A maturing generation of computing technologies is creating a service framework that enables enterprises to adapt to the business climate in real time, to improve their functions, reduce cost of development, and generate new value; this propels the entire commerce value system into a higher gear of economic reasoning.

These technologies center on Web services, which are standardized software components that can be programmatically invoked over the Internet. More significant in the long run, behind the production of Web services­based applications, are the open standards, architectures, confluent technologies, platforms, development methodology, and services providers.

This article first describes the concepts in the Web Services Paradigm (WSP). It then expands on how WSP drives commerce value systems by enhancing the structure of inter/intrabusiness processes and applications; going beyond operations to the center of business strategy, providing a business services framework to implement service tradeoffs; and providing an overview of the coming real-time commerce webs, also known as dynamic commerce webs.

Under the Hood: What Is WSP?
WSP embodies four IT industry concepts (see Figure 1):

1. Web Services Architecture (WSA): Web services are software components that can be programmatically invoked by other software components using canonical XML formats over the Internet in a loosely coupled architecture with network protocols such as HTTP or SMTP. WSA has five layers, along with respective standards: network (HTTP/S), messaging (XML, SOAP), description (WSDL), infrastructure (services), and applications (BPM). Different Web services value providers and consumers will be interested in different layers. For example, while human users mostly interact with Web services within the application layer where services are delivered, systems and devices interact with Web services simultaneously.

A canonical Web service, regardless of what programming language implements it, uses the extensible Simple Object Access (SOAP), and is registered and exposed using the Web Services Description Language (WSDL). Note that at the network level, using persistence technologies, Web services can interact with applications in real-time and overcome the stateless and reliability problems inherent in http/https.

2. Service-oriented Architecture (SOA): SOA provides the business services framework in which services are created and consumed. SOA harnesses the confluence of computing concepts, including networking, software engineering, software architectural styles, object-oriented technologies and business process management (BPM, which here includes process orchestration, execution, monitoring, and administration).

Deploying inside SOA are software development and business process engineering methodologies needed for the develop-ment, registration, classification, and deployment of Web services. These applications and process development methodologies play out mainly at the top two layers of WSA: the infrastructure and the application layers. These two layers share functionalities and service grids that use proposed standards such as Universal Description, Discovery, and Integration (UDDI), and ebXML. For transaction standards, SOAP-CTX is in the works.

3. Integrated Systems Environments (ISEs): ISEs provide platforms for development with functionalities such as the creation, assembly, linkage, description, registration, discovery and simulation of Web services, data mapping, messaging of loosely coupled events, and dynamic bindings of services at runtime. In the immediate future, ISEs will expose existing applications and components such as EJB, COM+, CORBA, CICS, SAP, People Soft, and Siebel.

4. Web Services Value Chain: This is made up of value providers and Web services consumers. The various classes of consumers include businesses, the general public, systems, devices and appliances, digital dashboards, mobile devices, smart cards, portals, industrial applications, moving vehicles, and content and service aggregators. The value providers include new and reinvented IT functions such as business solution provider and process architect, independent broker/evaluator, and infrastructure provider/architect.

Moving Forward
Registered Web services evolve from simple to business class to include contracts, contractual personalization, itineraries, service level agreements, nonrepudiation transactions, and digital signatures. Furthermore, to leverage the object-oriented paradigm, Web services will exhibit composite functionalities, "kind-of" inheritance features, and polymorphism. For example, business applications components can be grouped as related Web services with concept/subconcept relationships. To provide naming simplicity, the same Web services name can behave diferently depending on context (polymorphism).

The Benefits
WSP provides openness, canonization and standardization of processes, applications, and services. Modularity can be achieved in both functionality and representation, resulting in cross-platform usability. On top of this, the ubiquity, simplicity, and accessibility of the Internet provide the network-effect value to consumers and businesses of all sizes.

Architecting Dynamic Commerce Value Systems
Internet e-commerce has been puttering along with the "World Wide Wait" stuck in first gear. Now, WSP kicks it into fifth. For all industries involving information, starting with the IT industry itself, WSP transforms both the structure and nature of linkages of inter/ intrabusiness processes by fluidly architecting dynamic business models and real-time business applications with real-time BPM capable of quickly adapting to the unpredictable business climate.

