Introduction
Introduction
In today’s increasingly interconnected world, application programming interfaces (APIs) are becoming the digital reflection of an organization. The API economy – the commercial exchange of business functions and capabilities using APIs – has captured the attention of not only software developers, but strategists, marketing leaders and partnership executives seeking to move to the next level of marketplace differentiation.
Embracing the API Economy is a mandate for embarking on digital adoption. If you care about rapid customer acquisition, reducing customer churn, seizing new business growth opportunities, and improving business performance in a difficult economic climate, this paper provides a prescriptive guide on getting started and sustaining your company’s impact in the API Economy. It also explores the API experience and provides guidance on managing APIs as products and services.
Market Forces
Market Forces
In today’s market, companies are compelled to provide access to their systems and data. Clients expect it and employees need it in order to do their jobs. You can accomplish this with the use of APIs. Here are some of the market forces driving companies to begin a journey into the API economy.
Disruption
The market is changing rapidly, not only because of the introduction of new data streams and systems, but also because incumbents are driving disruption. Companies need to make sure they change with the market. They must deliver new digital capabilities quickly, easily, and securely, both to clients and within their own enterprise.
Reaching new customers and markets
Companies want to grow and gain more revenue, so sometimes they must be able to reach new customers and markets. Reaching new customers and markets sometimes takes more than the “business as usual” models. One way to do this is to expose assets, such as data and transactions, in order to drive sales through APIs. Driving sales through APIs, whether with new customers and markets or with current ones is where API Monetization can also come into play. API Monetization is where APIs are used to drive up revenue.
Customer expectations
According to a recent study published by the IBM Institute for Business Value, 68% of C-Suite executives expect organizations to emphasize customer experience over products. New technologies are changing the way that customers interact with businesses. They expect to be delighted. With the prevalence of cloud, cognitive, mobile, and IOT technologies, integration through APIs is key to new customer experiences.
Regulations and compliance
Governments and industries are beginning to look to APIs to standardize cooperation and drive innovation. Because of this, they have begun to create regulations that guide the way that business takes place. Some of these new regulations that might influence your API strategy are PSD2 for European banking services, FHIR for healthcare providers, and other guidelines around the world.
Securely connecting back-end systems to front-end developers
Developers are able to gain new insights on customers when they use APIs. With these new insights, developers are able to iterate on the experiences that customers are being given. Through the use of internal APIs within companies, developers are able to bring together the data and capabilities of their back-end servers and systems within their front-end design, leading to better customer experiences.
Securely exposing data and services across multiple clouds
Companies have rapidly adopted a multicloud approach, either by default or as a deliberate approach. Workloads and business requirements across different departments are not the same. For example, public cloud adoption is rising fast for departments like marketing, but traditional IT and mission-critical workloads are more suitable for a private cloud environment. The multicloud reality is driving the need for APIs as a simple and secure way to expose data across multiple cloud environments.
Organizations realize they can no longer compete on their own. In fact, almost 70 percent are looking to increase their external partnerships.
Organizations realize they can no longer compete on their own. In fact, almost 70 percent are looking to increase their external partnerships.
-Evolution of the API Economy (IBV Study)
Role of API Economy
Role of API Economy
The API Economy is the commercial exchange of business functions, capabilities, or competencies as services using web APIs. APIs drive the digital economy and companies that do not embrace them risk getting left behind due to competitive pressure and potential market disruption.
Companies embrace the API Economy to cultivate innovation. APIs enable companies to innovate internally by making services accessible across lines of business. APIs also ensure that companies are simple to do business with and enable open platforms for partners and third-party developers to tap into external innovation.
Benefits of using APIs:
There are numerous benefits that demonstrate why companies should embrace web APIs and become active participants in the API Economy:
- Grow your customer base by attracting customers to your products and services through API ecosystems. Use API ecosystems to extend your business capabilities and products to the widest possible audience. Amazon, Facebook, and Salesforce.com are examples of companies who created platforms for their capabilities while promoting third parties, accelerating loyalty, and encouraging customer growth.
