"We see this as one of a suite of formats," says Ellis. "How people connect, we expect that to evolve over time. We have 30,000-plus companies we work with with different expertise and skill sets." Donie Lochan, vice president with the Cap Gemini Ernst & Young Financial Services Consulting Group, says Wells Fargo's strategy will be a common one as Web services is offered externally. "There's a large cost to develop common middleware across an enterprise," says Lochan. "But if you didn't have that, you would need to go and rewrite a lot of the mainframe applications that you have to expose them securely."

It's also necessary to think hard about how to maintain systems' performance when Web services applications interact with each other, says William Wood, executive vice president for enterprise business services and information management with Wells Fargo's IT organization, Wells Fargo Services Co. "To manage end-to-end availability, you're only as strong as the weakest link, so capacity and performance planning and really understanding what service levels are provided needs to be a very big focus," says Wood, who oversees Web services investments at the enterprise level. That's easier to do yourself than if you're depending on external trading partners to provide Web services.

RISK NO. 5: No evidence yet for enterprise ROI.
MITIGATION: Think long term.

While evidence is emerging that companies already have realized benefits from their investments in Web services, enterprise-level ROI is still largely theoretical. Leading organizations currently report their gains in terms of the time and money saved on application development, says Cap Gemini's Lochan. Such savings can be impressive - the Navy lopped more than $8 million a year from the cost to manage just one operation planning application as a Web service, and can now develop new applications in a few months instead of years. The Navy also reports improvements in strategic processes such as mission planning due to Web services that, for instance, enable the aggregation and centralization of mission-critical weather reports.

While it's taken a year and a half to whittle 100,000 applications down to 6,000 Web services, Shephard anticipates it will take several more years to reach her ultimate goal of a few hundred Web services. Because technological change is driven by fundamental changes in how the Navy operates, the business value of Web services is dependent on how commanders execute their mandates to collaborate more closely. Getting top Navy leaders to buy into the potential of Web services was one of Shephard's biggest challenges. "We may have disagreements [now] about whether a particular effort takes advantage of Web services in the best way possible, but we're not arguing about whether [Web services] is pertinent to the U.S. Navy," she says.

Wells Fargo's Wood notes that "it's difficult to have short-term metrics" for Web services. Wells Fargo doesn't even maintain a separate budget for its Web services investments, instead incorporating them into its IT architecture budget. At the corporate level, Wood looks for ROI in the progress made toward sharing customer information among different business units and improvements in levels of service provided to customers. When it comes to specific projects, Peltz says he'll keep investments under control by developing new services in short, iterative cycles rather than sinking a lot of money into big projects. And he'll tackle first the projects that customers want the most - services like event messaging (customized notifications about payments received or other financial events) and payment transactions.

Becoming an early adopter of Web services is not an easy road. "Most cultural change programs fail. Most strategic change programs fail. Most large IT programs fail or underperform," says Motorola's Desai. "Aggressively adopting Web services at the enterprise level is all three combined. So the most critical decision is to see how not doing this can be competitively dangerous."