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The Dawn of the Power of API Economy

Application Programming Interface (APIs) are, customizable software interfaces that enable once separate software components to effectively communicate by overcoming the inherent incompatibilities created by differing software platforms. APIs bring in a different level of connectivity and data sharing between multiple applications, irrespective of their platforms, data structures, and underlying technologies.
Emergence of API into Technology  
We are at the beginning of a new era which can be as revolutionary for business as that of the Internet itself. The 90’s saw the start of the web, which by the looks of it seem something big. Those days some believed having a website was not important, but after 20 years, most people will agree that a web presence is essential for businesses of any size. API’s are on that same-level of world-changing technology as the Web. Soon, businesses won’t be able to grow, stay modern, innovate and be competitive without an API strategy, and they will find it difficult to do business, to leverage customer and partner engagement without it. The innovative power of APIs has led to the realization that APIs can be a critical component of enterprise solutions that impact the operational bottom line, contributing to efficiency and growth. This, in turn, has created the API economy, which is loosely defined as the way APIs can positively affect an organization’s profitability.
The API economy
The API economy is a new way of doing business, centered on opening up your business and its assets so that those assets can be accessed as a platform by third parties. The goal is to generate additional business value through new opportunities, which are accessed through the eco-sphere of a third party. In a classical sense, API refers to application interfaces for specific languages such as DLL files for C++ or JAR files for Java. However, while considering the API economy, the term API is much more generic which include the language API interfaces, but also encompasses web services and any kind of software interfaces to business assets. So API is a more general term for exposing business assets, whether they are data or software or processes.
Why the boost in API now?
Recently the number of private and public APIs has been growing exponentially, with already 13,444 publically available API’s. The surge in these numbers can be associated with mobile devices, social networking and social content, clever apps, online services and new software markets such as Google Play, App Store of Apple. Recently, a survey concluded that 77% of all Mobile Apps would not exist without API connection, which acts as backend services of some or the other kind of data or process access. IoT outlines how everything will become internet connected and will be all dependent on API’s. Together all these factors are a mixture of opportunity to gain new customers and link into new communities.
According to analysts, the number of open APIs is projected to reach 30,000 by 2017. Furthermore, reports suggest that the commercial sector is quickly catching up. While “dark APIs” (i.e., APIs not publicly exposed) are thought to have a 5times growth rate of open APIs.
Benefits of being part of API economy
The standard business strategy followed in the past has been to guard internal assets and to try to lock in sales channels. In contrast to the earlier strategy, in the API economy internal assets are exposed via API’s and enabled for access by third party businesses. The objective is to enable these third party businesses, in order to generate new kinds of products and services, and added value for the API business owner and the third parties.
Assume a shoe manufacturer has a large inventory and an established network of distributors around Europe and few e-commerce stores online. API-fying the inventory will allow a small business focussed only on outdoor pursuits, to offer online only the outdoor footwear to its own base of customers without actually committing to any physical stock. Now imagine this also occurs for the children’s footwear, the ladies fashion lines, etc. This results in a new dynamic community of distributors, becoming a self-organising eco-system, which allows the shoe manufacturer to tap into new markets for their footwear and also to access valuable market research. Every new use of the API inventory can be a new channel to market products.
Business challenges in the API economy
The starting point can be, having a new conceptual view of your business as a collection of API-able assets. To figure out how to use API in your businesses, it is needed to have an innovative, out of the box thinking. A smart strategy, adopted by some banking companies, is looking at the collective brain power of employees and launching an internal API challenge with the aim of re-inventing the bank and its products/services.
Soon API’s will be new business assets, that will require to be managed: prototyped, tested, rolled-out and marketed as would be done for any new traditional product or service. In particular, marketing needs to be thought through, as the third parties, the market for the API’s may have little overlap with the existing partners or channels.
The third party developers and associated communities are the key players in using APIs, making the API well documented and well supported and nurturing developer communities, as in developer portals. API usage will be frequently in the cloud or another scalable, on-premises environment. This will require proper security and authorisation when the data used or returned by the API is restricted or sensitive.
The API economy is an enabler for turning a business or organization into a platform. These platforms multiply value creation because they enable business ecosystems inside and outside of the enterprise to consummate matches among users, so that everyone can exchange goods, services and social currency.
For most organizations, the API economy proves to be a viable avenue to creating new services and capabilities, which will ultimately lead to new avenues of revenue. With the mainstreaming of APIs and the popular services that make use of them, in the future organizations will be making APIs as a major factor included in their business model. The accelerating progress of mobile technology and the Internet of Things has left little doubt that the API economy will continue to grow and flourish at a rapid pace.