Resolution:
Here are the steps of what you need to do:

1.    Open a project in TIBCO Designer and create one or more process definitions that implement operations you wish to expose as web services. The input, output, and error schemas for each                    process definition must be specified as WSDL messages. See Start Activity and End Activity for more information about defining input, output, and error schemas.
2.    Create a transport shared configuration resource (either HTTP Connection or JMS Connection) to use as the transport for the web service.
3.    Select and right-click on the name of one of the process definitions in the project tree.
4.    Choose Tools or Multi-User > Generate Web Service > From Process from the pop-up menu.

You also can’t have ‘Element Type’ as an input schema.
Only valid input/output schemas must be specified either as WSDL Messages or XML Element Reference.

If none of the above applies then exit completely from Designer and restart it.

I have a project that contains a process which I want to create a webservice using Tools / MultiUsermenu, but the option is grayed out. In addtion, I see that in the console i am getting this error "java.lang.NullPointerException".