Which Geographies and Industries are Most Advanced in the API Economy
I meet customers in all industries, of all sizes and in all geographies. When I am asked a question a few times this usually signals an opportunity to write an article to address the issue since many others may have the same question. A question I have been asked frequently but have avoided writing about until now is “Which geographies and industries are most advanced in the API Economy?”.
Why have I avoided addressing this question? Because you will not be happy with my answer and it really is not the question that you want to have answered anyway. Still, let me start by answering the question as stated…
As mentioned, I meet businesses in every geography and all industries, so anecdotally I cannot answer this question since all geographies/industries have significant interest and are moving forward. The rooms I am in are full, but that does not tell me if everyone who is interested is in the room or if there are many more beyond the attendees and if so, how many? So, I turned to analyst studies. There are several studies that specify specific examples and studies that cut data by use case types, but I could not find any publicly available studies that organize the data for API adoption by geography or industry. Programmableweb has data by industry, but it is only for public APIs which most believe to be an extremely small percentage of the total API effort.
Next option was to look at the results of API usage. In my blog from January this year on the State of the API Economy, I called out several macro trends (e.g. Hybrid Cloud / Multi-cloud) and follow on efforts (e.g. Digital Transformation, AI) that are solutions using APIs. Maybe we can correlate API adoption to the things that APIs are being used to create? I chose to use this approach.
Which Geography(s) Are Most Advanced?
A report that I like is by Markets and Markets titled, “Digital Transformation Market by Technology (Cloud Computing, Big Data & Analytics, Mobility/Social Media, Cybersecurity, Artificial Intelligence), Deployment Type, Business Function, Vertical (Retail, Education), and Region – Global Forecast to 2023” –
https://www.marketsandmarkets.com/Market-Reports/digital-transformation-market-43010479.html This report shows geographic adoption for digital transformation but also includes cloud, AI and other related areas in the effort to pull together the data. It also has a good coverage of industries. The report summary includes the following adoption graph showing data for geographies:
What does this tell us? First, the overall growth rate is very good at 18.1% CAGR. Looking at the geographic breakdown, North America, Europe, and APAC look to be relatively close in size in each year with MEA and Latin America smaller but also growing each year. Of course, the economy of MEA and Latin America is smaller than the other geographies, so this would be expected. What I take away from this is that the growth rate/adoption is higher than usual but proportional to the size of the economy for each geography. There is no single geographic leader for digital transformation reaching beyond what would be expected in the geography, and I would propose that this is also true for API Economy adoption.
Which Industry(s) Are Most Advanced?
All industries are not equal in API adoption, some industries are adopting APIs more rapidly than others. So, which industries are leading and why?
Here is my perspective on industries where I am seeing the most activity (in no particular order) – Banking, Insurance, Financial Services, Retail, Telecommunications, Government, Healthcare, Automotive, Travel and Transportation, and Technology/Software. On the slower uptake list, I would include – Metals and Mining, Chemicals, Manufacturing, and Utilities. Many others are somewhere in the middle.
Part of the reason for the quicker uptake is regulatory requirements and industry standards. Some governments have issued requirements for Banking, Government (open data) or Healthcare requiring external access to assets in these industries. This is most easily accomplished through APIs. Other industries where standards have already existed for interoperability (e.g. Telecommunications) have recognized that modernization of the older standards would be beneficial.
But I do not think that regulatory requirements and standards are the biggest motivators. There are many industries moving quickly without these drivers and many use cases beyond what is required for regulatory or standards compliance. Primarily, I think the correlation between API adoption speed and industry is related to general adoption speed by that industry of new IT technology. The list of industries above that has higher API activity are the same industries that typically move faster to use new IT technology and the slower adopters list likewise.
What Do You Really Want To Know?
Are you satisfied that the question has now been answered? I expect not. I’ve told you that adoption rate by geography is in line with the size of the economy in the geography and that adoption rate by industry is in line with the normal adoption rate of new IT technology in the industry. Entirely unsatisfying!
But what is really behind this geography/industry question? I expect that the real question that I am being asked is, “How do I stack up against my competition? Am I behind? Do I need to worry?”. The question has been phrased to understand what is happening in your geography and industry to try to understand if your competitors – translated to part of the world and industry – are very active (and you are not yet active) and therefore behind. Or, maybe (hopefully!) your geography and industry are not as active, and you have less to worry about. Funny thing is I am never asked the question by businesses that have already put in place an API Economy initiative.
There are several flaws in drawing competitive conclusions from information on geography and industry regarding the API Economy:
- Competitors may come from outside your geography. APIs are a great way to enter new markets. APIs enable businesses outside your geography to enter your market quickly. Looking solely in your geography may miss other geography competitions.
- Competitors may come from outside your industry. Many businesses are introducing new and innovative business offerings using APIs that expand beyond their traditional industry and potentially entering yours. Limiting your competitive view to inside your industry may miss your next competitive threat.
- Most likely your most aggressive competitors did not exist in your industry just a few years ago. Many are startups or external entrants to your market. Looking at historical competition may not let you see the new competitor that is coming your way.
Whether your competition is your traditional competitor or a new threat from outside your geography, industry, or a startup, your best action is to be prepared to react quickly to a competitive threat – or better yet – move first. Your legacy IT environment has been valuable to your company, but sometimes acts as an anchor to change as faster-moving companies enter your space. Reacting simply takes too long. APIs are an enabler for Speed. Using APIs to encapsulate core capabilities from your existing IT assets enables these assets to be brought forward quickly – turning your legacy “anchor” into an advantage over companies that do not have the assets that your business can bring forward – if enabled to do so. The secret is to use APIs to free up access and make them part of an agile approach to new business opportunities.
Every industry can benefit from APIs. I wrote a series of industry blogs, “API Use Cases for Every (?) Industry” that can help you get started with sample ideas for APIs – no matter whether your industry is fast or slow in adoption of APIs. The most important thing is to get started! Do not wait for the competitor to force your action.
If you have questions, please let me know. Connect with me through comments here or via twitter @Arglick to continue the discussion.