"One of the great things about the API economy is that it is based on existing business assets.... What were assets of fixed and known value suddenly become a potential source of seemingly unlimited business opportunities."
-- Giancarlo Succi and Tadas Remencius, Guest Editors
Opening Statement
If you look at history, innovation doesn't come just from giving people incentives; it comes from creating environments where their ideas can connect.
-- Steven Johnson
One way of looking at the API economy is to consider it as a combination of technological advances and new social and cultural trends that merged to form an interconnected environment ripe with exciting business opportunities. At the center of this fertile ground are Web APIs, which connect providers and consumers (developers) into a symbiotic ecosystem. In a sense, APIs connect companies much as social networking sites connect people. However, where the latter are driven by social needs, API ecosystems are based on a win-win scenario in which benefit is gained not only by providers and consumers, but also by end users, who receive more and better products and services targeted at context-specific user experiences and expectations.
Innovation is the specific instrument of entrepreneurship ... the act that endows resources with a new capacity to create wealth.
-- Peter Drucker
One of the great things about the API economy is that it is based on existing business assets. There is no need to design new products or come up with new services -- companies can simply capitalize on their existing core business strengths. This potentially allows any company, regardless of its size or actual business, to join in the new economy by exposing some of its assets to its partners or the general public. What were assets of fixed and known value suddenly become a potential source of seemingly unlimited business opportunities.
The role of API ecosystems makes the API economy quite different from a typical business philosophy. Companies are no longer in direct control of the outcomes of their actions -- the impact of API consumers on the success of the exposed APIs is simply too great. No matter how well producers prepare or how many investments they make, the ultimate factor in the outcome of an API program is the API consumers and their ability to develop innovative and timely products and services. In fact, both parties depend heavily on each other, while having a relatively low level of direct contact and little control over each other's actions. The advantage of this arrangement is that it offers a lot of flexibility and prevents tie-ins on both sides: providers generally can change or stop an API program quite easily, while consumers have the freedom to switch to alternative APIs from other providers at low or zero overhead cost.
Innovation is taking two things that already exist and putting them together in a new way.
-- Tom Freston
On the API consumer side, the API economy is all about innovation and rapid time to market for new solutions. Even fresh startups with zero starting capital can quickly produce new mobile apps by combining multiple existing APIs in innovative ways or applying them in new contexts.
We can see innovation not only in developed solutions and services, but in business relationships as well. New business models centered around APIs are appearing and evolving at a fast pace.
The late Steve Jobs stated in one of his speeches that "innovation distinguishes between a leader and a follower." It is interesting to consider how this applies in the context of the API economy. Here innovation becomes a shared commodity that goes in a continuous cycle from producer to consumers and back again. So who is a leader and who is a follower in this case?
If anything can be said for sure, it is that the time of the API economy is now, and an interesting time it is. The potential benefits are many, and there are plenty of success stories out there. However, which of those benefits are achievable by specific companies and in what ways remains unclear. This issue of Cutter IT Journal explores these topics and aims to help companies answer the question of how the various benefits offered by the API economy can be unlocked.
We begin with an article by Cutter Fellow Israel Gat and his coauthors, who take a critical look at some of the main selling points encountered amidst the hype surrounding the API economy. The authors first discuss whether the API economy is really a new type of economy and suggest that there are, in fact, a variety of different economic models in play -- some old and some new. They then look at the current state of the API economy, taking note of its rapid growth. They elaborate on potential future directions, pointing out the risk of market saturation, and conclude that now is probably the best time for businesses to invest in the API economy, if they haven't done so already. Gat et al. continue with an examination of how the API economy affects human innovation and whether it really serves as a driving factor. The authors show that "human innovation" is a somewhat misleading term, arguing that it would be more accurate to talk about "human creativity" in this context. Finally, the authors examine the claim that the API economy acts as a leveling factor for companies of different sizes. While they agree that the API economy provides opportunities for smaller companies (particularly in the role of consumer), Gat et al. highlight the other side of the coin -- the advantages that big players have when it comes to marketing their APIs and enforcing provider-favorable SLAs and API business models.
In our next article, Chandra Krintz and Rich Wolski present their strategy for implementing an API governance platform for managing, unifying, delivering, and composing APIs in a commercial setting. They advocate the use of cloud-based technologies and emphasize the need for consistent control over the APIs, uniformity of operations and management features, as well as standardized access control. The authors draw examples from their experience with such a platform and focus on the key capabilities and functionalities necessary for effective API governance.
Christian Schultz, our next author, takes an in-depth look at how traditional companies -- so-called digital immigrants -- can use an API-centric approach to achieve significantly faster digital growth and better cope with the challenges of the digital marketplace. He highlights the importance of embracing innovative business practices and suggests companies focus on creating new and convenient customer experiences. Schultz then discusses the typical advantages that an API program offers and follows up with API growth opportunities. He concludes with a look at how an API-centric approach can mitigate certain risks of digital business and ensure that the core team remains intact, thereby maintaining critical know-how within the organization.
In the issue's fourth article, the two of us present a methodology for API management based on the ITIL framework. We describe a 10-step approach that corresponds to the service strategy process in ITIL and is targeted at the creation of a new API program. Our focus is the business side of APIs, starting from high-level business goals and available business assets. We offer both top-down and bottom-up approaches to identifying which particular business assets should be exposed as APIs and in what way. In the article, we show how organizations can make use of business cases to form an initial API business strategy, identify target consumer (developer) groups, and come up with benefits for the consumers who adopt the exposed API. The described framework also includes risk, budget, and ROI assessment and ends with a construction of API marketing and consumer support strategies.
We wrap up the issue with an article by Chuck Hudson, who delves into common pitfalls that occur when Web APIs are used in a mobile environment. He identifies seven typical challenges faced by API providers and consumers, ranging from connectivity and optimization problems to authentication flaws and licensing limitations. Hudson accompanies each challenge with a short description of known solutions for mitigating the issue and gives examples of typical approaches currently used in the industry.
As you get into this issue, remember that the API economy is a new phenomenon that is evolving at a fast pace. Therefore, don't take anything presented in these articles as a strict rule or a certainty. Rather, use the information provided here as general advice gained from the experience of others and apply it in your own context as you see fit. Even though all signs point to the new API economy staying here for a long while, only time can tell where it will lead us. After all, unpredictability is an inherent feature of innovation.
To conclude, we would like to invite you to visit www.apiwisdom.com, our API economy research initiative, which includes an open API for analyzing RESTful APIs.
ABOUT THE AUTHORS
Giancarlo Succi is a Senior Consultant with Cutter Consortium's Agile Product & Project Management practice. He is also Professor of Software Engineering and Director of the Center for Applied Software Engineering at the Free University of Bolzano-Bozen. Dr. Succi's research areas include Agile methodologies, open source development, empirical software engineering, software product lines, software reuse, and software engineering over the Internet. He is the author of four books and more than 300 papers published in international conferences proceedings and journals. He can be reached at gsucci@cutter.com.
Tadas Remencius is a Researcher at the Free University of Bolzano-Bozen. His research interests include Web APIs, empirical software engineering, software and team metrics, teamwork in software development, data visualization and interpretation, and experience management. Mr. Remencius holds a master's degree in computer science from Vilnius University (Lithuania). He can be reached at Tadas.Remencius@unibz.it.