- Drive innovation by capitalizing on the composition of different APIs, yours and those of third parties. The merging of capabilities using APIs offers companies opportunities to take advantage of emerging trends and the convergence of mobility, social platforms, analytics, contextually aware computing, Internet of Things (IoT), and wearable computing.
- Improve the time-to-value and time-to-market for new products. The API Economy has changed how we think about building applications (think apps), and how we deploy software (think cloud). The largest impact of this change for business is speed: Business processes and data are no longer locked inside applications. The result is the death of data and application silos.
- Improve integration with web APIs. Using APIs for sharing data and business functions between endpoints (such as applications, devices, and websites) creates the opportunity to lower the cost and time for integration for both present and future scenarios.
- Open up more possibilities for a new era of computing and prepare for a flexible future. The API-centric “as-a-service” delivery model, is disrupting the consumption of business services as cloud disrupts the IT consumption model. Embracing the API Economy allows companies to both prepare and take advantage of the next generation platform, building apps at the edge of the enterprise, and positioning companies to open up possibilities.
What do you think?
Is the API economy only suitable for certain industries?
Agree
Although certain industries, like retail and banking, have taken the lead and are innovating rapidly with APIs, all industries have started to embrace APIs.
Discover API use cases for every industry Continue to learn more about industry specific examplesDisagree
Correct. Innovation in the API economy is taking place across most major industries and there are numerous use case examples to learn from.
Check out API use cases for every industry Continue to learn more about industry specific examplesIndustry specific examples
Industry specific examples
Industry-specific API ecosystems are growing rapidly in several industries, such as retail, financial services, telecommunications, and healthcare. These API ecosystems allow companies to expand into new customer bases and niches that they might not be able to reach on their own.
A good case for API's in retail lies with product and physical store-front discovery. APIs have become key to ensuring consistent shopping experiences across multiple retail channels. The most common retail services exposed as APIs include: store locator services, which help online buyers discover physical storefronts; product catalogs, which shoppers search for and learn more about products and services; and order services, which help users place and check the status of their online orders.
Vendor management in retail and consumer products offers a yet more stronger case. On-boarding new suppliers and integrating them into corporate structures is a challenge for companies and the vendors being on-boarded. Managing multi-tier partners adds another layer of complexity. APIs are simple and designed for self-service, removing much of the on-boarding effort. Using APIs to expose catalog data, integrate supplier data into current workflow solutions, and send electronic invoices and business documents to all business partners can shorten the on-boarding cycle.
In financial services and banking, several banks are exposing various APIs and services. Examples include APIs for ATM and branch office locators, foreign exchange rates for travel apps, deposit and lending rates, loan eligibility calculators, bill presentment services, and, of course, access to account data and payments. Open Bank Project3 is an open source API and app store for banks. The objective of the project is to accelerate the adoption of digital products by banks in the API Economy.
In another example, Nedbank wanted to participate in the application programming interface (API) economy. The bank’s IT department was under pressure to support applications on a wide range of mobile operating systems and digital platforms. The bank also wanted to build channels to identify new customers, increase engagement with existing customers and generate new partnerships.
“We wanted to create new, highly capable and secure APIs and, in the process, create new distribution channels. We knew we had to join the digital economy or we would be left behind.”
-Sewis Van Wyk, Enterprise Architecture Executive at Nedbank
In a commissioned Forrester Consulting global study, organizations that prioritized modernizing systems of record have a 1.7x higher rate of digital transformation success than those who did not.
Michigan Medicine, academic medical center of the University of Michigan, had several IT groups that operated as separate silos without an efficient and secure way to share information. The medical center needed a solution that could securely consolidate APIs under one portal.
We now have the capability to truly drive change in the business and IT. It’s no longer a discussion of should we do APIs but how.
We now have the capability to truly drive change in the business and IT. It’s no longer a discussion of should we do APIs but how.
-Ram Palkodaty, Technical Lead, Health Information Technology and Services, University of Michigan
What do you think?
Our business is leveraging APIs for innovation with cognitive solutions. We are managing our API initiative with ecosystem centric behavior and motivation. Our processes for creating and managing APIs are automated.
Agree
It’s clear that you and your team are working well in the API economy. Now it’s time to turn your APIs into a crucial and fruitful part of your business.
