In recent years, we've heard about the shared economy and the on-demand economy. Now, there's the API economy. With each economy that emerges, it's important to know what it involves and how you can become a part of it to leverage any relevant benefits for your business. Although this meaning of economy is slightly different, it's important to know what it involves because today's businesses do need to consider leveraging APIs to service unique customer needs and expectations.
What is the API Economy?
The API economy is defined as "the exposure of an organization's digital services and assets through application programming interfaces (APIs) in a controlled way." This means that the idea of economy relates to careful management of the APIs and the resources associated with them.
IBM explained that API economy is a term used to describe how business APIs can positively impact a business. This includes business drivers, such as "speed to market, reaching new markets/customers, innovation (at low cost/risk), and improved sharing of assets across the enterprise (domains)."
Research firm Gartner also furthered the explanation of the API economy. “The API economy is an enabler for turning a business or organization into a platform,” said Kristin R. Moyer, a vice president and an analyst. “Platforms multiply value creation because they enable business ecosystems inside and outside of the enterprise to consummate matches among users and facilitate the creation and/or exchange of goods, services and social currency so that all participants are able to capture value.”
What Do APIs Do?
APIs move data from one software application to another software application without any changes. This is important because there are many different apps and software applications.
Forbes noted that APIs are a "set of software modules, tools, and protocols that enable two or more platforms, systems and most commonly, applications to communicate with each other and initiate tasks or processes. APIs are essential for defining and customizing Graphical User Interfaces (GUIs) too. Cloud platform providers all have extensive APIs defined and work in close collaboration with development partners to fine-tune app performance using them."
Why Does the API Economy Matter?
The primary goal of the API economy is to create user-focused apps that support business objectives. There is more need to include APIs regardless of what type of business you have because of integration needs. For example, you will need APIs when integrating your e-commerce store with payment, inventory, and security tools.
As an economic force, there are numerous examples of API value. Netflix has used its API to provide service on more than 200 different devices. This includes television, gaming devices, remote controls, and mobile platforms.
It is estimated that 75% of business-to-business collaborations occur through public Web APIs offered by Fortune 1000 firms. This is increasingly the case because companies and consumers are leveraging cloud platforms and Internet of Things (IoT) connectivity. These, and other technological changes, require integration that only an API can provide.
How Do I Address API Economy?
In your own business, it's important to consider how the API economy can be addressed. According to Deloitte, "Application programming interfaces (APIs) have been elevated from a development technique to a business model driver and boardroom consideration. An organization’s core assets can be reused, shared, and monetized through APIs that can extend the reach of existing services or provide new revenue streams. APIs should be managed like a product."
First, meet with your IT team or any vendor partners to develop API strategies. Also, identify new business processes to apply the strategies. Second, if you have been thinking about omnichannel selling, then APIs take priority to ensure you provide a seamless experience. This includes the integration of inventory, customer management relationship, payments, personalization features, data security, and more.
The Bottom Line
APIs are a valuable tool to achieve business goals. Also, they are a driving force behind growth in numerous industries and channels. APIs deliver additional revenue derived solely from integrating platforms and apps. This means businesses can use new models, like omnichannel, to scale at a much faster rate. Now's the time to identify strategic partners to leverage APIs in the most thoughtful, fiscally prudent way. This will yield the greatest return.