More specifically, WSP enables enterprises to orchestrate business processes seamlessly inside and across company boundaries by dynamically combining elements from interactive models such as portal, dashboard, cockpit, and business web models, including Agora, aggregation, value chain, alliance, and distributive network. This kind of orchestration creates new composite and fluid business models leading to dynamic commerce webs spanning all suppliers, distribution channels, and customers across all industries. For day-to-day operations, this leads to the real-time implementation of business strategy across all phases of market adoption of products and services, whether it's the creation of disruptive innovations, shortening time-to-market, enabling operational excellence, or facilitating continuous enhancements. The result: real-time business applications (see Figure 2).

A More Powerful Engine: WSP and the Structure of Business Processes
WSP improves enterprises' operations by changing the structure of business processes and applications. While the structure of intrabusiness processes refers to linked activities within an enterprise, including CRM, SCM, marketing, product development, and ERP, the interbusiness structure refers to linked activities across enterprises. WSP improves the structure of business processes and reduces cost of development by adopting WSA and SOA (see sections 2 and 3 of the figure).

How It Works
The process orchestration in WSA changes the architecting of business processes as it brings business architects and software engineers closer together to implement business applications. BPM with Web services provides fluid orchestration, including nested process composition from high to low, or coarse- to fine-grain levels of process abstraction. For example, Biztalk Orchestration Designer shows business process flowcharts side by side with implementation components and connects the two worlds by various wizards.

Underlying WSA and SOA are the following behaviors that are crucial to the architecting of industries' dynamic value systems and value chains:

1. The decoupling of business logics as they are modeled and implemented as coarse- and fine-grain Web services and as declarative and explicit business process templates and schemas in canonical XML formats
2. The exposing of applications and data, both new and legacy, as Web services, to registries and repositories
3. The translation between syntactics, i.e., XML dialects and EDI
4. The frictionless orchestration, composition, assembly, and integration of Web services by linking them together statically or dynamically at runtime instead of writing custom "glue code"

Efficient supply-chain solutions lie not with frictionless technologies but with federated planning among enterprises sharing objectives and insights. WSP takes this to a different playing field by creating new synergies between frictionless technologies and federated planning by enabling new compositions of business and value and supply chain models, no matter how unconventional or unprecedented the business and technology requirements are, and the aligning of business objectives among partners to define and manage the value chain using explicit rules and policies that are themselves exposable Web services.

Enterprises can optimize their value chains to specific objectives by assembling and linking components and frameworks of Web services. The decoupled business process model and WSP provide increasing layers of abstraction, allowing increasing layers of control touch points, which in turn allows executives and specialists to communicate in real time with precision. The linking makes possible what-if optimizations of process flows, real-time changing of business rules, and accommodation of cost-inhibitive flow exceptions.

Ringing true in supply chain technology, decoupling the business process is the key to balancing the divergent requirements of functional efficiencies on one hand, and agility in sourcing resources, as well as customer/supplier-oriented functions, on the other. WSP provides the keys to the systematic decoupling and the ease of orchestrating to different tunes and constraints.

Ease-of-service integration using formal business process flow languages such as ebXML, Microsoft's Biztalk/XLANG, IBM's WSFL, or Vitria's VCML, will blur the boundaries of supply, customer, and channel relationship management and tighten the feedback loops in value systems. In addition, real-time product developments across organizations and in collaborative settings involving direct and indirect materials can be realized by linking together Web services.

Test Drives: WSP and Business Processes
Web services at Dell: Dell uses the Internet and Web services for touch points across value chain activities to give direct interactions. For example, customers can buy, make changes, view inventory, and track every step of the process online and in real time. In addition to the outsourcing principle, Dell heads toward a real-time joint-managed supply chain and manufacturing to reduce cost. To reduce inventory from weeks to hours at various nodes in the value chain, Dell uses Web services on its extranet to publish manufacturing data in real time. For e-procurement, Dell uses Web services and XML standardizing data and processes. The result is impressive: Dell saves a business customer $4 million per year.

