IT has changed leaps and bounds as the size of devices and computable machines reduce from large monumental powerhouses to pocket sized gadgets. Applications running on them also experience prodigious shift from byte code to thick client to Web-based, multi-tier and now application based.

The enterprise software landscape also has become more diverse and complex. Today’s applications not only access data and functions from internal systems of record, they also increasingly use Application Programming Interfaces (APIs) to integrate with back-end business processes and system of records in a simpler fashion.

This article aims to provide a view on what API is and why it is required, the API economy and its benefits to the organizations, the API economy marketplace, and API monetization considerations.

API Necessity

Renowned scientist and cosmologist, Stephen Hawking, once said that the 21st century is the age of complexity. This quote stands true in the context of business ecosystems, which continue to chart a tortuous and uncertain course, becoming large as ever with permeable boundaries. If we look at it from a different perspective, this complexity also gave birth to simplicity, since IT solutions and integration techniques using API are becoming simpler for business agility.

The last decade has witnessed a paradigm shift in the way business is done. With connected devices taking the size of hand held smartphones and wearable devices, even the applications and IT systems had to turn more digital and lightweight using APIs.

APIs have become de facto standard for communication today in business ecosystems. Growth of these APIs stems from an elementary need of today: a better way to encapsulate and share information and enable transaction processing between elements in an enterprise.

API connects your business processes, services, content, and data to channel partners, internal teams, and independent developers in an easy and secure way.

According to a ProgrammableWeb—an organization that manages a global API directory—there are more than 13,000 open APIs listed. This count substantially is predicted to increase to 1,000,000 for internal usage within global enterprises. APIs can help address some of the teething issues of business and are foundational to grow customer cases with new offerings; drive innovation by integrating content from partners to create cross-sell and upsell opportunities; create new lines of business and extend product offerings by leveraging corporate data in new ways—leading to more revenue streams; strengthening the brand by providing a consistent, familiar, personalized experience across devices; improving on time-to-value and time-to-market for new products; and enabling reusability and monetization, resulting in the completion of new partner integrations in days, not weeks.

API-centric as-a-service delivery is disrupting the consumption of business services and taking advantage of next-gen platforms, similar to how cloud disrupted the IT consumption model.

Types of API in chronological order for enterprises to consider include private, internal APIs; protected, business to business APIs; public, open-Web APIs; and product APIs.

API Economy and Adoption
Look around and see how mobile applications bind Web and in-store consumer experience and behavior. Retailers capitalize on mobile applications as new channels while adding value to brick-and-mortar and Web experiences. Without APIs, app users wouldn’t be able to change seat assignments, purchase tickets, or compare and order the product that caught their eye.

API Economy allows commercial exchange of business functions, capabilities, or competencies as services. In the API economy, APIs should be managed like a product, which provides direct programmable interface—one built on top of a potentially complex technical footprint that includes legacy and third-party systems and data.

Companies embrace the API Economy to make adoption of their value propositions simple. There are three drivers of API Adoption, mobile, HTM5, and B2B integration.

In API Journey map, stages of maturity depends on how API initiative affects the business and provides value. Higher level of maturity depends on the degree to which API initiative is ingrained into the business and the way they operate. Repeatable methods, degree of business impact, and the business outcomes are indicators of higher maturity.

Ecosystem communities emerge where companies seek to nurture and support partners in developing APIs or apps that advance their value propositions. Amazon and Google are just a few examples of companies with rich ecosystems that advance a company’s value propositions, competencies, and business services.

API Evolution Cycle
The API Evolution cycle starts from analyzing the data and assets available in the enterprise and goes onto a state where productization is achieved with market acceleration. At every step the desire is to add new audiences and value to the ecosystem.

Making Business Digital—With API
Once an enterprise has decided to board the digital buzz wagon while harnessing emerging technologies, they will have to disrupt portions of their existing business and operating models. Similar to SOA transformation model, the journey to API adoption and monetization has to evolve incrementally, so that the investments made are not redundant, conflicting, or compromised. The cycle illustrates the path of digital transformation, which also applies to emergence, management, and governance of APIs.

Accelerate digital channels by identifying business assets like data, service, and capabilities that can turn digital. Build upon your existing SOA investments. Delight customers with an engaging experience on any channel or device at any point in time to mobile—enable your enterprise, externalize your products and services as APIs, and stay ahead of customer trends to accelerate time to market and reduce total cost of ownership by leveraging existing applications.

