity • Tool support Organizational • IT skills • Software development • IT architecture • Financial justification

• • • •

Environmental Business partners Industry inertia Security Standards

marginal challenge

moderate challenge

Adoption of innovation (Web services)

strong challenge

Figure 2: Challenges of web services adoption Software development was identified as one of the areas in which clear benefits through Web services are expected. The participants expect higher developer productivity, shorter turnaround times, and improved communication between IT developers and the business. Getting to a service-oriented architecture alone was viewed as an important goal, whether through Web services or by other means. Some organizational factors pose clear challenges, while others provide incentives for adoption. Overall, organizational factors are considered a moderate challenge for Web services adoption.

7.3 Environmental The environmental factors that appear to be important in the context of Web services are business partners, industry inertia, security, XML messaging standards and industry specific vertical standards. Several participants revealed that a reason for not adopting Web services is that the external demand for Web services is not strong enough. The most influential players in the industry are currently not requiring Web services. The general inertia in the financial industry towards innovation contributes to the challenges of adoption. Once Web services reach the early or late majority stage in the innovation life cycle, wider adoption can be expected. Currently, the network externalities pose a “chicken and egg” dilemma and there is not a clear relative advantage for using Web services. As expected, security is a key concern among the financial institutions adopting Web services. Interestingly, security was viewed more of a business or standards issue rather than a technological issue. A key lesson related to Web services adoption, which was

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mentioned by several participants, was that security standards are not yet mature. Organizations are hesitating to provide Web services publicly outside their firewalls. This point was illustrated by one participant who suggested that there are, “No blind dates in Web services”, emphasizing that, “Old fashioned face-to-face agreements” is currently the only way an exchange with a partner occurs. Another surprising finding is that custom XML-based messaging protocols were already commonly used. This is largely due to a lack of suitable standard messaging protocols at the time the systems were conceived. Switching to SOAP would be costly and provide little benefit for the organization at this point in time. Furthermore, the standards addressing issues such as reliable messaging were not yet considered mature. Also, vertical industry standards for the message payload are still under development. The perceived immaturity of standards poses a substantial challenge for Web services adoption. Overall, environmental factors appear to play a dominant role prohibiting or slowing down the adoption of Web services in the financial industry, while organizational factors have some influence, and innovation factors appear to only contribute marginally to the challenge.

8. Conclusion This study examined the factors that are inhibiting the adoption of Web services technology in four organizations in the financial services industry. The findings were grouped into three categories: innovation, organizational, and environmental factors. The environmental factors, particularly the demand from business partners, appear to dominate the adoption decision in this industry. This can be explained by the "network effect" caused by network externalities. As expected, security plays an important role and the lack of solidified standards related to security and other areas is a key inhibitor for the adoption of Web services. More surprising is the marginal impact of innovation characteristics, such as the complexity and availability of tools. For example, none of the organizations identified the lack of tool support as an issue. The move to Web services technology is not seen as a large effort, although some training will be necessary. Organizations in the financial industry tend to be relatively conservative with respect to technology innovations. It is important that clear benefits over costs can be demonstrated before a majority of organizations will adopt a technology. The key driver for Web services adoption, however, will be a strong business need fueled by the demand of key customers or suppliers. Once this business need is realized, the adoption of Web services may grow very rapidly, given the indicated ease of moving to this technology.

This research can be used as a guideline for both practitioners that are in the process of adopting Web services and for those that have not yet done so. The findings are put forward for comparison and to help balance expectations as it raises the awareness of the current state of Web services adoption in the financial industry. This study also provides a framework for future research in the area of Web services adoption and addresses the scarcity of empirical studies that examine the adoption of this technology. The findings of this study only reflect the experiences made in the four organizations at this point in time. The importance of factors may vary over time and factors that were not mentioned in these cases may surface. As in most case studies, the generalizability of the findings is limited. The findings also only reflect the experiences made by organizations in the financial industry. Organizations in other industries with different requirements and business drivers may take a very different adoption path. Further research will be necessary to substantiate the findings. One approach is to replicate this study in other industries or develop a broader quantitative survey based on the findings from this study. A more rigorous qualitative data analysis may also help to reveal further insights. A longitudinal approach in which we revisit the organizations at a later point of time would also be helpful to compare current attitudes towards adoption with actual adoption (or non-adoption) decisions in the future.

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