The Platform Economy: Why APIs And Integrations Are Crucial

The platform economy, driven by the rise in big data, new algorithms, and cloud computing, has been on the uptick for years now.

Individual platforms are built on Web application programming interfaces (API). Described as the “glue that holds the Web together,” APIs enable a standard mechanism to share data and functionality.

Developer-facing models have emerged to support nearly every industry. As APIs become more and more ubiquitous, many executives are asking how they can best adopt a platform mindset to retain a competitive edge.

For answers, we turned to the experts on the forefront of API-first digital transformation. They shared with us the most important trends in the API economy, along with how CMOs and CTOs can apply them to their unique environments.

What Is The State Of The API Economy?

APIs are more than just a buzzword. Programmable Web, the largest public API directory, now catalogs over 21,000 public APIs. And, according to Cloud Elements’ “2019 State of API Integration Report,” 55% of businesses use APIs as a revenue stream.

Now more than ever, executives regard these integrations as the lifeblood for the enterprise. “Enterprises increasingly regard APIs as a strategic asset,” said Olaf Van Gorp, technical sales, Akana, at Rogue Wave Software.

Why? Well, the transformative nature of APIs breaks down barriers and streamlines interconnections between businesses. For Jason Woosely, vice president, commerce product and platform, for Adobe’s Experience Business, this equates to democratizing access to data.

“One area that I see tremendous growth is in the value of data APIs, bringing silos down and allowing rationalization of insights across disparate data stores,” he told CMO.com. “It’s the fuel behind the truly unified view of the customer we’ve all been chasing.”  

The API economy is also in a state of transition. Matthew Reinbold, writer of Net API Notes and maintainer of WebAPI.events, said he has noticed a move from “open” developer models to more partner-to-partner relationships. This trend, he said, is influenced by security concerns, cost ineffectiveness, and a lack of strategic vision in some public programs.

For Reinbold, the hidden power of APIs may actually lie in their ability to improve internal operations.

“It’s the internal decomposition, the reduction coupling, and coordination overhead where the real digital transformation lies. Highly modular architecture allows experiences, powered by APIs, everywhere on everything,” he told CMO.com.

What Are Some Benefits Of Becoming An API Platform?

Many benefits can arise from taking a dip into the platform pool. If executed correctly, API platforms can generate and sustain great economic value.

In addition to leading innovation in a particular vertical, platforms tap into a “potential to generate additional revenue by enlarging the ecosystem with new partners and new channels,” according to Rogue Wave’s Van Gorp.

Amazon Web Services, Twilio, SendGrid, Capital One, and many others use a platform model for revenue. Platforms flourish by empowering partners, Reinbold said. “A platform’s business model is an aggregation of returns,” he added.

Similarly, Adobe’s Woosely said he sees such ecosystem enablement as a primary benefit of platform models.

“Ecosystem enablement is by far the greatest benefit,” he said. “An empowered ecosystem takes your product into spaces you would never have identified, and that ingenuity drives growth and health of the community.”  

Woosely acknowledged many benefits, such as easy cooperation with legacy infrastructure and positive, long-term maintainability. “Nothing generates long-term benefit at the same rate as an investment in the ecosystem,” he stressed. “Allow the makers to make.”

Which Industries Depend On Ecosystem APIs?

The answer to this is simple: Every single one. Look behind travel, banking, manufacturing, automotive, IoT, and others, and you’ll see APIs are omnipresent.

“I would argue that it is impossible not to be impacted by APIs in today’s economy,” Woosley said.

Even if your software isn’t integrating directly with APIs, the underlying systems, suppliers, and distributors you rely on certainly do.

“[All industries] require programmatic communication at some point, even if it is only within itself,” Reinbold said.

Though APIs are clearly widespread, their maturity ranges from sector to sector. Areas influenced by recent regulation, for example, are still undergoing broad reform.

