Technology silos may still be around, but Web services, including the messaging protocol SOAP (Simple Object Access Protocol), are linking them in a way that holds considerable promise.

To some extent, Web services are just the successors to the middleware connectors of old. Whereas companies once used proprietary software from vendors like Tibco and WebMethods to connect their heterogeneous systems, now they are doing it using standard protocols and approaches. "A lot of functionality is implemented in mainframes and other systems," says Vijay Tella, chief strategy officer of Oracle Fusion Middleware. "Companies want to move toward more modern applications that are easy to understand and change and get intelligence out of."

An even bigger payoff is coming through the creation of shared services—applications that exist within one department of a company that may now be made available to other departments.

For instance, a company may have a perfectly sound back-office process for taking orders. Web services can help the company use that process in new channels, such as an outsourced call center and on a Web site. "If you share this thing three times, you've given yourself a 2X savings," says Gartner analyst Dan Sholler. "That becomes a huge amount of leverage because people spend a lot of money on software."

Because Web services are so new, though, companies face some big challenges. One is finding developers who understand the model and can execute it. The other is organizational; the multi-business-unit nature of shared services means you "run into a whole mess of governance problems," Sholler says. To date, the earliest adopters have been in the financial services industry. This year, Sholler expects more government organizations to jump in.

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