Discover API best practices that we have learned from working with clients Continue to learn more about challenges associated with API'sDisagree
It looks like you and your team are just getting started in the API economy. It's a great time to learn what works (and what doesn't) for your company.
Get started in the API economy Continue to learn more about API economy challengesChallenges
Challenges
Beginning any new venture can be riddled with challenges that can seem overwhelming, and beginning your journey into the API economy is no different. Below are some of the most common challenges that occur in the API economy as well as while implementing your API initiatives.
Security at scale
While APIs can provide easy access to innovation partners, without adequate precautions they can expose their digital enterprise assets to intruders. APIs provide a full course of services available for a hacker’s appetite that can be used together in interesting and often unintended ways. This has enabled new attack vectors that are exploited by myriad devices ranging from web applications to mobile devices to Internet of Things-enabled devices.
Multicloud security
There's a specific challenge with regards to scoring workloads and protecting data in a consistent fashion across private clouds and diverse public cloud providers. This may leverage a standard mix of technologies, but does so using different models and paradigms specific to a multicloud environment.
Overexposure
There are a range of implications associated with sharing data that previously resided within organizational boundaries. Not only does the information exposure via APIs have significant ramifications on security and privacy, its unintended uses by third parties creates significant competitive threats. For example, the mining – or “scraping” – of inventory levels or the tracking of historical price trends by a competitor turns an API into a weapon against the company.
Technical constraints
Once adopted, an API can place significant strain on the existing technology platform, which must be able to support a high volume of calls. If companies don't have the technological capabilities to maintain adequate levels of reliability, security and functionality, developers can become disillusioned easily.
API maintenance and versioning
When multiple groups within an organization create an API, they often find it difficult to track usage and maintain consistency. Related challenges include the constant updates APIs must undergo to take advantage of new functionalities. Organizations lacking clear, internal guidelines for managing API taxonomy, version control, documentation, and common platforms and processes have increased maintenance costs and slow development.
Ease of use
If an API presents a developer with a significant learning curve, there will be challenges with keeping the developer engaged and willing to continue to invest their time and energy to build applications. Ease of use is critical to widespread utilization and adoption of an API.
Lack of skills and roles
The API economy has implications for both an organization’s skills and cultural mindset. For example, the skills needed to oversee the entire lifecycle of a successful API initiative are often different from the technical capabilities needed to architect and code the actual APIs themselves. Many companies who are just beginning on their API journey lack these skills and the development of roles that use these skills.
Lack of analytics
The absence of feedback mechanisms to capture customer usage or investment makes the allocation of costs associated with API development and operation difficult.
By addressing these challenges with the right set of capabilities and organizational practices, your company can differentiate itself and avoid the pitfalls that have afflicted other organizations.
High-performing organizations have automated 30% more of their deployment processes than low-performing organizations.
High-performing organizations have automated 30% more of their deployment processes than low-performing organizations.
Source: 2017 State of DevOps Report, survey of 3200 cross-industry, global IT professionals, presented by puppet and DevOps Research and Assessment (DORA).
What do you think?
OIs API security one of the major concerns that is keeping CxO's up late at night?
Agree
Correct. API security is often highlighted as one of the biggest challenges and major concerns for API initiatives.
Learn how API's are secured end to end Continue to learn what it takes to be successfulDisagree
It looks like you and your team are just getting started in the API economy. It's a great time to learn what works (and what doesn't) for your company.
Get started in the API economy Continue to learn what it takes to be successfulCapabilities Required to be Successful
Capabilities Required to be Successful
In order to embrace the API economy and the numerous benefits of APIs as explained earlier, it’s important to view APIs not just a development tool but also as products. Organizations that build APIs have to consider the needs of their customers and how to make their APIs compelling to them. Organizations that view their APIs as products, rather than just as technology, can leverage successful patterns and mechanisms of product management.
For example, just as with any other products, APIs require a lifecycle and a governance model to enforce that lifecycle. An API management platform provides a comprehensive set of capabilities to cover the entire lifecycle of an API, from its creation to deployment and management. It should be an integrated creation, run time, management, and security foundation for both business grade APIs to expose core business assets and microservices to power modern digital applications.