“We also witness API-driven digital transformation programs in other sectors, like health and even financial [with various open banking initiatives being the prime example]. Other sectors, like logistics, for example, are lagging behind somewhat, though major players here are conscious of the fact and starting initiatives to catch up,” Van Gorp said.

API Disruption And Future Evolution

Uber replaced taxis. Netflix usurped Blockbuster. Amazon Web Services democratized the cloud. The social graph drove the disruption that created the Facebook economy. In all of these instances, Web APIs had a defining role in challenging incumbents and disrupting established practices.

However, Van Gorp cautioned that such extreme digital disruption is rare. “In all likelihood, only a few players will be really successful here,” he said. Nevertheless, the precedent has been set.

What may be truly disruptive is the hidden potential API strategies have to increase internal agility. Reinbold expressed how “APIs are challenge existing organizational and operational structures,” bringing lean DevOps principles, such as infrastructure-as-code and continuous integration/delivery pipelines, to fruition.

But APIs are simply a doorway; they require truly innovative back ends to effect real transformation. Such internal streamlining efforts may be the next battleground for competing digital services.

“Disruption from APIs often happens without the API at the center of the innovation: The API unlocks the capability to innovate, and so attribution tends to miss the underlying technology or platform unlock,” Woosely noted.

How Can APIs Be Used In B2B Partner Strategies?

Perhaps the most interesting prospect for executives is that APIs offer a lean, strategic means to effectively integrate partner systems.

Of course, B2B integration is an old practice. However, as Rogue Wave’s Van Gorp described, “what is new is that APIs offer a single, modern, open standards-based way to integrate, eventually replacing legacy protocols.”

The most important element of the platform economy is standardized, API-based communication: Gone are the days of custom code for partner integrations. With standard REST APIs, which are an architecture style for designing networked applications, “everything [typically] ‘speaks’” HTTP, securing and monitoring API gateways have vetted playbooks and standards [like OAuth], and there’s a mature talent pool available,” Reinbold said.

The end result of such optimized interoperability is a more agile, repetitive transactional ecosystem. For Adobe’s Woosely, B2B efficiency can only reach these goals through APIs.

“For B2B, APIs replace your manual processes, enhance your visibility into real-time performance, and reduce latency and responsiveness. They are a tremendous source of efficiency, but also unlock new capabilities,” he said.

What Are The Major Takeaways For CMOs And CTOs?

APIs have historically been a deeply technical subject. However, a revolution has taken place, beckoning C-level executives to seriously consider how their infrastructure is both consuming and providing APIs. Here’s what to know:

• APIs are big business: Once relegated to the realm of startups, APIs have made major enterprise inroads. “Over recent years, APIs have moved center stage, from small-scale integration projects to business-critical ecosystem,” Van Gorp said. APIs can be treated as products in their own right, enabling both ecosystems and innovative partnerships to emerge.

• APIs help realize multiple digital transformation efforts: Technical leadership is feeling pressure to deliver digital transformation while maintaining governance. According to Reinbold, “APIs, with their standardization of message exchange and centralized points of control, can play an essential role in both objectives.”

• Security is paramount to platform success: One element of API strategy that is often overlooked is security. Olaf recommended a “security-first API strategy,” stressing, “as business success and continuity become increasingly dependent on the API ecosystem, security becomes of paramount importance.”

• An API platform investment is an investment in the future: Architects must invest in long-lasting infrastructure. With roots extending to classic software design, APIs have a storied record. Paired with REST design and the ubiquity of the Web and HTTP protocol for transferring data, APIs are set to stick around for some time. Experts acknowledged the predominant use of APIs in machine learning and AI services, signaling their continued use for innovative, forward-thinking technologies.

• Durable investments are platform investments: Perhaps the most sound advice came from Woosely, who simply stated that “durable investments are platform investments.” He cautioned executives to “architect your own solutions for dynamic implementations, select vendors that invest in interoperability, and to challenge yourselves to think outside the box about data insights, as connected systems are rich with actionable information.”

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