The API economy offers many opportunities for both providers and consumers. Brad Drysdale, APAC Field Chief Technology Officer at Kong, discusses how the API economy functions and how keen-eyed businesses can take advantage of it.
The use of Application Programming Interfaces (APIs) within IT infrastructures has done more than facilitate the efficient channelling of data. It’s led to the creation of an entirely new economy.
APIs are designed to allow applications and users to exchange data in a structured and secure manner. They allow communication between different systems and applications that support business processes and drives efficiency.
As usage of APIs has increased, the way they can be leveraged by developers both within and outside an organization now constitutes the ‘API economy’. This economy is the combined value exchanged between providers of APIs and consumers of them.
It should be noted that the API economy is not a technical concept, nor is it a financial model. Rather, it reflects an ecosystem of mutually beneficial exchanges of data and digital services.
Organizations taking part in the API economy build their services and products with two goals in mind. Firstly, they want to consume APIs available on the market to speed up the development of entirely new features and enhancements to existing features.
Secondly, they want to expose APIs to add value for consumers, whether those be end-users or other companies. This extends their reach, market share and monetization opportunities.
A more level playing field
A business can be an API provider, or an API consumer. Either way, it becomes a part of the API economy.
One of the main effects of the API economy is the way in which it levels the playing field. Previously, large companies could spend an unlimited amount of money to offer closed-source services and lock consumers to use their platform.
In the API economy, successful companies integrate and use different data and services quickly and most efficiently. Small start-ups are now able to compete with large multinationals and bigger players are acquiring individual apps because of their disruptive potential.
The value chain of the API economy not only exposes a company’s internal assets to internal users, but also to business partners, third-party developers, or the general public. Organizations are able to expand their horizons and their services aren’t just limited to their end-users or end products.
Significant business benefits
The efficient exchange of data and services through APIs allows faster product turnaround, increased consumer satisfaction and trust and access to new markets. Companies can also optimize their development efforts and reduce go-to-market times.
By building a thriving internal API economy, an organisation can create a valuable catalogue of APIs that can be made available externally. This catalogue also allows other developers within the organisation to leverage and reuse code for future projects and outcomes.
A new digital experience can leverage an API built for a previous digital experience, knowing that it’s useful, relevant and has already met the security and governance standards set.
An opportunity for monetization
The providers of API not only benefit from gaining a favorable market reputation, but they also have the opportunity to monetize usage. This, in turn, can result in an entirely new revenue stream.
As an example, an API provider could create a strong client base by offering a free tier. After establishing a loyal following, it could then offer value-added APIs using a revenue-sharing or subscription model.
This is often seen in companies that use data they have access to as a source of value to others, which can be monetized. The result is a win-win for providers and users.
There are also opportunities for multiple organisations to work together to scale their API offerings. For example, a group of banks could opt to expose some of their partner APIs for other financial institutions such as insurance brokers or stock-trading firms. This would streamline things for customers and help to build long-term loyalty.
Overall, the API economy will continue to allow businesses to both expand their offerings while also making use of resources provided by others. New opportunities can be grasped much more readily and services provided to customers in a much more timely manner.
APIs changed the way corporate IT infrastructures are designed and built. Now, the API economy will deliver even more opportunities for growth and development.
