Digital Transformation - Power of APIs

Application Programming Interface (API) is one of the areas that has gained prominence over the last decade as a Digital Transformation driver in addition to Cloud, Mobile, Social Media and Big Data Analytics. Like Artificial Intelligence (AI), APIs have been around for a long time and it became prominent and mainstream in early 2000 when Salesforce, eBay and Amazon opened its e-commerce platforms to Developers. This concept gained prominence with the social media entrants like Facebook, Twitter and Flickr introducing their own APIs that gave access to their content and even authenticate the users using their social media profile information. Google and Amazon took this step further by making its software tools (e.g. Google maps), storage as a service (e.g. Amazon S3) and virtual servers/hosting as a service (e.g. Amazon EC2) via APIs.

 APIs enable communication between two software or system through a set of rules around what data is available to access and who can access the data. They serve as a vehicle of communication between applications, platforms and devices. APIs enable diverse platforms, apps and systems to connect and share data with each other. API enables customized searches and access to different data sets through secure API keys direct from application to application integration between organizations. While the concept of open platform and open source has been around for a long time, creation of APIs around enterprise software services, processing power, cutting edge acceleration technologies like Virtual Reality, Neural Network etc. has enabled developers and organizations to leverage these technologies and create wide spread application using these capabilities. This has started levelling the playing field with big data and analytical capabilities easily available to business of all size and it is fast becoming a de-facto development approach worldwide due to rapid technological drive from cloud adoption, open data standards and establishment of data exchanges.

Today, APIs play a big role in B2B engagement apart from business to customer (B2C) and business to developers (B2D). This is resulting in new business models, cross selling strategies and new revenue opportunities to the organization. Organizations are building and making complex capabilities available to individual developers as well as business of all size to integrate and use them as data and services APIs. Numerous examples and use cases are emerging including authentication via facial recognition, social media profile, analytics tool and complex services like chat bot and contact centers via APIs instead of businesses building their own. It is becoming the standard for building software products along with micro services architecture and atomic design as it determines the system’s flexibility, creation of reusable components and modular blocks for a particular purpose.

Public APIs

With billions of dollars being poured into development of APIs, the number of APIs has been constantly increasing over the last few years. While it took approximately 10 years to get to the first 2000 APIs, it has become the annual count of APIs for the last 5 years. The growth is expected to continue for next 10 years and reach ~50,000 APIs by 2030 from the current ~20,000 APIs. With sizable revenue of Salesforce, eBay etc. coming from APIs, the trend is going to continue with more organizations entering the API race. The 20,000 API count doesn’t cover the private APIs that are meant to be restricted and accessible only internally between systems and requires appropriate rights to access. Whereas Public or Open APIs are accessible by anyone and no authorization or restriction is placed on them. The advantage of this approach is that the development community could easily build on the base software product and improve on it without depending on the product vendor. It also allows large quantity of data to be directly fed into the analytics software without any human intervention. The disadvantage is the security of the data and code and ensuring right usage and utilization of the same. This means the awareness around who has what access to data both internal and external, who is trying to gain access to the data is crucial to ensure right security control, authentication and API management monitoring and auditing in real time is crucial.

Prominent Public APIs

The recent most prominent API services includes Mapping and Location APIs providing mapping services, routing services, location services and geospatial and location services to applications. APIs providing information on street side curbs, parking, toll and parking fee helps many ride apps to estimate distance, traffic pattern, travel time, price estimates. The same is available for sea and river routes to estimate most effective sea routes. Weather API and ultraviolet APIs provide current, forecast and historical weather patterns and UV data. IP Geo APIs provide data specific to an IP by longitude, latitude, city, ISP etc. A real-time location tracking API provides building, floor details. Other prominent ones include Stormpath, a secure user management API with built-in support for Facebook, Google, LinkedIn login for social network identity and supports Twitter via OAuth.io. It maintains user profiles, allows for authorization roles, and handles forgotten password flow. Twilio is another API prominent in telecommunication world. It provides a simple, well-documented API for voice and text, send or receive phone calls, SMS text messages, MMS images and more.

With natural language conversion between machines and user coming to mainstream, the system to system relationship will be extended to system to user through APIs in the coming days.  The smart wearable IoTs are also driving API usage in our day to day lives. Fintech and Mobile apps are other dominant factors that is driving APIs usage on a daily basis. Twitter gets 15B API requests daily, Google and Facebook is in 7-10B range, Netflix, Salesforce and eBay are in 1-2B range and it is continuously increasing. Salesforce makes 50% of their revenue from APIs. It is not just the corporations and technology companies that is benefiting from this digital disruption, spectrum of industries from US Food and Drug administration (FDA) to Public works, Crime, Budget and other agency data are also available through APIs.