Creativity at work: Web services enable DigitalWork to aggregate over 30 different Web services, such as Dun & Bradstreet's credit reporting, billing logistics, and payment processing, and provide them for brick-and-mortar Web sites such as Costco, HomeDepot, and Mail Boxes Etc., which then offer these composite services to small business and consumers.

Pushing Productivity
Operationally, Web services push the productivity frontier outward by enhancing the efficiency of information retrieval and processing. Full-fledged Web services enable business users to create process flow and business applications and communicate in tighter feedback loops with software designers. Before long, business users can create applications with "off-the-repositories" Web services.

Ease-of-service integration creates the mass customization of Web services. The costly best-of-breed integration with glue code will now be replaced by linking Web services together. The marriage of BPM and the component paradigm finally blossoms as business processes are encoded in XML, transmitted over the network using XML formats (i.e., SOAP), combined with other processes, and executed by state machines specified by an XML Schema in a dialect such as XAML.

The mass customization of information technology is fueled by a culture whose time is ripe: reuse, which is simpler and from distributed sources. Every business process can be reused, including the executing/transaction service engine itself.

Organizations will define how and what Web services can be aggregated or delegated among participating members to create a new kind of dynamic value chain management, including real-time synchronization of supply and demand, collaborative planning, and joint-managed inventory, bringing unprecedented efficiency to the supply chains and benefiting all value systems.

For example, tools such as Microsoft's Biztalk or Vitria's BusinessWare provide functionalities for orchestrating, managing, and monitoring business processes. Bowstreet's Web Factory can be used with IBM's WebSphere or BEA's WebLogic to dynamically assemble J2EE components and Web services from back-end systems to external Web services using visual point-and-click to create customized end-to-end applications.

The Result
As the structure of a business process is more fluid, enterprises can dynamically link and repurpose decoupled business logics to implement dynamic business strategy, which includes value propositions, product designs, partnerships, channels, sales, pricing, and marketing strategies. Specifically, WSP enhances:

1. Collaborative development environments with open and easily integrated components
2. Opportunistic one-time and ad-hoc services
3. Implementation of "point" solutions from an increasing availability of registered components
4. Integrated solution packages
5. Verticalized frameworks
6. Service-usage statistics enabling real-time process improvement
7. Mass availability and customization of analytics services

WSP gives enterprises more positioning strategies as customization of services is more efficient. WSP catalyzes ease of product creation, and in turn increases business creativity. Tradeoffs, which arise from business processes, product configurations, core competencies, and human resources, need to be reevaluated as inefficiencies from customization decrease.

Using the Roadmap: Creating Industry-Specific Real-time Applications
Nearly all industries' activities involve the creation, processing, and communication of data and processes. Using WSP and industry-specific XML, software solution providers can translate service creativity into executable processes that dynamically assemble available services. For example, a future service can integrate using process flow languages, internal core services with services of external organizations, continual or one-time services, and other personalization. A customer can create in real-time a tailored service using fine-grain components and coarse-grain frameworks in verticals such as financial, legal, or health care. These services include functionalities such as preliminary assessments over the Web to find out what other services and class of services are further needed; searching and locating providers in the preferred geographical areas; scheduling and coordinating of appointments; and handling and routing of necessary documents, information, and forms.

Strategy
Strategy has to reflect how WSP enables value systems to be architected, as well as optimized, in real-time, involving customers, product designers, process architects, value chain analysts, and suppliers. For example, a customer can specify desktop workstation specifications at one end of the value chain and trigger the automatic linking of fine-grain computer-aided manufacturing Web services to provide just-in-time engineered products and services. Meanwhile, value-chain analysts and process architects, which can be Web services, specify the optimized process flow and parameters for sourcing software agents and auction bots. This is a real-time system approach calling for the strategic selection of analytics and heuristic rules.

Standardization at all levels of the Web service value chain enables not just mass customization, but also carries the duplication of enterprises' strategies and activities to the next stage of IT evolution. A document sent by one Web service to another can encode all the data, processes, and contexts enabling a re-creation of a whole business-process state machine ready to plug into participating supply chains. The result isn't just the enabling of a paperless factory, or a paperless office, but also the enabling of the duplication of the enterprise's functionality and the entire value chain with deployment on specified hardware/platforms included.