The key capabilities for an API management platform include but are not limited to:
- Automated, visual and coding options for creating APIs: A set of tooling to rapidly design, model, develop, test, and deploy APIs in an automated continuous delivery model.
- Polyglot runtime support for creating microservices: Polyglot runtime support is key to enable innovation and agility within different programming models required by different use case scenarios. Support for Node.js and Java runtimes, among others, is essential.
- Polyglot runtime support for creating microservices: PSLA in API Management is backed by platform characteristics, such as performance, scalability, load balancing, and failover.
- Lifecycle and governance for APIs, Products and Plans: Productizing the APIs, packaging and cataloging them, and tracking their lifecycle are all activities that will help the effective management and control of APIs as they are deployed.
- Access control over APIs, API Plans and API Products: Another key function for security is managing the access to APIs at various levels of granularity involving users and user groups in a consumer or provider role.
- Advanced API usage analytics: Monitoring and analyzing API usage metrics from different user perspectives and roles help in providing a feedback loop to the API owners and developers for future improvement.
- Customizable, self-service Developer Portal for publishing APIs: Publishing and socializing APIs through a user-friendly portal is crucial in promoting the access to your core business and to the market reach of your brand.
- Policy enforcement, security and control: • A high performing and scalable API security gateway is imperative in any API management platform, mainly to protect access to your back-end systems.
There are four major stakeholders in an API lifecycle, and any framework that addresses their individual concerns provides the comprehensiveness needed in an effective API management model:
- The application developer is the consumer of APIs. This person discovers and subscribes to the API that will be included in the business logic of the application.
- The API developer is the creator of APIs. This person designs and implements the logic behind the API to deliver the proper data payload from the back-end business assets or services.
- The API owner/product manager is the designated owner of the API and the business asset that is exposed through that API.
- API IT operations lead is the IT owner of the API infrastructure, both the run time and management of the infrastructure.
Serving those four major stakeholders requires an effective API management platform. There are at least six major components to an API management platform. Two of them are solid and resilient runtime components, and the other four are UI components that address the needs of the stakeholders personas described in previous section:
- The developer toolkit is an SDK for API developers to model, create, and test APIs locally and use Cloud DevOps services to automate API build-deploy tasks.
- The microservices polyglot run time executes API and microservices business logic in different programming models, for example Node and Java. This run time usually includes a UI console for IT operations staff to perform unified ops and management across the runtime instances.
- The API management component enables API owners, API developers, and business users to catalog, package and publish APIs to the Developer Portal.
- The API gateway visualization is usually a UI tool for API owners and developers to obtain dashboard views of API usage metrics for monitoring and analytics purposes.
- The API analytics component enforces runtime policies to secure and control API traffic.
- The Developer Portal is a web interface for app developers to discover APIs published by API owners and subscribe to use them in digital applications.
In addition, in a multicloud world with new, advanced deployment strategies, a proper API management platform requires the ability to run components across different clouds. For example, to maximize security and performance, you need to be able to run your enterprise gateway on any cloud and then cluster those gateways into a single deployment. Doing so means you can co-locate your gateway with the backend you are exposing.
These capabilities and architectural components are instrumental for organizations to establish a governance model for your APIs and the right platform to maximize the value out of their APIs. These capabilities also address the challenges that were enumerated in the previous section.
Best Practices
Best Practices
In order to compete successfully in the API-driven economy, companies need to create effective practices for creating compelling external experiences and also build internal capabilities.
Designing engaging API experiences allow organizations to differentiate themselves in an increasingly competitive marketplace. It also ensures that APIs appeal to developers and reflect the organizations core messages and values. Managing an API as a product to address elements of the entire API lifecycle, from inception to retirement, in much the same way a company oversees development and ongoing support for any physical good or digital service.
Organizations striving for a successful API experience for their consumers should consider the following best practices:
Focus on the API brand
Understand how API-related performance promotes or inhibits overall corporate perception in the marketplace. Ensure that API-related materials – for example, developer websites, documentation and training programs – are consistent with your corporate standards and practices. Monitor customer perceptions in the marketplace and address any issues.
