With the turn of the year I thought it might be an appropriate time to take stock of where we are in the API Economy journey.  This is intended to be a point in time macro view.  Of course, your individual company may be just at the start of your API journey or perhaps ahead of the curve.


Assessment

Macro-Trends

Let’s start by looking at some major company/IT initiatives that are driving the use of APIs:
Tech Trends

  • Agility – Businesses have always tried to improve time to market but APIs and Microservices enable the possibility to increase agility far beyond what was previously possible. APIs and Microservices provide rapid building blocks that shield the business offering developers from the complexities of back-end systems and provide rapid deployment of new offerings.
  • Multi-Cloud / Hybrid-Cloud – Movement to cloud is driven by a business cost factor and the promise of increasing agility. Still, many systems remain on premise (perhaps temporarily or perhaps not).  Companies are recognizing that different clouds have different strengths and cost equations may drive the desire to move or use multiple different clouds.  Avoiding vendor/cloud lock-in is also a consideration.  With all of this, the need for transparency of the location of IT systems is critical and the need to deploy, manage, and integrate systems that cross multiple locations – multiple clouds and on-premise – is an absolute requirement.  The use of APIs and Microservices enable the flexibility to move resources to their best fit location without affecting the consuming application and shield the calling application from the location of these back-end assets.
  • Industry Standards and Regulatory Requirements – In some cases industry or government organizations are mandating the use of APIs or at least strongly encouraging this as a preferred option. In the EU, PSD2 is a reality and open banking initiatives are also underway in Canada, Australia, Mexico, and other countries.  In the USA healthcare initiatives (around FHIR) are requiring APIs, and in other geographies government open data initiatives are driving the use of APIs.  Also, in the EU GDPR/Privacy legislation went into effect in 2018.  While not directly requiring APIs, API capabilities to limit access, audit, and secure resources can play a big part in enabling compliance.  There are many more examples.  Expect that industry adoption and government regulations will continue to drive API use across more geographies and industries moving forward.
  • Use Cases – Every business may choose unique use cases appropriate for their initial projects. I have identified use case examples for APIs in every industry.  Most industries are at least starting to explore the use of APIs with some further ahead.  As initial use cases, the most popular categories for initial projects are mobile (or UI), data access, and sharing assets across IT.  However, social media, IoT, Partnering, and Public API use cases are also very common.  If your business is not at least exploring these use case scenarios, then you are behind.  Some businesses are exploring API Management solutions with no defined use case or strategy.  Without requirements, choosing a solution can lead to poor results.  See “The 7 Biggest Mistakes Companies Make on their API Initiatives”.

 

Challenges


person jumping over obstacle
Not everything in relation to APIs is rosy.  I see two key areas where API adoption is still challenged:

  • Business Involvement – still far too often I see the API initiative treated as an IT-only concern. These companies are missing out on the largest value of the API potential and may become disillusioned.  As an IT integration technology there are some benefits to ease of use, security, analytics, etc. but the business is missing the point of revenue generation, time to market, customer focus, etc. that can be enabled through APIs.  Starting in IT is okay but move forward quickly to business solutions or your competition will and you will be playing catch up.  See “The Biggest Impediment to API Economy Growth is…?
  • Monetization – The problem with monetization is the lack of understanding as to what monetization is. There is an expectation (and incorrect definition) that businesses will directly charge for the use of their APIs.  This is only one (not very common) business model.  However, there are many additional business models, and much of the value and revenue is obtained through these other monetization models.  Companies that go into API initiatives believing that directly charging for their APIs is the goal often are disappointed.  See “API Monetization – What Does It Really Mean?”.

 

Both challenges are easily overcome if the opportunity is correctly understood.

 

“It’s In There”
welcome to the future

You know a technology has arrived when it is assumed to be there, and the focus is on the higher level function that uses it.

  • Digital Business / Digital Transformation – This is the big one for 2019. Yes, it has already attracted lots of buzz, but wait until you see the focus this gets this year! “Digital Transformation – Becoming a Digital Business” is about customer centric business offerings that pull information from everywhere – your IT systems (on the cloud and on-premise), social media, partners, AI, contextual events, etc.  How is all this information going to come together?  APIs are the key interface with microservices and other integration capabilities also required.  In my opinion, this is the business orientation that the API Economy needed to pull it out from IT-only usage to a larger business-led purpose.
  • AI – Businesses are starting to imbed Artificial Intelligence (AI) capabilities into their business offerings (see above). How do they do this?  Through APIs.  Businesses are not creating their own AI capabilities, they are consuming these capabilities using API interfaces.  See Watson APIs from IBM as an example.
  • Blockchain –Industries are looking at Blockchain technologies to manage multi-party ecosystems involved in providing customer solutions. Companies put entries onto a blockchain and read entries from the blockchain.  How do they do this?  APIs are the most common method.

 

Where is this going?


crystal ball
Predicting the future is an inexact science at best.  A few years ago, along with several colleagues, I wrote the API Economy Journey Map which is a maturity model view as to how the API Economy will evolve.  I am still happy with this prediction.  Initial stages define IT led scenarios with experimentation and primarily internal API users.  Subsequent steps involve the business as partners in the initiative and some business value orientation.  This then moves to a business-led initiative with IT support (as the web is today). Successful digital transformation initiatives may take us to this stage.

 

Looking further out we see companies focused on market expansion and new business models.  Companies using APIs form rapid partnerships and industry and cross-industry ecosystems.  Eventually this becomes more dynamic and predictive.  We called this “Innovating with Predictive Transformation”.

 

Will all of this occur?  Well, we are certainly seeing the initial stages play out as predicted.  We will have to wait and see what this year and beyond bring!

 

hAPI New Year to you all!

 

To understand more about IBM’s thoughts on the API Economy visit the IBM API Economy website.  IBM API Connect is IBM’s complete foundation to Create, Secure, Manage, Test, and Monitor APIs.  You can find more information about IBM API Connect at the API Connect website.  And you can also experience a trial version of API Connect.

 

If you have questions, please let me know.  Connect with me through comments here or via twitter @Arglick to continue the discussion.

3 comments on"State of the API Economy – January 2019"

  1. a very valuable “State of the Union” statement on the API Economy

  2. Mark Masercola January 04, 2019

    As usual Alan– you continue to be the best source on the topic of APIs. Thank you for continually sharing your knowledge. hAPI New Year !:)

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