WSP is the engine enabling the real-time behaviors in dynamic value systems to replace the traditional sequential and linear ones so that all mutually dependent participants can create community solutions and federated planning. WSP can cut through layers of value systems, making them behave like frictionless information ecosystems, while combining dynamic business models to provide integrated solutions, ad hoc point solutions, and vertical frameworks.

For example, the real-time health care value system and related information value systems seen in Figure 3 consist of millions of participants from the following categories: the health care industry, software solution providers, Web services solution providers, and Web services platform providers. This value system can include community solutions and federated planning to stabilize and balance the real-time effect of millions of value chain participants across value systems, activating exponentially larger numbers of Web services.

Furthermore, given the complete understanding of the relationships between all participants in the value chain and the chain's constraints, the loosely coupled architecture makes it easier to cut through the layers of interconnected decisions from thousands of interacting nodes to dynamically show hot points. Strategically, real-time optimization doesn't need to respond wildly to every variation in the value chain to accommodate unusual and unpredictable demands. When done appropriately, real-time optimization complements models based on trends and federated strategy.

"Technology changes; economic laws do not," states Carl Shapiro. It's certain that both macro- and microeconomic principles work more efficiently in increasing frictionless dynamic commerce webs. As always, limited resources in value systems dictate enterprises' policies on what services and information can be shared versus made proprietary in a collaborative and federated environment. But only now is federated planning in real­time across value chains and value systems possible. Techniques in operation research, including game theory and control theory, will commingle with those in computer science and software engineering to produce frameworks and infrastructures for Web services, Web services traffic hubs, and BPM involving Web services in order to create more efficient marketplaces and business values.

Strategy will reflect consumers' and businesses' increasing interest in accessing and renting, rather then owning, services because they are continuously improving in real-time. WSP will enhance CRM, catalyzing direct sales and configuration of complex products and services by suppliers and manufacturers to businesses and consumers. In addition, new intermediaries in the Web services value systems will emerge to provide "relationship" services to publishers and requesters, including relationship-based insurance services.

The increasingly frictionless market gives rise not only to new business strategies, but new marketing strategies as well. This opens up a whole new world of customer experiences. For the consumers, renting services creates communities of similar service renters. More relationships will be formed instead of fewer, and new intermediaries will emerge, inventing new value systems.

Information-based value systems increasingly leverage the economics of networks while decreasingly depending on the economics of software component development. Businesses and consumers inevitably favor Web services linkages and infrastructures with the most traffic, just as they favor communication networks with broad reach. Metcalf's Law will apply to the development and to the utility phases of Web services as more and more enterprises become "componentized" and register their services. Business processes and Web services will become first-class objects enabled to call and execute one another. Integration becomes frictionless, and frictionless marketplaces add fuel to dynamic commerce webs.

Blue Sky, Open Road
WSP, providing increasingly open and common standards, enhances the egalitarian ecosystems of services. Integration schemes, becoming so elegantly simple yet powerfully utilitarian (and nearly free), give rise to increasingly profound changes in the structure and nature of value systems. As the line between business strategy and information technology continues to blur, WSP will provide the instruments to address the encoding and processing of information and knowledge driving the commerce web.

There will be metaservices providing "goal and constraint" programming services for the real-time configuration and assembly of Web services using business rules. An example of such metaservices would include a second-order configuration capability, possibly involving Prolog, which applies sophisticated business rules to real-time configuring of processes and services both automatically and semiautomatically.

Beyond real-time optimization, the extensible WSP will provide services for reasoning about optimization. Here Web services interact with other Web services acting as economic advisors to determine preferred value chains and value systems in dynamic commerce webs. This reasoning about optimization will automate how the nature and structure of value systems work in real time, catalyzing even more frictionless dynamic commerce webs. Orders of magnitude more utilitarian value systems and value chains will bring forth increasingly frictionless marketplaces the likes of which Adam Smith himself could only dream of. We're cruising now!

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