Strategic Planning, M. Knox, W. Andrews, C. Abrams Research Note 18 December 2003 Web Services Take Root in Banks and With Asset Managers Financial-services providers' early Web services implementations stress internal over external connectivity. This will change, however, when confusion clears and security and standards are addressed. Core Topic Financial Services: Financial Services Architectures and Emerging Technologies Key Issue What architecture models and technologies will enable FSPs to adapt to major industry trends such as straight-through processing, the real-time enterprise, corporate performance measurement and risk management? Strategic Planning Assumption At least 80 percent of FSPs will employ Web services by 2006 (0.8 probability). Note 1 Survey Description Gartner's 2003 FSP Architecture survey was conducted in June and July 2003, and included 102 U.S. banks (with deposits of $500 million or more) and asset managers ($1 billion or more under management). Interviewers screened respondents to determine those who were knowledgeable about the technology architecture, data management, data quality practices and XML used in their enterprises. Web services are gaining a foothold in the financial-services industry. A recent Gartner survey (see Note 1) showed that 24 percent of the banks and asset managers surveyed use Web services based on Gartner's following definition: "Web services are software components that employ one or more of the following technologies Simple Object Access Protocol (SOAP), Web Services Description Language (WSDL) and Universal Description, Discovery and Integration (UDDI) to perform distributed computing. Use of any of the basic technologies SOAP, WSDL or UDDI constitutes a Web service. Use of all of them is not required." (See "Introducing Common Sense to Web Services.") However, we believe that the true amount of Web services usage among financial-services providers (FSPs) is likely twice that of the 24 percent figure, because the survey results underreported actual usage due to the following factors: Correction for confusion about what constitutes Web services. Despite Gartner's Web services definition, many respondents who initially said they used Web services later told us they didn't use any of the three technologies. Thus, we've deleted these respondents from the number of users shown in Figure 1 (but included them in the "neither" category, if they said they didn't plan on using at least one of the technologies). However, from conversations we've had with our clients, we know of instances in which enterprises are using SOAP or other Web services technologies, but individuals working with these implementations are unaware of their incorporation. Thus, it's likely we've overcorrected for the confusion. Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
Lack of awareness about their enterprises' Web services initiatives. Respondents were chosen because they were identified as being "knowledgeable about [their] company's information technology architecture, data management, data quality practices and use of Extensible Markup Language (XML)." However, since many FSPs lack a formal Web services strategy or governance process, they may be unaware of Web services projects that are under way. Moreover, some company developers are reluctant to publicize that they're using Web services, due to the perception that these are new and untried technologies. Instead, such developers tend to promote the new or enhanced business functionality. Web services embedded in vendor applications and services. Increasingly, vendors use Web services to provide for connectivity within their solution suites, and to open their solutions for ready integration. Third-party service providers also use Web services to provide automated data access to their customers. However, these vendors and service providers are reluctant to tout their use of Web services. For example, one bank testing Web services for providing data to its customers expressed concern about its customers' understanding of Web services. The bank stresses the business benefits of data delivery, not the technical aspects. Figure 1 Survey Respondents' Use of Web Services 76% neither (24% of these plan internal and 21% plan external) 13% internal integration, connectivity only (36% of these plan external) 6% both 5% external for customers and suppliers only (50% of these plan internal) Source: Gartner Research (July 2003) Given these factors, Gartner projects that at least 80 percent of FSPs will employ Web services by 2006 (0.8 probability). 18 December 2003 2
Where Web Services Are Being Used Survey results show that Web services primarily are used for internal integration and connectivity. Web services used for external communication and connectivity are mainly earmarked for Internet banking and provision of payment and account information (especially for corporate customers). Security concerns, unresolved issues about technical and industry standards, lack of a critical mass of Web services adopters, and a lack of appropriate technical skills have deterred the use of Web services for external implementations. Because of the high visibility of such external links, FSPs are understandably wary of the potential for security breaches and damage to their reputations. As these barriers are surmounted, however, Gartner anticipates the increased use of Web services for external connections. The survey data stresses that most Web services implementations in financial services are fairly immature and don't rely on more-sophisticated Web services technologies and standards. Although most Web services implementations use SOAP, far fewer use WSDL and fewer still use UDDI (see Figure 2). This is significant because WSDL and UDDI play key roles in promoting Web services use, for the following reasons: WSDL is a formal XML vocabulary and grammar that enables enterprises to describe, discover and use Web services. This promotes interoperability as well as the ability to connect to Web services without pre-negotiation among parties. UDDI provides a directory service for enterprises to publish, search for and use Web services on-site or from other enterprises. This promotes the availability and reuse of applications and data interchange supplied by Web services, and provides time-to-market for new applications. 18 December 2003 3
