API Business Models

How to Make the API Economy a Reality


The growth in cloud computing and the need for enhanced integration have pushed organizations to accelerate their plans for moving operations to the digital world. In the process, application programming interfaces (APIs) and a number of related new technologies — such as API management and integration solutions, cloud native products, integration platform as a service (iPaaS) offerings, and low-code platforms — have become critical in order to participate in the API economy.

In this post, we look at the importance of APIs, how intelligent enterprises are generating revenue via APIs, and technologies to consider in order to be a part of the API economy. Let’s dive in.

But, what is the API economy?

The API economy is the ability for APIs to create new value and revenue streams for organizations through the use of APIs. For example, Stripe, a company that provides payment processing capabilities for online businesses, generates its entire revenue through APIs. Similarly, Google Maps is a free service offered to consumers who want to find their way around. The app earns revenue through advertising, but also through its Google Maps API, which is used by companies like Uber and Lyft. These companies use the Google Maps API in their apps to show driver and passenger locations, fulfilling a critical piece of functionality. Since it is expensive for Uber to create and maintain maps data, it is a win-win situation for both Google and Uber. Furthermore, Google APIs have enabled even smaller players like startups to build great navigation experiences.

APIs: the game changer for big business

Today, there’s an API for almost any service. Everything from communications (such as Twilio), billing (Stripe), financial (Plaid), and travel services (Priceline) expose services that are consumable as APIs. In the past two decades, IT teams have been busy getting software and connectivity embedded into everything imaginable. We now have software embedded in air-conditioners, washing machines, cars, refrigerators, and even light bulbs. The connectivity of all these devices are enabled through the use of APIs.

All of these together form a massive API ecosystem for developers. As a result, developers are increasingly creating new digital products and services by combining these standardized building blocks. The winners of the next two decades are going to be the ones who are best at combining and utilizing these APIs to create digital services that generate value for their consumers. In the next decade, the API economy should show exponential growth from where it is right now.

Realizing the promise of the API economy

How do we then realise this promise of the API economy? What does it take?

The most successful organizations are going to be the ones willing to participate in the API economy. Participating requires both consuming APIs from the global API ecosystem and contributing to it as well. Let’s take a look at what it takes to participate in the API economy.

API marketplace: template, share, and reuse

An API marketplace is a common place that contains all kinds of APIs, events, and data streams and commonly used-third party APIs (connections). This can be viewed as an innovation toolbox for an organization’s developers. Not only does it give a global view of all programmable endpoints within an organization, it also helps reduce duplication of work by encouraging reuse and sharing.

An API marketplace puts a significant amount of power at the fingertips of developers. It also helps the organization’s innovators and thought leaders to assess the feasibility of their ideas by inspecting what’s available for them to build on. Having a global view of all such endpoints also drives new ideas for digital products.

Low-code to enhance programmability and connectivity

An organization stands out against its competition by building capabilities that outperform its competitors offerings. In his book “Ask your developer”, Jeff Lawson, CEO of Twilio, explains the benefits of building software as opposed to buying to differentiate a business. One of his famous quotes from the book is to “Build or Die!”. Of course it only makes sense to build the parts that differentiate yourself while reusing common functionality that are not in your main line of business.

Building software in today’s world requires connecting to many APIs (both internal and external) and programming on top of them. The connectivity and programmability offered by platforms used by developers to build new digital services are therefore critically important to the success and growth of an organization.

The most important aspect of this is that you have both programmability and connectivity and not just one of them. Connectivity is comparatively easy, but programming on APIs is not always straightforward. This is because developers need to understand the API specs, authentication mechanisms, error handling details, and much more to program on an API successfully. This is why API-integration platforms advocating low-code tooling are making big waves in the industry. This article from SD Times identifies 2021 as the “Year of Low Code”. It is important to note, however, low-code is also used to refer to building end-user applications (mobile apps, web apps) with low-code. In this case, we’re talking about the productivity low-code tooling gives developers who are composing APIs to build new APIs. The Capabilities offered by iPaaS and EiPaaS therefore become essential to your organization to participate in the API economy.

API management

Proper API management is essential for any API program to succeed. A successful API is a product that requires proper product management. It requires lifecycle management, versioning, documentation, a developer portal, and so on for it to be successful. One of the most important aspects of this is to make sure that every API be added to the global API marketplace for discovery. Of course not every API has to be public, nor accessible from outside, nor even visible to everyone as well. API management products offer these types of governance to scope and limit the API’s exposure to the intended audience. They also provide features to manage the API’s security and access rate limits as well. The business insights you gather from the usage of the API becomes essential to drive its roadmap and find its position in the API economy.

In today’s world the real value of API management is realized with the ability to compose new APIs fast, experiment, and iterate. That is why the programmability of APIs play an important role in an API management system.

Microservices style development (and culture)

If the pandemic has taught businesses one thing, it is the fact that businesses need to be highly adaptable. Being adaptable doesn’t always mean you’ll succeed, but adaptability combined with the “fail fast” mantra gives digital organizations a great chance at success. This is why microservices style development and cultures are crucial for modern digital businesses. They facilitate software architectures and cultures that are adaptable. This gives organizations a better chance at bringing out new ideas to the market faster, experiment with it for a while, and reiterate over them until they get it right.

Microservices style development however doesn’t come for free. Often organizations have to incur large costs to deal with the complexities associated with it. This is one reason why organizations move to the cloud to utilize cloud services as much as possible and simplify their tasks. However, the increasing complexity of the cloud is not helping organizations in this feat. For example, Amazon’s AWS now has a suite of 175 service offerings for organizations to build upon! Figuring out what services to use and how to connect them with others requires obtaining a degree in AWS technologies.

Ideally, organizations need purpose-built platforms that provide all of the tooling required for them to participate in the API economy. These platforms should enforce API best practises while taking away the unnecessary complexities. They should let developers focus on doing what they know best, which is to implement the APIs required for the organization. This article by ThoughtWorks explains how the complexity of the cloud is now a “business problem” and why platforms are important.

Closing thoughts

The promise of the API economy can only be realized by increased participation. This requires more and more organizations to consume from and contribute to the global API ecosystem.

Modern integration platform as a service (iPaaS) offerings provide tooling required for developers to discover APIs easily, program effectively, and connect reliably. API management becomes a critical piece of these platforms for organizations to participate in the API economy. They need to adopt platforms that apply cloud native engineering principles on the services they build. And it needs to be done in ways that do not burden developers with its complexity and allows them to focus on their business domain.

If you want more details about an IPaaS solution and want to see one in action, please visit Choreo — a comprehensive platform for low-code, cloud native engineering.

This article originally appeared here.

Nuwan Dias

Nuwan Dias

Vice President & Deputy CTO - API Management & Integration at WSO2

APIdays | Events | News | Intelligence

Attend APIdays conferences

The Worlds leading API Conferences:

Singapore, Zurich, Helsinki, Amsterdam, San Francisco, Sydney, Barcelona, London, Paris.

Get the API Landscape

The essential 1,000+ companies

Get the API Landscape
Industry Reports

Download our free reports

The State Of Api Documentation: 2017 Edition
  • State of API Documentation
  • The State of Banking APIs
  • GraphQL: all your queries answered
  • APIE Serverless Architecture