How to Make the API Economy a Reality

  • By Nuwan Dias
  • 17 May, 2021

The growth in cloud computing and the need for enhanced integration have pushed organizations to accelerate their plans for digital transformation. In the process, application programming interfaces (APIs) and a number of related new technologies — such as API management and integration solutions, cloud native products, integration platform as a service (iPaaS) offerings, and low-code platforms — have become critical in order to participate in the API economy of the business world.

In this post, we look at the importance of APIs, how intelligent enterprises are using APIs for value creation and are generating revenue via APIs, and technologies to consider in order to be a part of the API economy.

But, What is the API economy?

The API economy is the ability for APIs to create new value and revenue streams for organizations through the use of APIs. For example, Stripe, a company that provides payment processing capabilities for online businesses, has built their business model to generate its entire revenue through APIs. Similarly, Google Maps is a free service offered to consumers who want to find their way around. Their business model is built around earning revenue through advertising, but also through its Google Maps API, which is used by companies including Uber and Lyft. These companies use the Google Maps API for data access to show driver and passenger locations, fulfilling a critical piece of functionality. Since it is expensive for Uber to create and maintain map data, it is a win-win situation for both Google and Uber. Furthermore, Google APIs enable even small businesses to build great navigation experiences.

APIs: The Game Changer for Big Business

Today, there’s an Application Programming Interface (API) for almost any service. Everything from communications (such as Twilio), billing (Stripe), financial (Plaid), and travel services (Priceline) expose services that are consumable as APIs. Business processes in business ecosystems have been automated. In the past two decades, IT teams have been busy getting software and connectivity embedded into everything imaginable. We now have software embedded in air-conditioners, washing machines, cars, refrigerators, and even light bulbs. The connectivity of all these devices are enabled through the use of APIs.

All of these together create a massive API ecosystem for developers. As a result, it enables developers to increasingly create new digital products and new services by combining these standardized building blocks. The winners of the next two decades are going to be those who best combine and utilize these APIs to create digital services that generate value for their consumers. In the next decade, the API economy should show exponential growth from where it is right now.

Realizing the Promise of the API Economy

How do we then realise this promise of the API economy? What does it take?

The most successful organizations in today's digital economy are going to be the ones willing to participate in the API economy. Participating requires both consuming APIs from the global API ecosystem and contributing to it as well. Let’s take a look at what it takes to participate in the API economy.

API Marketplace: Template, Share, and Reuse

An API marketplace is a location that contains all kinds of APIs, events, data streams, and commonly used-third party APIs (connections) that leverage third party algorithms. This can be viewed as an innovation toolbox for an organization’s developers. Not only does it give a global view of all programmable endpoints within an organization, it also helps reduce duplication of work by encouraging reuse and sharing.

An API marketplace puts a significant amount of power at the fingertips of developers. It also helps the organization’s innovators and thought leaders to assess the feasibility of their ideas by inspecting what’s available for them to build on. Having a global view of all such endpoints can also drive new ideas for digital products.

Low-code to Enhance Programmability and Connectivity

An organization stands out against its competition by building capabilities that outperform its competitors' offerings. In his book “Ask your developer”, Jeff Lawson, CEO of Twilio, explains the benefits of building software as opposed to buying to differentiate a business. One of his famous quotes from the book is to “Build or Die!”. Of course it only makes sense to build the parts that differentiate yourself while reusing common functionality that are not in your main line of an enterprise.

Building software in today’s world requires connecting to many APIs (both internal and external) and programming on top of them. The connectivity and programmability offered by platforms used by developers to build new digital services are therefore critically important to the success and growth of an organization.

The most important aspect is that both programmability and connectivity are available. Connectivity is comparatively easy, but programming on APIs is not always straightforward. This is because developers need to understand the API specs, authentication mechanisms, error handling details, and much more to program an API successfully. This is why API-integration platforms advocating low-code tooling are making big waves in the industry. This article from SD Times identifies 2021 as the “Year of Low Code”. However, it is important to note low-code is also used to refer to building end-user applications (mobile apps, web apps) with low-code. In this case, we’re talking about the productivity low-code tooling gives developers who are composing APIs to build new APIs. Thus, the Capabilities offered by iPaaS and EiPaaS become essential to enable organizations to participate in the API economy.

API Management

Proper API management is essential for any API program to succeed. A successful API is a product that requires appropriate product management. This requires lifecycle management, versioning, documentation, a developer portal, and other factors to be successful. One of the most important aspects of this is to make sure that every API is added to the global API marketplace for discovery. Not every API has to be public, be accessible from outside, or even visible to everyone either. API management products offer these types of governance to scope and limit the API’s exposure to the intended audience. They also provide features to manage the API’s security and access rate limits. The business insights gathered from API usage becomes essential to drive its roadmap and find its position in the API economy.

In today’s world the real value of API management is realized with the ability to compose new APIs fast, experiment, and iterate. That is why the programmability of APIs play an important role in an API management system.

Microservices Style Development (and culture)

If 2020 taught businesses one thing, it is that organizations need to be adaptable. This doesn’t always mean you’ll succeed, but adaptability combined with a “fail fast” mantra gives digital organizations a great chance at success. This is why microservices style development and cultures are crucial for modern digital businesses. They facilitate software architectures and cultures that are adaptable. This gives organizations a better chance at bringing out new ideas to the market faster, experimenting with it, and reiterating until they get it right.

Microservices style development doesn’t come easily. Organizations usually have to incur significant costs to deal with the complexities associated with it. This is one reason why organizations move to the cloud to optimize cloud services and simplify their tasks. However, the increasing complexity of the cloud does not help organizations. For example, Amazon’s AWS now has a suite of 175 service offerings for organizations to build upon! Figuring out what services to use and how to connect them with others requires obtaining a degree in AWS technologies.

Ideally, organizations need purpose-built platforms that provide all of the tooling required for them to participate in the API economy. These platforms should enforce API best practises while taking away the unnecessary complexities. They should facilitate developers to focus on doing what they know best, implementing APIs required for their organizations. This article by ThoughtWorks explains how the complexity of the cloud is now a “business problem” and why platforms are important.

Closing Thoughts

The promise of the Application Programming Interface (API) economy can only be realized by increased participation. This requires more and more organizations to consume from and contribute to the global API ecosystem.

Modern integration platform as a service (iPaaS) offerings provide tooling required for developers to discover APIs easily, program effectively, and connect reliably. API management becomes a critical piece of these platforms for organizations to participate in the API economy. They need to adopt platforms that apply cloud native engineering principles on the new services they build. Furthermore, it needs to be done in ways that do not burden developers with its complexity and allows them to focus on their area of expertise.

If you want more details about an IPaaS solution and want to see one in action, please visit Choreo a comprehensive platform for low-code, cloud native engineering.

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