One of the more interesting observations I've made in the past year concerns the model on which corporations base their IT strategies. I've visited a large number of major corporations, and there's a very strong trend. These corporations are large, with established business practices and IT organizations, and one of the things they all have in common is that no one is writing a new business application. That's not to say that they're not actively redeveloping business processes that they already have, or updating an application to move it from the mainframe to a distributed platform, because they certainly are. But what's really interesting is that with few exceptions, corporations are not building new software. What they are doing is rebuilding existing software.

While this may not seem remarkable, it does have a profound effect on how they go about their approach to IT, and even to a certain extent how they approach their actual line-of-business processes.

Business process outsourcing (BPO for short) is one approach that is much considered, and represents the next step in the evolution of hosting services. Rather than just move an application or Web site to a hosting vendor to take advantage of the hosting center's volume cost model, businesses are increasingly looking to move the entire process out of the corporate mainstream and onto a set of processes provided by an outsourcer.

Another approach to this situation is to rely heavily on packaged applications that can be customized. Some well-known examples are Peoplesoft and SAP, but there are numerous other packages that are less well known, but tailored to a particular industry.

When an organization takes either of these approaches, it accepts a business model other than its own particular way of doing business. The business advantage of doing either tends to run toward cost containment, usually based on the recognition that the process in question is, if not commoditized, at least standardized to the extent that no real competitive advantage can be gained from creating a completely custom in-house process. Even when such processes exist, organizations recognize that the cost of maintenance exceeds the value that they bring to the corporation.

One large corporation recently admitted that for every dollar spent on IT, 98 cents is spent on maintenance and infrastructure. Businesses can't cope with such costs and continue to adapt to changing business climates. In such an environment, there's no headroom for new application development (and therefore, no room for new business processes).

Into such a world come packages and BPO (and sometimes a mix of both) as solutions to the issues. The BPO solution changes the pricing model and takes the infrastructure and maintenance costs out of the equation, although in the long run costs may be higher as the model does have an indefinite aspect to it (i.e., there's no final cost; there are yearly costs ad infinitum).

Of course, when you go BPO a lot of your staff is surplus. Unfortunately, staff often equates to institutional memory, and cuts can have a negative impact on the ability of an organization to do their work (like cutting the only guy who knows how to run a key report).

Packages allow corporations to take the maintenance out of the equation, while leaving the infrastructure. In either case, what is left after you move to the new situation is the need for an interface. Something simple - an easy-to- access mechanism that can be utilized regardless of technology. Yes, Web services.

I know, I dove right from 30,000 feet to sea level on that one. But the reality is that once you make the high-level decisions, you need the ground-floor support to make them work out. In this case, Web services is the key to achieving that ROI that everyone talks about. Which is why package vendors are moving towards it in droves, and BPO vendors are considering it the way to eliminate multiple versions of their software. In this issue we'll examine some of the ways Web services are being applied to packages and how this will impact the way we do the business of IT. Enjoy, and welcome to the brave new world of IT.