Private APIs

Private APIs benefits faster time to market for new product and services development, results in new channels and revenue. McKinsey study shows that organizations can achieve substantial efficiency and productivity through improved collaboration from private API. The implementation often leads to compassable enterprise, creating new business structure and value chain, an area worth exploring. Private APIs in most cases can be extended as partnership APIs and drive additional revenue generation. Private APIs are only exposed to internal developers therefore the API publishers have total control over what and how applications are developed. Private APIs offer substantial benefits with regards to internal collaboration. Using a private API across an organization allows for greater shared awareness of the internal data models. As the developers are working for (or contracted by) one organization, communication will be more direct and therefore they should be able to work more cohesively as a group. Private APIs can significantly diminish the development time needed to manipulate and build internal systems that maximize productivity and create customer-facing applications that improve market reach and add value to existing offerings.

Creation and success of Private and Partner APIs are driven by the digital strategy of the organization and in some cases end up giving shape to the organization digital strategy. For example, multi-platform sales APIs enable two sided sales involving buyer and seller like Uber and eBay or three sided sales like Amazon involving buyer, seller and advertisers or across entire supply chain like Alibaba APIs. The benefits varies including building platform as a channel, new products, revenue sharing, new revenue through licensing, business model, support model etc. Example involving Boeing and General Electric APIs is another good example – the jet engine systems of Boeing and GE send real-time engine status, diagnostics information to their databases, and to set of applications that analyze the data. The company then notifies their airline customers’ service departments of service required so that service technicians can be ready and waiting with the right parts and tools to perform service the instant the plane lands. All this accomplished by APIs in real time. Such strategy not only focuses on exposing the organization’s APIs but also consuming others both technology enablers as well as business drivers and value creators and vice versa resulting in powerful partner API ecosystem like the one used by Boeing and GE or Alibaba.

APIs as Innovations Drivers

As Gartner puts it, APIs are the center of modern application architecture, through API you get things you didn’t plan for and build things you didn’t expect in addition to enabling decomposition of software monoliths. API strategy will be shaped by customer journey, customer experience, business opportunities and unique industry needs. APIs are driving innovation, which is resulting in creation of new marketplace and ecosystem. It creates new digital products, business model and a connected world. What we saw with Salesforce, Twitter, Netflix and Facebook going to be the software industry norm for connecting systems, entities, people and IoTs.

For organizations that is looking to leverage APIs to expand their services and benefit from the API economy, it is important to understand the value chain and key players involved in the value chains, identify the unique strength and value the organization brings like data, product, capabilities, geo presence etc. and understand the gap in the value chain. For example, prominent APIs for ecommerce sales tracking and attribution from providers like Salesforce usually come with analytics tools to help retailers analyze the data and get a better picture of the shopper journey and sales projection. While the ecosystem of API driven companies is in early stage, the API first approach in design and development resulting in independent services that is aligned to micro services and agile software development alone is sufficient for organizations to take this path.

It is also important for organizations to keep in mind that not all APIs from an organization would be successful especially in a complex and competitive ecosystem. With industry barriers to entry lowering across all industry, and consumers expecting better experiences across all touch points, the role of APIs as driver for agility, co-creation and co-innovation is crucial success factor for every organization. This is about API economy and this is about how companies can come together and create whole more than sum of all partners. With estimated 9 million developers working on private APIs and 1.2 million developers on public APIs, there is sizable talent and opportunity pool to tap to expand this API driven economy and ecosystem. While this burst is positive and driving rapid innovation, the need for proper governance and standard becoming more prominent to ensure the right APIs are visible to all and it is used for right intended purpose and it is safe and secure and meets quality, performance and service standards. For most organizations, prioritizing user experience and starting with a private/partner API with a select few strategic partners would be the optimal way to enter the API economy. As the domain in which a company chooses to release an API can reveal a lot about the organization’s market positioning and long-term strategy, it is important for organization to ensure their API strategy is well aligned with their strategy, business model and priorities.

Way Forward

In the API economy, the biggest companies may be the ones that aggregate the most data smartly and open it up to others. This results in new types of competitive barriers. Prominent APIs that developers rely on like Netflix, Facebook, LinkedIn, Twitter, etc. have either significantly dialed down their functionality, changed their API terms of service, or shut down altogether in recent times. Sudden changes to APIs, both in terms of endpoint access or terms of use will have significant impact on the companies and on the ecosystem itself. The challenge is every company wants to be a platform owner like Amazon, Google, Twitter, Facebook or LinkedIn. Every organization wants to control the platform or owning the ecosystem in a world where new open ecosystems, integrated platforms, and seamless data sharing are defining the success of business. They all recognize APIs is the key to drive this partnership and co-creation between businesses, customer and the entire eco-system to innovate and respond faster. Limiting this important element in digital value chain is going to restrict organizations capability to innovate and narrow the opportunity to collaborate and co-create. While the integrity and ethical usage aspect of data is critical in co-creation, the organizations must recognize the need for establishing a governance framework and standard to make this model work. This alone will ensure business success in a fasting changing digital landscape.