API Business Models

Accelerating Connected Data Initiatives to Drive Economic Outcomes

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Digital Victoria is an initiative set up by the Victorian Government to drive digital transformation across government and drive digital ways of connecting our business and our citizens with the state government. This article talks about the new API marketplace we are setting up in Victoria and accelerating connected data initiatives to drive economic outcomes.

Organizations can standardize their systems to connect and interact with their data. The goal is to implement this connection once and then give access to many different users instead of customizing connections for each user. This dramatically cuts down on the costs and opens up the ability for people to create new use cases. It can help drive innovation and growth.

Suppose you think about your standard electric power point as a provider API. In that case, the provider API specification is that the device needs to accept 240 volts of electricity to plug in and charge any device. If this is the standard, then anyone making appliances everywhere can create many different devices that can also be charged up using the same power point. It is a simple analogy for what APIs enable. But when thinking about APIs, think about the digital solutions that need to plug in, to consume data safely and securely.

Victoria is committed to supporting the digital economy. The Victorian government recognizes that an effective digital economy will enhance ordinary Victorians’ lives by driving productivity, creating jobs, encouraging inclusive growth, and supporting new business opportunities. Victoria is invested in various entities with a substantial role in supporting the digital economy, including “Invest Victoria” and “Launch Vic.” But there’s also a role for government to increase open data sets available to businesses and make it easier for small to medium-sized businesses to consume government information, share information back with the government, connect with other business systems, and create new services. Because of this, the Victorian Government has also invested in its connected data and API infrastructure. It’s made this investment because it recognizes the power of this technology to drive transformation and innovation in how government operates. It also recognized the opportunity that easier discovery and access to open APIs could have to grow the digital economy. And this has led to some critical initiatives, such as the Data Vic platform. This platform makes it easier for developers in the government and community to discover, access, and use government data to create innovative and useful products. A second initiative has been the Victorian Government API Gateway. The Gateway has had an incredibly successful first year of operations. It has contributed to several major digital initiatives across the state. The Gateway has supported the COVID-19 response on the Victorian Government QR code “check-in” service. We’re enabling secure data sharing through APIs between the “check-in” service and Department of Health contact traces. The Gateway has also supported the Department of jobs, precincts, and regions COVID-19 relief by enabling identity verification requests through integration with the Commonwealth Department of Home Affairs. One more example is where the Gateway supports other departments to transition legacy services to reusable APIs. A third is the “Developer.Vic” portal. The portal provides the tools and resources for application developers to connect their applications with data from a range of government departments and selected government partners.

Currently, all three of these initiatives are operating within Digital Victoria. Digital Victoria was created to transform the experience of government for all Victorians through innovation. The triple goals are better, equitable, and more accessible services for Victorians, a digital-ready public sector, and a thriving digital economy. The API marketplace that we’re talking about is part of that focus.

The third goal is to support a thriving digital economy. We know we can help reduce the barriers for Victorian businesses, start-ups thrive and grow through things like digital marketplaces and options for partnerships with the government to create new digital solutions for Victorians’ problems. We have had success with this in the past. Over time, we’ve built a single digital presence, which is a shared online publishing platform built by the government for government. The “Engage Vic” platform is an online public consultation platform. It makes it easy for the government to collect community feedback on policies, projects, and strategies, a business insights platform. This enables the Victorian government to analyze citizen sentiment and needs. Then we have the API Gateway and Data Vic.

All these solutions started with a common problem. Once we validated the problem, we designed and delivered a minimum viable product as a proof-of-concept. Often we’ve done this in partnership with industry partners and as much as possible from Victoria. And we’ve got the concept in use early. And once it’s in use, we’ve tested it. We’ve learned from our testing, and we’ve improved it. After test and learn cycles, we confirm that we can go to scale. This approach has been successful for us, and we believe it’s worth repeating. 

