Web services will cut the cost of integrating systems, but projects must be able to demonstrate clear savings to be approved at the moment, according to analysts.

Milind Govekar, research director at Gartner Group, said that demands from the board to build 'real-time' businesses are driving interest in integration and web services.

"Very few companies are increasing their IT budgets," he told a BEA-sponsored web services round table.

The web services approach to integration is not appropriate to all situations. But its use of industry-wide standards promises lower implementation costs than, for instance, using proprietary connectors.

"Web services has good standards," said Govekar. "Realistically it is not going to replace application integration, but it lowers integration costs."

He added that the cost of "the glue", the connection between applications, is typically five to eight times that of the applications themselves.

But the analyst warned that web services does not handle data transformation, data routing or business services management.

Govekar suggested that 2003 is the year for customers to experiment with web services.

"Then it is a matter of plug and pray," he said, indicating that the web services connection is not yet very reliable.

But projects are unlikely to get funding unless they can demonstrate a quick return on investment, according to Martha Bennett, vice president at analyst Giga Europe.

"Web services is just a business strategy component. Ask what a technology can deliver and strip off the hype," she said.

"Put it in business terms. For example: 'The claims department will make fewer mistakes, saving £x.'"

And Luis Leamus, senior vice president at Meta Group, suggested that companies are looking to cut deals with vendors where, for example, payments are based on return on investment.

"Without cash flow the company is out of business. So businesses are looking for a less penalising entry level by risk-sharing. Software has been too long a con business," he said.