HTTP10 401 ISS00849001 Invalid credentials WWWAuthenticate Basic realm%3dwebMethods Connection ...

Hi. an external system is currently invoking our IS service via http (xml).
Frequently (ie. once every few transactions), the following error returned to the system upon invoking our service:

’ HTTP/1.0 401 [ISS.0084.9001] Invalid credentials WWW-Authenticate: Basic realm=“webMethods” Connection: Close Content-Length: 0 ’

Checked that the ID & password provided to them to invoke the IS service is working fine.
Observed that this issue keep occuring in development & UAT server.
(NOTE : Dev & UAT IS is in the same physical server)

Is there a reason why this error (<statuscode>=401) keep being sent to them? Why is it occuring so frequently?
Is it an error that is occuring at the EAI side?

how can i rectify this error?