API Marketplace

When we were brainstorming how the government could help grow the digital economy, we wondered if history could inform a digital approach. Historically marketplaces would be in the center of most cities to maximize exposure and access. It was the economic hub of most cities. These marketplaces would drive investment, improve citizens’ economic outcomes, and help the community grow and prosper. And the government would help marketplaces by building infrastructure like roads and rails to help increase trade access and opportunities. We asked ourselves what that help would look like in a digital world. And that was about 18 months ago, and then the pandemic hit. So we’ve been we’re reeling from that. Some of the data that informed the brainstorming session question were from 2019, and Deloitte Access Economics had looked into the Victorian start-up ecosystem with a 20-year view on growth. They flagged a strong link between connected data initiatives and economic growth. And the Victorian Government asked what could be done to expedite those connected data initiatives to accelerate that growth trajectory. That was what we were asking in 2019. We want to see what we can do to help the state’s economic recovery due to the pandemic. And while there have been impacts on the economy, the analysis did not foresee a global pandemic; we were eager to understand what is happening within organizations and how the pandemic impacted them.

We reached out to Google Cloud. They had completed a very timely report looking into organizations using APIs and the effects of the pandemic on it. It turns out that three-quarters of the organizations could continue their transformation, despite the pandemic. 65% of those organizations accelerated. APIs are leading the way for these transformations because of the reasons that we’re all familiar with. Organizations recognize that APIs deliver better outcomes and experiences both internally and externally. They are creating massive value for reusability. And they facilitate integrations with external customers and partners. Now, we dove into some more detailed responses from this report. And many organizations have dedicated a specific API platform funding initiative as part of this transformation. They’ve recognized the value in connecting with the outside world for new markets and new growth opportunities, including partnerships. So we’ve been speaking with Deloitte Digital and Google Cloud about this concept of an API marketplace. And they both stepped up and said they’d love to help deliver and develop the API marketplace proof of concept. We’re proud to announce that Deloitte Digital is our strategic delivery partner, and Google Cloud is our technology platform partner. Now, Deloitte Digital and Google Cloud have stepped up because they see the benefit for the technology community and the ecosystem. And they know that with connected data initiatives, a rising tide lifts all boats. Ater the positive feedback from Deloitte Digital and Google Cloud, we then went out to speak with key industry players to get feedback directly from the horse’s mouth, see what experiences they’ve had, and get some feedback on the concept of the API marketplace.

Here are some of our learnings. Many organizations are undertaking extended, complex transformation programs, which are usually a bit more challenging than you expect. But the good news was that APIs are leading that change. Most of these transformation programs are based on modernizing legacy systems and moving them to the cloud. APIs are essential for these transformations. The business cases for modernization are well known. The focus usually is on internal APIs. They often include external APIs as a key new revenue stream, and they’ve positioned them at the back end of those transformation programs. You will not have external API programs when you haven’t finished moving your assets into the cloud.

We’ve seen a budget shift, where R&D budgets on innovation have been allocated to transformation programs. That means there’s very little room for your traditional R&D. Traditionally, closed-off organizations are now looking for their next growth area. They identify opportunities, connect data, and open up those closed walls. We spoke directly with organizations that had stood up those dedicated API or developer portals, and we asked them, “Why did you do that? What was your strategy behind doing this?”  Many organizations said, “Well, we created them intending to monetize or create an ecosystem around our approach, access our data, our solutions.” Whenever we dug a little bit deeper, the feedback we got was that they weren’t necessarily hitting their projected revenue targets. And that was due to underutilization and lower than expected transaction volumes. So the revenue targets weren’t necessarily being met. They find it more costly to run due to the effort required to onboard new users. This is usually because of the sensitivity of the data. A lot of due diligence needs to be done to ensure that third parties are appropriately using that data and your customer data is secure and safe. They’re also finding it more expensive to convert users because of a much higher than expected SEO spend. This is attributed directly to a global advertising competition for general search terms. Now discoverability is impacted by potential users because of this stubborn problem. And so this directly affects the API program’s usage and user conversion potential.

Finally, we also spoke with developers or start-ups in our scale-up community. And whenever it came to APIs and portals, there were two main pain points that they highlighted. The first one was discovering and finding new integrations and data sources. Discoverability was a considerable problem when most providers were operating as islands. Discovery in an ocean of different common search terms is very difficult.

The second pain point was even when you find a potential integration. There are usually significant hurdles and barriers that need to be overcome before a developer can even test whether it fits the purpose. At other times, complex commercial negotiations and commitments need to be made before access is provided. 

