An API-driven business model means investing into and employing APIs to streamline, guide, and improve business.
An API — Application Program Interface — is a special form of code that allows two programs to communicate with each other. Program X can call program Y’s API to get access to data or functionality of the other program.
X can be integrated with Y without an API. This integration works … until something changes in Y, which breaks the integration. Then A needed to re-do their integration until something changes in Y, which breaks the updated integration. And so on.
For now, APIs not only motivates and empowers developers to create new software, but also become closely related to business things: developing new revenue streams, streamlining go-to-market strategy, and enhancing customer experience.
We are here to explain why you should think about APIs not as developers’ tools but as a part of your digital strategy and pay more attention to API strategy.
Why are APIs important?
APIs allow for faster innovation. By using ready-made API solutions, you provide space for creativity to focus on key unique features. APIs are crucial to digital transformation and to the emergence and development of new API-driven business models. They are an important part of application economics, which can be developed better, faster, and cheaper.
Businesses can grow more quickly than ever before through the use of APIs. It opens new opportunities for integrating with partners and adapting to customer needs through a more atomic approach to software development. As software products assembled from independently deployable APIs can enable parallel software development efforts and DevOps approaches, such as maturing applications through rapid iteration.
API allows companies to expand into markets they may not have considered before. As external parties consume a provider’s APIs, those APIs become more likely to be used for new use cases outside the provider’s core capabilities. This kind of adoption may generate a system of suppliers and consumers around the provider’s services which will help the provider to enter adjacent markets.
API use cases
- rather than building their own mapping, payment, or communication services, Uber used the best of those programs and connected them all via APIs
- a keyword tool that leverages Google’s search API to suggest keywords your business should target
- Google Maps integration into ridesharing applications
- chatbots into messengers like Slack
- The New York Times offers an API that will let you search their database
- NASA makes satellite data and imagery available via an API
- Connected2Fiber (connectivity intelligent platform) leverages APIs to save time and labor resources.
Benefits from APIs implementation
1. Reduced costs and software development efficiency. Much of the functionality you need in your software already exists elsewhere. Developers have already learned not to reinvent the wheel but instead to rely on APIs from third-party platforms. Using APIs helps developers focus on building unique functionality which saves money and resources for business.
2. Superior user experiences. With APIs, your developers can build a variety of solutions across any channel. The better experiences, which they provide for the end-user mean better customer engagement and more excitement for partners and employees alike.
3. Focus on key features. API-driven businesses can focus on their core competencies without having to duplicate anything that has already been done.
4. Tasks automation. API is the keystone for automation strategies that rely on their integration. Automating manual tasks with integrations enables a seamless transition between linked applications. Your business can save costs, time, and efforts thanks to the integration and automation of processes.
5. Access to data. APIs help new and small organizations use data they weren’t able to collect before. A good example may be food delivery, which features an API integrated with essential info for prospective customers and meets requests by nearby customers.
6. Enablement of cutting-edge technologies. APIs have become an important part of application architecture, as they allow for loosely coupled integration, being the data conduits behind mobile apps and many IoT devices. Many industries are using APIs with IoT devices to provide new and innovative solutions. This can also empower innovation inside the company by providing the agility needed to do so.
7. APIs encourage creativity. When customers or your field personnel engage with an API, they may create new solutions you have never considered, which can magnify your product’s value.
8. Monetization. APIs make it easier for companies to monetize. Having a presence on more platforms means that companies can sell more ad space.
Security. APIs are gateways that can become a hacker’s primary target. When the API is compromised, all other apps and systems become vulnerable to attack.
Performance. The obvious challenge for the developer is that your application’s performance relies on third-party APIs if they are accessed at runtime.
Availability. As with performance, your application’s availability is dependent on the availability of APIs you use, especially when they have real-time dependencies.
Constraints with multiple APIs. If your company uses multiple API providers at the same time, they should leverage multiple SDKs. This might bloat the enterprise application system and cause performance issues. With the model refined, large-scale comparisons and tests are needed to finalize it.
Looking for APIs for different features is resource-intensive and time-consuming
A successful API strategy requires collaborating with multiple API providers and building partnerships with multiple organizations.
When developing your API strategy, it is not easy to forecast how APIs may change your business. For example, your integration with a messaging system means that users login to your service less often. Will it be a bad result for you? If you feel the need to withdraw an API, it can be a pain for users. This is not a common case but it can happen.
API strategy: how to leverage APIs effectively
1. API strategy should be balanced with an organization’s goals, which are driven by customers and ecosystem partners. Start your API strategy from the outside-in. This means that you should not build APIs until you know you really need them.
2. Сonsider security from the very beginning of your API strategy. Ensure strict standards that include only exposing interfaces as needed, only collecting and sharing essential data, and providing access to the key users and systems required by the API. Organizations need to have plans for handling problem situations that may arise from their API development, as well as for communicating with users on policy changes and more.
3. Consider the infrastructure. IT and business infrastructure ultimately determine how APIs operate, so understand the resource availability and performance they will require.
For instance, consider which data is being unprotected, its location, whether data is single-sourced or aggregated, how it is accessed: locally, remotely, through a cloud.
Infrastructure considerations also include networking requirements that API access will demand and the necessary regulatory and security requirements a business needs to meet.
4. Prioritize. Figure out and map the most important API journeys and then note the complementary APIs to unlock the needed data, cloud, and core resources. You also need to identify APIs that will contribute to the organization so it is able to operate in an agile mode.
5. Leveraging third-party APIs is a good practice and brings significant convenience to enterprises. However, enterprises should keep innovating features to make their products competitive
API strategy for selecting third-party APIs:
- the vendor follows the OpenAPI Specification
- read the API documentation
- check if your architecture is open and API-forward and can be well suited to address changing future needs
- an ideal API should provide stability and deliver optimal performance
- make sure the feature is relevant to the main business. It can enhance user experience and increase number of customers using the feature
- encrypted data is critical to ensure the safe use of APIs by other vendors. Sensitive customer information should never be transmitted through unencrypted channels. What’s more, enterprises should implement secondary authentication for critical operations and avoid APIs from unknown sources
- No system can guarantee 100% availability. So, enterprise organizations should use two or more providers for each feature as a backup. While one service provider might suffer a fault, the business can switch to backup immediately.
- APIs help your company grow, innovate and expand to new markets
- pay considerable attention to API strategy and correlate it with
- overall business goals and strategy
- remember about tradeoffs that come with APIs.
As your API strategy matures, be innovative and use your wins to build on existing work, celebrate small achievements. Your IT ecosystem can be a valuable contribution to your company’s business goals if you are ready to prepare an effective API strategy.