API Business Models

APIs & Today’s Digital Revolution

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Marc Friend is the CEO of Rapid. In this article, he discussed APIs in the digital revolution.

 

When we talk about the digital revolution, we need to discuss how technology plays a part and how it affects the rules of the game so that the best technology solutions become ubiquitous. They completely rewrite the rules. Industry dictates how software is built, and software dictates how industries work.

 

One example of how technology changes our entire ideas of consumption as consumers is Uber. It’s not just an app, but it’s changed how we think about how we consume automobiles. In the United States, a survey by the University of California, Davis, in 2019 found that 27% of the population were putting off automobile purchases because they could use ride-sharing. So not only did they create a category, not only did they win that category, but Uber has changed how we think about consuming automobiles. The software company changes the way we consume automobiles.

 

An API is not just another piece of software. It’s software that tells you how to connect to it and how to communicate with it. It describes the ecosystem it sits in and describes relationships with consumers and developers API. So, an API is an encapsulated entire unit of work and then abstracted with a single interface. So, an API has several layers of abstraction based on what we want to use it for.

One more way of looking at APIs is how you interface with the service that you’re using and what service is encapsulated. Earlier, when we went to a bank, we went to a Teller for deposits or withdrawals. Then, they had one layer of abstraction called ATMs. It changed the way we banked. The next was credit cards. It represents a token for me to transact worldwide, in almost any currency and almost any vendor across the globe. That’s a pretty good abstraction. And if you think about even money itself, currency is an abstraction for trade. So, abstraction layers and abstractions have been going on in the industry forever. And yet, all of these abstraction layers in money we now have on our phones. So that’s how technology is beginning to change how we use and work with abstraction layers, and finance services is just one example.

 

Let’s move on to other industries. Let us look at the US film industry from its beginnings in the early 1900s to today, including streaming media, to talk about ecosystems and abstraction layers in the real world.

If you go to almost any small or medium town in the US today, you will still see a Paramount Theatre, a Fox Theatre, or a United Arts theatre. This was because film studios came into play in 1910 or so; the film studios owned the actors, and they owned the directors, and they produced the films and distributed them. Then, a little bit later came a radical production company United Artists. So United Artists is a group of Douglas Fairbanks, Murray Pickford, Charlie Chaplin, and DW Griffith. This was the first industry stack that was created. You had a production company and a distribution company, completely different companies. The actors were able to get more of the profits of the industry. In about 1933, there was enough turmoil and the Screen Actors Guild was created. It was a union of actors to ensure they got their fair share of the profits away from the production companies. So now you had Distribution that was separate; you had production companies, and you had actors. This gave three layers to this economy. Further, it split into four layers, actors, directors, production and marketing, and distribution. Now, it’s more complex and has multiple layers.

 

In 2011, you still had only two ecosystem companies, Microsoft and Apple. But by 2021, that number had grown by about four times to $13 trillion. And all but to our ecosystem companies. Ecosystems are critical to economics and business today. These ecosystems redefine business, and the software of those ecosystems redefined business.

 

Enterprises are building API-based ecosystems, connecting to their distribution or supply chains that partner through APIs. We see this in every industry.  Businesses are trying to increase their revenues by increasing their range of services and their distribution. To do that, we have to build out our API management and create APIs that can be consumed by partners.

 

Here’s how we think of ports. We think of huge ships run by captains going down the channel, maneuvering with hundreds of millions of dollars of valuable cargo. There’s only one problem: a shortage of captains; it’s very hard to find enough captains to Captain all these ships. So, we use technology, which uses a stack of software and services. So again, industry dictates how software is built. Software dictates how the industry works. And APIs are the connective tissue that brings that all together.

 

To conclude, what we are all doing here in the world of APIs is important. We’re redefining the pace of innovation. That’s how we look at the world from the Rapid point of view.

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