Drive partner adoption. Engage business partners and get developers up and running quickly. Launch a secure online portal to quickly onboard business partners and establish interactive online social channels with them. Drive partner adoption with updated documentation and a developer community. Connect with developers, inspire them, and drive your API use.

Monetize digital assets. Package, market, and license your assets and APIs to maximize revenue. Transform any application, service, or asset into elegant and simple APIs. Productize your data, create customized packages and tailored plans, and license them accordingly.

Analyze your business and investment. Get instant insights into your business and optimize the delivery and value of APIs. Maximize your revenue by gaining complete visibility into how your partners and customers leverage business data. Monitor activity for a specific partner, application, or developer and evaluate their impact on your business. Bring in governance and management methods and tools. Create a marketplace for the APIs, applications. Restructure your organization to align with different API roles.

Strategic Focus and Integration
Organizations who still use legacy and mainframe systems would question that to embrace API driven systems, do they really need to discard existing implementations and come up with this new model of application integration. Answer to the concern is “bimodal or two-speed IT,” where departments ensure a bifurcation between modern development and its predecessor. In this architecture, enterprise can continue with their old legacy systems but turn some portion of it to API-driven ecosystem.

Enterprises can work on the lines of some of key strategies to build APIs. Give the functionality to third parties. Help third parties build applications around the data you provide. Mobile applications use API to create a better experience. Build mashups to generate value from data residing in silos.

The modern user expects to work in context plus have an omni-channel experience with no need to jump between applications and systems. This requirement drives the need for more API integration. Integration may be in the form of connecting business functions between endpoints or using API mashups, which is a rapid way of integrating API services to compose a new service through a single API.

API mashups are quite similar to what we have seen in traditional architecture of EAI and SOA where web services started getting composed to create complex business process.

Decision is needed when to build a new API from scratch or to leverage existing back office and legacy services if any. A deep dive into enterprise application and data models is required to build API strategy.

Building API Strategy
When businesses start building API strategy, they cannot be mature at the very start. Normally at the start they don’t feel comfortable making APIs externally available, so start with only internal audience. As they learn and make improvements gaining maturity, businesses feel more comfortable adding audiences further outside of their domain of control.

Monetizing APIs
In 2011, 90 percent of Expedia’s $2 billion in revenue came through APIs. The time of APIs as a billion dollar business has arrived. Charging money for your APIs is the obvious form of monetization. Any use of APIs that broaden and strengthen your Business Ecosystem will ultimately also increase your revenue stream. This could be through open platform powered by APIs or even an open ecosystem where APIs are only one type of asset being shared. Choosing wisely will determine the success of any API monetization efforts.

There are some wider business candidates for monetization patterns, those who sell their proprietary data; digitized process, service, and capabilities; and the digital ecosystem.

API models can be categorized into distinct business models such as free, pay as you go, and revenue sharing. Free mode helps drive adoption of APIs and build brand loyalty. With pay-as-you-go structures, API developers pay for search, data, and capabilities. For example, Amazon enables developers to pay for only what they use; transaction fee—such as PayPal; or unit-based—such as Google AdWords or Maps. With revenue sharing, developer or partners are paid directly, using affiliates. In this case business expose API to partners to sell and advertise their content on website and apps. Online retailers enable content population and market place that indirectly results in revenue. Indirect, providers offer APIs for third-party developers/merchants to extend their platform. PayPal uses Adaptive Payment API to share revenue amongst merchants.

In addition, pricing rules can be put in place, mostly for enterprises who build APIs to expose platforms and capabilities. These may include a setup fee, a fixed monthly recurring fee, and a variable monthly recurring fee—or cost per call.

To achieve maximum value out of investment in API models, enterprises must ensure that the right management tools and procedures are applied. API Management solutions are available to provide security, governance, and monitoring capabilities. One can meter API invocations, charge per use and action, and also provide security for business data.

The essential ingredients of a complete API management solution are to collect, annotate, and publish key APIs. Reduce development costs and time-to-market for new business. Enhance the value of SOA projects with a catalog of links to business processes, applications, functions, and services.

Bottom Line
Technology in its widest sense has taken human age into a next generation digital revolution. Technologies continue to accelerate, evolve, and intersect impacting markets, business models, and spending priorities. This intersection is fueling the rise of applications and digital products that is APIs. Ensuring your services will be accessible in any context with any device—present or future—requires API adoption and participation in the API Economy.