We heard something similar from providers as well. When there was a potential partnership concept, and they were looking at possible partnerships with organizations, they had to reach out to the organization through the front door. There are some challenging conversations trying to find the right person within the organization to speak with. After you finally find that person, you have your directors hear the pitch. And if you make it past that gate, it’ll eventually head up to the CXO level. Since it’s a new partnership opportunity, due diligence needs to occur. Calendars need to align, adding to weeks of delay. And this is before the developers have even seen whether it’s feasible. This is just some of the feedback we got, and we can relate to it very strongly.

After all of that, sometimes the integration we find isn’t even fit for purpose. And so, all that time and cost incurred was wasted. Now, this is kind of manageable with your large or well-funded organizations. But this is not the case with developers, start-ups, and scale-ups where the capital, time, and resources are less and need to be used effectively.

These two problems compound and have two side effects of their own. And one is that your prototyping costs are much higher than expected. And if the ROI isn’t there, meaning that integration didn’t work out, then your company’s growth suffers because you’ve gone down the wrong path. And then secondly, you become a bit gun shy whenever it comes to trying out new integrations or partnerships. And this means that we’re seeing good ideas not being brought to fruition, resulting in a lack of innovation and opportunity.

I can personally attest to this. A few years ago, I’d come back after a six-month trip around the world. A friend and I were working and started a side hustle looking at solving a problem by creating a digital service to automate a very dull task. I found the organization we wanted to work with. I was even a customer of the organization. I tried for weeks to get access to the developer portal. But because we didn’t have a prototype to show, the organization wasn’t interested, and we couldn’t progress. And it’s a bit of a chicken and egg problem. It was a very frustrating experience and led to a considerable amount of time spent on poor workarounds that didn’t quite work. It led to poor customer service, and we ended up abandoning it.

 

To recap, we’ve seen the pandemic accelerate transformation projects in organizations, and APIs are leading the technology change. We see strong links between connected data initiatives and economic outcomes. Organizations with API programs face challenges with the utilization, discovery, and conversion of new users. And developers are having challenges discovering and testing new data sources. 

The API Marketplace is a free Victorian government platform built on the latest Google Cloud Apigee technology, designed to make APIs easy to discover and use. We want to improve discoverability for both providers and developers while reducing the amount of time and effort it takes developers to prototype an integration. It will allow providers to deploy APIs to a central platform, so developers have a single place to find new integrations from diverse industries. They will be able to prototype an implementation to prove a concept. Providers will have visibility over which APIs are getting traction to help focus their resource and development efforts. Reducing barriers for developers to discover and prototype new APIs will open new opportunities for providers to access new markets and users that they historically wouldn’t be able to access. This also benefits developers because they can then deliver more value to their users. We will be acting as a neutral channel to facilitate new connections and drive the connected economy forward.

You may be asking, why did the Victorian Government build this? We heard from organizations supporting this concept that there was apprehension around the entity that would operate a centralized directory. There were security, privacy, and commercial concerns that dominated. Still, there are concerns around quality, intellectual property protection, potentially restrictive terms or conditions leading to a loss of control of your data, a lack of visibility on operations, and potentially unfair listing incentives. Many organizations we spoke to during these large transformation programs also saw external APIs as an opportunity. But there was hesitancy surrounding opportunity availability and concerns about the budget and resourcing required to stand up an external program. We’re not just building a platform here; we’re actively speaking with organizations to promote, and support connected data initiatives. We have numerous initiatives from different government departments to help businesses and developers of the start-up and scale-up ecosystem. And the API marketplace is just the latest initiative that we’re supporting. Trusting that the government keeps a fair and open connected data platform helps reduce costs associated with going out alone. The Victorian government wants to enable businesses to succeed in the digital economy, and we’re committing resources to help drive that innovation and economic activity in the sector. To address these concerns, one of the central pillars of the marketplace is neutrality in this operation, ensuring that all participants are treated equally and equitably to increase collaboration opportunities for everyone by operating as a neutral party without a commercial interest. We can help unblock opportunities and expedite collaboration. We are not competing against an existing provider’s portal or API program, but we’re complementing and supporting that program by acting as a channel for growth. So similar to how the government built roads and rail to improve market access and opportunity, we have built the API marketplace to help improve access and uses of APIs. We believe that connected data will be vital in driving economic growth forward, and we’re aligning support to encourage a thriving digital economy — a key goal for digital Victoria.

Carolynne Hamilton

Carolynne Hamilton

Director - Product Management and Development Director - Product Management and Development at Digital Victoria

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