Today’s APIs offer a far more simplified interface to access valuable business data and functionality through standards that developers understand. This is becoming a key point within any organisation’s enterprise architectural landscape.
In this article, I look at the birth of the API Economy and emergence of “Composable Enterprises”. As API-fronted services rapidly proliferate, a radical new model for building applications is emerging – and it’s going to radically change enterprise IT. In this model, companies will choose from a toolbox of public and private API services that can be integrated and discarded with relative ease to meet changing business demands.
It will simplify the integration of complex systems into businesses – and it will see developers playing a decisive role in deciding which technologies win, driving adoption from the bottom up.
According to Wikipedia, “an API specified how software components should interact with each other”.
In other words, API is the interface specified and implemented by an application which allows other applications to interact/communicate with it. Often an API is confused or synonymously used, or interchangeably used, with Service.
An analogy is useful in illustrating what this really means, so let’s consider a service that all of us consume every day - electricity. Electricity is delivered to consumers by a utility company. The utility company provides a service (electricity) to consumers that is accessible through electrical sockets. These sockets vary from one country to another, limiting access to only those consumers with the correct plugs for that socket. The plugs are essentially consumers, only able to make use of the service if they have the appropriate authorization. In this case, the API is the socket itself.
APIs are gateways between services and consumers, providing consumers access to services through various interfaces depending on their credentials. In addition, consumers can use the services they receive and implement them in their own way. Consider a laptop, which consumes electricity through a socket. Through its own "API", a USB socket, it can provide that same electricity service to charge other devices.
The API Economy can be defined as follows:
The commercial exchange of information resources facilitated by:
Relating this definition to the analogy provided previously will give a better picture of the API economy. Organisations are beginning to understand the importance of APIs and the value they deliver to the business.
“Gartner predicts 75% of Fortune 500 enterprises will open an API by 2014. In this new API economy, those without an API strategy will be left behind.”
Businesses are developing "API products" as new sources of revenue. Expedia generates over 2 Billion USD annually through the data made available through their API. Salesforce generates more than half of its 2.3 Billion USD through its APIs. The API economy is here and growing fast.
Broadly speaking there are four types of APIs available today as follows:
API is the product
The core value is tied up in the API. APIs like Google, Amazon Web Services, Twilio, PayPal and Skype that provide APIs intended for a specific purpose come under this category. These APIs offer direct revenue, good utilization and different pricing options according to usage volumes.
API projects the product
The category of APIs extend the availability of functionality to new places. APIs like Salesforce.com, eBay, FedEx and Spotify, all offering specific functionality, come under this category. These APIs offer better reach to more places, more utilization value and enable mobile integration.
API promotes the product
In this case, the main characteristics are secondary service provision, more leads, increased traffic and indirect revenue impact. APIs like Google Business Services, Amazon.com, Expedia and Netflix come under this category.
API powers and feeds the product
APIs like Facebook, Twitter, Youtube and Foursquare use APIs for content acquisition and internal innovation. They reach out to all relevant content producers whilst also facilitating access to content.
The dynamics of a hyper-competitive global market mean that standard models of organisational structure, operations and information technology services are no longer fit for purpose. We need a new operating model for the enterprise.
Today, it is a reality of businesses that supplier relationships, logistics networks, product and service design and customer service all survive in a state of flux. Any path to sustainable competitive advantage will require a high degree of operational adaptability to market trends.
This new operating model requires a different approach for designing and implementing processes and the organizations that support them. Implementing this approach will have a lasting impact on the structure of organizations and the nature of work. This is very much like building Lego blocks.
Business designs based on this new operating model will create significant stress for traditional IT infrastructures and organizations. IT needs to become much more dynamically adaptable to keep pace with the speed of business today.
A new Architectural approach to IT infrastructure, applications and services will be required to ensure that IT can deliver what the business needs. The time between identifying a business need and delivering the required IT solution needs to be reduced. This will shorten the time-to-market, thereby delivering increased business value and competitive advantage.
The “Ying and Yang” of these approaches is a drastic departure from the siloed monolithic architecture of the past. We are now in an era where — for the first time — business and technology operating models can be seamlessly aligned to enable fast, flexible responses to rapidly changing competitive landscapes.
This model of enterprise architecture threatens to forever alter the economics and power relationships that define traditional enterprise IT organisations.
Nimble processes on top of obsolete, bespoke infrastructure will not be enough. It’s still just lipstick on a pig. The recent explosive growth in public APIs, along with an important debate on their role in enterprise strategy illustrates how essential APIs are to accomplish a composable enterprise model. The key attributes and capabilities of such a composable enterprise model are: