The API economy is simply the use of APIs in the digital economy. APIs help companies embarking on a digital transformation strategy to achieve integration and deliver better and new services quicker.
APIs make it easier to create better user experiences, share data, connect people, systems and much more. APIs used to be relegated to software professionals working to overcome incompatibilities within differing software platforms.
Now, APIs are a vital component of enterprise solutions that can positively impact the bottom line. In fact, 71% of large organizations plan to use more APIs.
Benefits of an API economy
An API economy has several benefits including:
Get to market faster: APIs can help you accelerate product delivery and build innovative features because you’re not focusing on building everything for your application.
Better data access/use: APIs enable data to be more flexible, accurate and accessible.
Increased revenue: APIs let you create a better customer experience, can integrate internal applications and more.
Risks of an API economy
On the flip side, an API economy can also have risks, including:
Access to APIs: Controlling who has access to APIs can be difficult. It’s vital that the API is secure and that the backend data is protected.
API management: Because APIs can be used in several applications and in several ways, managing them can become difficult and cumbersome.
Data hostage: Another potential downside of the API economy is the power held by “aggregator” firms. Once they aggregate a critical mass of global digital users, such firms are in a position to dictate the terms of data access and API usage, which can confine businesses whose apps depend on these APIs for one function or another.
API economy examples
There are API economy examples everywhere you look. Over 40% of large organizations use at least 250 APIs. Google Maps lets people find your location without having to build your own system. The UberEats API lets restaurants deliver food to customers without building their own service.
Take Uber, for example. This simple mobile app disrupted the entire transportation industry by combining public APIs with their proprietary processes. This ride-sharing company started by consuming the API of Google Maps without having to build its own mapping system.
Another example is McDonald’s partnering with Uber Eats to get food delivered to hungry customers without deploying its own delivery services. Or Twilio, a platform that now runs the telecommunications infrastructure for major corporations. All this is possible due to APIs. This exchange of value is what makes up the API Economy. It’s about how companies can work together to create more value than either of them could independently.
The beauty of the API economy is that it is not only for tech companies. Extending this data-sharing structure to non-software companies unlocks a lot of possibilities for how business can be built and operated. Every company is becoming a software company, extending the API economy into various industries.
Participating in the API economy requires an API strategy. Learn about 4 essential components of an API program to go from vision to successful execution.