What about the API Economy?

Do you find your head spinning at the emergence of the industry term, “API Economy?”   You might wonder what role your organization and company should play…once you figure out exactly what it is…

One definition comes from an IBM RedPiece entitled, “The Power of the API Economy.”

The API Economy is the commercial exchange of business functions, capabilities, or competencies as services using web application programming interfaces (APIs). APIs drive the digital economy and companies that do not embrace the API economy will be left behind.”

The API Economy is key to accelerating value, improving business performance, and extending your business services and goods to the widest possible audience. Making sure your company is easy to do business with and creating paths to new business opportunities is why the API Economy signals a new business reality. Companies that seize this opportunity will differentiate themselves and grow.

The way I explain the API economy is that the web and mobile computing make it very easy for businesses to share valuable components.  Application programming interfaces are somewhat like the doorway to using a component.  The components themselves can be data, logic or full services; they can be very small or large – just something that provides value to others.  Providing other institutions with access to these valuable assets can become a competitive differentiator, or provide a new source of revenue.  Consuming assets made available by other companies can accelerate innovation, again providing competitive differentiation.  Simply put, sometimes it’s better to buy than build.

Playing in the API Economy requires understanding what data, logic and services your company has that provide value to others, and also understanding what data, logic and services other companies have that provide value to your organization.  This determination does not happen effectively in a vacuum.  It must involve business leaders so that APIs offered and consumed align with the overall business strategy.

An analogy is that I make a really good potato salad.  If I offered access to my potato salad, other people could forget about searching for recipes, gathering ingredients and learning to make potato salad.  They would just use the API into my potato salad service, saving time and delivering really good potato salad whenever they needed it.  I would make money from no longer protecting my potato salad as a family exclusive offering but rather give many people access to my valuable potato salad assets.  However, offering my potato salad as an API based service does not make sense because I have no desire to enter the food service business – it doesn’t align with my business strategy.

Sometimes data, logic and services that your company wishes to offer into the API economy are tightly coupled in legacy solutions in a way that makes sharing them difficult.  The IT organization may need to undertake a de-coupling effort to separate user interfaces, data, storage, and business logic so even very granular sized assets can be made available.   This doesn’t mean an IT organization needs to re-engineer every asset.  Rather, any re-engineering efforts should occur aligned with business priorities associated with making the asset available for internal or external consumption.

Continuing the potato salad analogy – maybe someone really likes just my potato salad dressing and would like just that component.  If I wanted to offer my potato salad services, I might serve a larger market if I could de-couple some of the ingredients at a more granular level.  I might make much more money selling my potato salad dressing in addition to selling the fully integrated potato salad service.

This might sound like a daunting task when it’s your IT and business assets versus my potato salad recipe, but there are many software products and gateways that help make business assets accessible.  The place to start is not with the tooling but with understanding the business strategy and objectives as well as having an exploratory discussion regarding internal and external assets that should either be made accessible to others or that your company should start accessing.  Making the wrong assets accessible or accessing the wrong assets just helps accelerate doing the wrong thing for the business.  It’s better to use the agile concept of pausing to understand the highest priority assets to access and to make accessible, and keeping the works in progress to a small number during the re-engineering phase.

For the CIO, understanding what IT assets, business logic and business data exist is critical to entering the API Economy successfully. If your company plans to offer APIs versus just consuming them, then providing an infrastructure that supports unpredictable workload spikes without impacting performance is also extremely important.  The capability to measure and bill for API-based service consumption also needs to be established, unless your company sees value in offering API-based access to assets on a charitable basis. 

Hopefully if your head was spinning it no longer is regarding the definition of the “API Economy.”  Also, hopefully, you don’t see participating in the “API Economy” as a daunting effort.  Part of the “API Economy’s” beauty is the component-based approach, making use of other organizations’ good work versus requiring your organization to shoulder the majority of efforts. 

And if none of this makes sense but all this talk of potato salad is making you hungry, maybe just drop me a note to get my recipe….