Use design-thinking principles to craft the API experience
Help users “understand the possible” regarding API usage and value. Capture the customer journey to understand users’ thoughts, actions and feelings during the API adoption journey. Start small and create incremental experiences, adding functionality over time.
Create your API community and grow champions with superior experiences
Develop an appealing “home base” that provides users with a place to go for new innovations, technical updates and other experiences that create stickiness. Cultivate advocates who are willing to share insights and enable others on the adoption journey. Engage in a dialogue with the community to capture innovations and address concerns.
For companies looking to quickly ramp up their API management capabilities, consider the following best practices:
Apply API standards to act quickly and reduce complexity
Develop internal catalogs to make it easy to find APIs and supporting documentation. Use common platforms and processes to improve development speed and reduce maintenance costs. Engineer APIs that address reliability, scalability and security from the beginning of the development process.
Build an API coalition within the organization
Incorporate product development skills into your API developer organizations. Build API awareness and competency into supporting disciplines to reduce legal and compliance risks. Provide education to internal and external developer communities on API development and use.
Articulate and measure API benefits
Develop a clear framework that outlines expected API benefits. Closely monitor API usage to understand customer behavior as well as potential technical and security issues. Incorporate usage into future business case discussions.
By following these best practices, an organization will be ready to support the API lifecycle and build out the capabilities needed to execute on their API strategy.
By giving our agents real-time insights into each customer’s needs, we’re creating the basis for a more satisfying customer experience.
By giving our agents real-time insights into each customer’s needs, we’re creating the basis for a more satisfying customer experience.
-Tetsuhiko Saito, Chief Marketing Officer, Mizuho Bank Ltd.
Steps to Get Started
Steps to Get Started
While the API economy allows organizations to reimagine their business processes, create unique customer experiences and develop new products and services, many are still starting their API journeys. As companies consider their roles in the API economy, here are 3 steps to started:
1. Learn more
This book is your guide to applying the power of APIs to business challenges from changing business models to embracing a world of devices.
IBM IBV Studies on API Economy
The first report, “Evolution of the API economy,” examines the forces driving API usage, as well as the potential business models and monetization strategies APIs can help create. The second report, “Innovation in the API economy,” explores the API experience, the use of APIs as a new, dynamic form of product offering and underlying API capabilities.
IBM Redbook on the API Economy
This IBM Redguide publication illustrates how to get started and gain value with the API Economy. It is about creating a digital platform that allows your company to improve its brand loyalty, reduce customer churn, improve business performance, increase revenue sources but most importantly, increase client value.
2. Talk to an expert
You can schedule a 1:1 consultation with one of our API technical experts.
3. Try creating, securing, managing, and socializing APIs for free
IBM® API Connect is an API management solution from IBM that offers capabilities to create, run, manage, and secure APIs and microservices, thus managing the full lifecycle of APIs for both on-premises and cloud environments.
The latest version, IBM API Connect 2018.1, delivers enhanced capabilities for market-leading IBM API management solution, with the ability to deploy in complex, multi-cloud topologies and enhanced experiences for developers and cloud administrators at organizations.
You can try IBM API Connect for free.
Here’s a tutorial to get started to create your first API.
IBM DataPower Gateway is a single multi-channel gateway platform to secure, integrate, control, and optimize delivery of workloads across multiple channels, including: mobile, API, web, SOA, B2B, and cloud.
The latest version, DataPower Gateways v7.7, delivers support for the next-generation physical appliance, increased integration for the DataPower Operations Dashboard, and the new multi-cloud hybrid architecture IBM API Connect 2018.1.
You can try IBM DataPower Gateway for Docker.
Here’s a tutorial to get started to deploy your first gateway.
Check out these resources for more details on IBM API capabilities.
Get Started in the API Economy
Now that you know your business needs to be a part of the API Economy, get involved.
IBM Redbook on the API Economy
Improve your brand loyalty, reduce customer churn, and improve business performance.
Evolution of the API Economy
Check out the IBV study around the formation of the API Economy.
Mizuho Bank Ltd. Case Study
Real-time analytics helps contact center agents serve customers more effectively.