API Economy

In this Digital Transformation era where there is such an emphasis on being Agile, Mobile First, Cloud Native and Omnichannel Presence, it has become paramount importance for organizations to move away from the traditional application platform to adopting newer model and technology that enabled them to address the changing business demands.

APIs (Application Programming Interfaces) are seen as one such way to address the needs of Digital Transformation. They bring new level of connectivity and data sharing between multiple applications, regardless of their platforms, data structures, and underlying technologies. APIs are considered as critical component of enterprise technology enabling organizations in delivering an exceptional customer experience to optimizing internal IT operations, contributing to efficieny, collaboration, growth and innovation, and thereby increasing their revenue streams.

For instance, Uber is an example of a business built on a platform because it leverages Google Maps through an API to enable its entire business model of matching drivers who have a vehicle with passengers who need a ride

This transformation in Software Development has created new economy called API Economy that has become the driving factor of Digital Transformation.

As we witness this transformation, here comes few predictions of Gartner on API

• "Gartner predicts that 50% of business-to-business collaboration will take place through APIs by 2017, and by 2018 75% of Fortune 1000 firms will offer public Web APIs"

• "Gartner says that The API economy is an enabler for turning a business or organization into a platform"

• "Gartner says that APIs make it easier to integrate and connect people, places, systems, data, and algorithms, create new user experiences, share data and information, authenticate people and things, enable transactions and algorithms, leverage third-party algorithms, and create new product/services and business models"

1. New Customer Acquisition Channel - Organizations can open new channels that provide significant growth in CLTV (Customer Life Time Value) when compared to other traditional channels. Gartner says that by 2018, more than 50 percent of users will use a tablet or smartphone first for all online activities

2. Added Revenue Source - Maximize the reach of your content by maximizing the distribution channels. For example,

• Salesforce.com generates 50% of its revenue through APIs

• Expedia’s 90% revenue is derived from APIs

3. Fosters Open Innovation - With developer-friendly APIs, organizations can attract creative developers who bring in a variety of insights that can result in new uses for your service/product. For example, Indian Railways opened up their ticketing API, which enabled the creation of consumer friendly apps. There are now 6 to 8 user-developed mobile apps in addition to the website from Indian Rail and other third party partners

4. Increase Collaboration - APIs nurture integration and interoperability of Enterprise Applications, thereby removing the barriers in software collaboration that were there for years. For e.g., Twitter redesigned their API strategy so that twitter.com would be consumers of their own API. This shift helped in optimizing the collaboration of their API team with each of the consumers including their own website team and mobile apps team

5. Flexibility - APIs can help in addressing unanticipated future business needs. By making data available through APIs, one can provide greater flexibility in delivering services. For example, Myntra, a leading online fashion apparel store, went with a mobile-only strategy in 2015 that backfired, as they saw customer visits dip by 20%. Nevertheless, thanks to an API strategy in place, they were able to bring back the web-based application in a short amount of time

That is Awesome! APIs are transformative, and the benefits are multi-fold. However, how can an Organization achieve in building an “API Economy” so that they do not fall behind in the race? Are there any challenges? Yes there are:

• Accelerating Go-to-market Strategy - How soon one can conceptualize, develop and publish the APIs?

• Orchestration within the Enterprise Ecosystem - To leverage data from various applications, how do one orchestrate the API connectivity within the suite of enterprise applications besides access to external third party developers and partners?

• Securing APIs - Consideration of best practices and industry standards to secure private and public APIs

• Onboarding Developers and Partners - Ability for third party developers to discover and trial-option before using the published APIs. The ideal solution would provide a self-service portal that can enable some of these, including documentation, authorization and support.

• Agility to support Changing Business Needs - Simplifying the development, testing and deployment aspects thereby mitigating the risks involved while reacting to changing business needs.

• Understand API Usage and Optimization - Provision to log and understand the API usage metrics thereby providing an opportunity to optimize the published APIs. Continuous monitoring and improvement is the key to success.

• Monetization - From providing various subscription models to defining usage tiers. There should be a trial option before charging the third party partners and developers.

API Centric Design is a strategy that helps Organizations to overcome some of these challenges. It provides insightful approach to the design, development, and deployment aspects of an API that one can apply to overcome some of these challenges.

In the upcoming article, I provide detailed insights to API Centric Design.