Figure 2 Web Services Technologies Used Internal SOAP WSDL UDDI External Use Currently Plan SOAP WSDL UDDI 0% 20 40 60 80 100 Source: Gartner Research (July 2003) Gartner believes that broader adoption and experience with WSDL and UDDI are necessary to move Web services from point implementations to an infrastructure role initially in individual enterprises and then extending to markets. For the next several years, SOAP likely will remain the primary vehicle for application interoperability within an enterprise and in business-to-business contexts. WSDL ultimately will play a bigger role when it moves beyond the specification stage to a firm recommendation in 2004. Greater use of WSDL also will require more vendor and end-user experience, as well as a track record of successful implementations, to achieve critical mass. UDDI is limited in terms of actual implementation. Since it's a directory application, UDDI needs a critical mass of Web services to categorize, so it often doesn't make sense to deploy UDDI internally unless more than 100 Web services must be accessed. Role of XML Standards in Web Services Adoption Further insight into the maturity of Web services implementations arises from examining how FSPs that deploy Web services use XML standards (see Figure 3). Less than half use Extensible Stylesheet Language (XSL), which governs how XML documents are presented or formatted, or its subset, Extensible Stylesheet Language Transformations (XSLT), which specifies the rules to transform one XML data stream into another. Both are essential 18 December 2003 4
to enable "hands free" Web services, which don't require prenegotiation, manual or batch intervention for communication between parties that use different industry XML-based messaging standards. Figure 3 XML Technologies Used by Survey Respondents BPEL ebxml WS-Security* XQuery XSL XSLT 0% 20 40 60 80 100 Percents are based on financial-services providers with current Web services implementations. * Due to confusion caused by the generic naming of the WS-Security standard, we believe respondents citing use of WS-Security may be using other security methods for their Web services initiatives. Source: Gartner Research (July 2003) The low incidence of XSLT use suggests that most FSPs are implementing simple Web services. A simple Web service is selfcontained that is, it includes all necessary functionality within itself. In contrast, complex Web services make use of other Web services to complete their functionality. XSLT is more likely to be used in complex Web services, where the format of the data must be transformed into a format required by the other Web services. However, there also may be underreporting of XSLT use. If the Web service is implemented using an integration broker, the data transformation using XSLT may occur without the developer's knowledge. For example, if the Web service is built using Microsoft BizTalk Server, developers use a "mapper" to create the maps that specify data transformation. These maps are implemented using XSLT, but the BizTalk Server user may not see XSLT. Reported usage of related standards may be experimental or in the planning stages. For example, the use of Business Process 18 December 2003 5
Execution Language (BPEL) (see "BPEL Is the Best Shot for a Business Process Standard") is low 24 percent of survey respondents who use Web services. That constitutes only 5 percent of the total survey population. Use of Electronic Business XML (ebxml) is a bit higher 35 percent of survey respondents who use Web services, which constitutes 8 percent of all survey respondents. However, Gartner believes this level of usage is inflated. There is much confusion surrounding ebxml, which is not a purely Web services specification. This standard addresses higher-level, semantic-based transactions and isn't limited to Web services. It was intended to be a suite of specifications for conducting business electronically, as well as a lower-cost alternative to electronic data interchange for conducting business over the Internet. ebxml enables collaborative trading profiles that will exist in conjunction with Web services. The level of usage reported for the Web Services Security (WS- Security) specification also is likely inflated because of its generic name. Approximately 35 percent of FSPs with Web services implementations said they use WS-Security; however, we believe some of these respondents actually are using other Web services security standards. Other XML technologies cited by respondents included Extensible Markup Language for Analysis, Universal Business Language, Security Assertion Markup Language, Resource Description Framework and BPEL. Acronym Key BPEL ebxml FSP SOAP UDDI WSDL XML XSL XSLT Business Process Execution Language Electronic Business XML financial-services provider Simple Object Access Protocol Universal Description, Discovery and Integration Web Services Description Language Extensible Markup Language Extensible Stylesheet Language Extensible Stylesheet Language Transformations Bottom Line: Web services implementations in the financialservices industry are mostly immature and confined to internal initiatives. Nonetheless, financial-services providers that use technology aggressively have adopted Web services and believe them to be a "must have" for future business growth. FSPs should develop Web services capabilities via internal initiatives, and in alliance with defined customer and partner groups, gaining experience with core Web technologies. Vendors should use Web services technologies to provide connectivity within their product suites, and open up their solutions for access by other applications. 18 December 2003 6