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How APIs Can Help Power Your Digital Transformation

What do SaaS providers, cloud services, and the latest smart devices all have in common? They all depend on the power of APIs

Application program interfaces (APIs) have been around for years, however, like everything digital, the size and nature of the opportunities they provide continue to develop and grow. Today, APIs have become an almost ubiquitous part of the online world – powering the web’s ever-increasing interconnectivity and enabling new functionality, services, and platforms to be unleashed faster and more efficiently than ever before.

APIs can have a significant impact on a business’ digital transformation, yet, to exploit their full potential, it is important to understand what you are looking to achieve and how your intended use of APIs, or your API strategy, is aligned with your overarching business goals.

What is an API?

Before we get into the details, it’s worth explaining, at a top-level, what an application program interface (API) is and does. If you go back a way, systems and web applications were largely isolated, using custom or proprietary formats and protocols to interact with each other. Thankfully, APIschanged that, acting as a bridge between disparate systems. You could think of APIs like a direct communication channel for software, helping different systems or platforms talk to one another in a way both sides understand. Alternatively, you could liken APIs to a translation service; you want to talk to someone but don’t speak their language. The API does the hard work for you, creating a common language and translating the data you want to send into a structure that the recipient platform can digest.

From a digital development perspective, APIs can also remove the need to build the same functionality from scratch on multiple systems. Instead, the developer can use an API to ask that functionality be delivered from another location. For example, Google Maps is embedded on millions of third-party websites and each uses a simple API to render the map on the page. The developer didn’t need the topographic data to create the map, but they can still interact with it, add data to it, and style it to match their brand’s identity. Google Maps’ API is free for most business users, with only websites that attract significant traffic having to pay a fee.

One of the most common uses we see for APIs is supporting the growing interdependence between ‘software as a service’ (SaaS) and ‘product as a service’ (PaaS) businesses, along with their customers, partners and developers. For instance, if your business uses Salesforce, HubSpot or any other customer relationship management (CRM) platform, users of your website could potentially register an account, with their information sent via an API to be securely stored in your CRM. Once that user is logged in, your website can make a call to the CRM, again via an API, and return a set of data that can be used to tailor website content that is of particular interest to the user and aligned to their specific requirements. The pages they visit and the content they digest can all be communicated back to your CRM, helping you to develop a high level of insight into your customers’ behaviour. This technology and related processes are major catalysts for the exponential growth of digital personalisation.

Another relatable example of API use is Expedia and its network of 10,000 affiliate sites. Expedia’s Rapid Booking API allows partners to embed the functionality to book rooms and fix rates from Expedia’s partner hotels. The API creates a reservation at a given property, including sending payment information securely within the data packet. The affiliate receives a commission for the booking, as does Expedia, which generates more than 50% of its revenue through its affiliates. It is easy to dismiss this type of opportunity as something reserved for large corporates but, in reality, these types of APIs are supporting every conceivable type of business, from start-ups and owner-managed businesses, right through to the likes of Amazon or Expedia.

The final thing to remember is that APIs can be either private or public. Private APIs will be used between an organisation’s internal/external systems to transfer data and enable its customers to access information or use a service. Public APIs, by contract, are typically used in more commercially-driven ways, such as Expedia, Twitter, or Facebook who provide ad-based APIs that allow for targeted advertisements based on a user’s behaviour or previous activity. The social media giants also charge a fee to use this type of API and it represents a significant revenue source for them.

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APIs’ real power comes from their limitless opportunities to leverage owned and third-party data, and to remove the silos that stifle digital transformation. According to the recent 2020 Connectivity Benchmark Report from MuleSoft, which questioned 800 IT leaders across the globe, 89 percent believe data silos are an obstacle to their digital transformation. APIs are critical to addressing this challenge, for the reasons given above, and IT leaders agree, with the same report stating that 60% think that integration via APIs is essential to their digital transformation strategy.

When used together, accessing data and functions via APIs, businesses are empowered to uncover new commercial opportunities. For example, an MTM agency client recently developed its first API for its customers for use within their enterprise planning systems (ERP). The purpose was to integrate the API into the customer’s order management system and to enable automatic ordering of components, using a just-in-time model. Orders are processed automatically, and the customer receives updates sent directly via the manufacturer’s CRM. The client noticed an immediate, six percent increase in orders, and an improvement in production scheduling. We worked with them to market the API to their other existing customers, as well as to create messaging to attract new customers with the benefits it offered.

These types of opportunities are the reason why the number of public APIs continues to swell. ProgrammableWeb, which has been tracking publicly available APIs since 2005, reports that there are now more than 23,000 publicly exposed APIs. Compare this to just 100 in 2005 and only 10,000 in 2013. This growth is supported by the MuleSoft survey, which reveals that of those businesses questioned, on average, 31 percent of company revenue is generated through APIs.

The key to a successful API program

APIs really do represent an inviting commercial prospect for many but building a successful strategy around APIs is not necessarily quick or simple and isn’t something to enter into without having a firm grasp on what you are looking to achieve. When done well, however, your API strategy could be a catalyst for growth, benefitting almost every aspect of the business, including cost savings on future integration projects, better governance and standardisation, and more.

But, opportunities aside, APIs are not free to create, and complex requirements could take developers months to deliver, meaning they can also represent a sizable investment. Because of this, simply having a desire to use APIs is not enough, you need a well-considered, comprehensive strategy of how you intend to use them, for what purpose and what you expect to accomplish. Those with an API strategy are proven to be more likely to bring projects in on time, attain higher rates of innovation, increase productivity, save costs, and better exploit the commercial opportunities APIs offer. This is again reinforced by the Mulesoft report, which highlights that 89 percent of API users have some form of API strategy in place. Even more significant is the survey’s finding that those with an API strategy reported higher productivity (17.5%), compared to those without a strategy.

When discussing its implementation strategy for APIs, JP Morgan hits the nail on the head when it suggests you approach it like you would a new business: aligning your strategy to your business goals before identifying supporting technology and bringing functional partners to the table. Only after these steps have been completed should you consider a pilot programme to begin to understand possible performance. And then, should you be successful, look to expand, building an ecosystem to support your API objectives – whether for external API consumers or internal API developers.

As I have hopefully conveyed, identifying, developing, and marketing an API programme is not only about technology. You also need to have considered a plethora of other factors, from your goals, how you intend to monetise your efforts, the size and nature of the audience, your competition, and much more. You then need to evaluate your findings and if agreed, identify the technology or partners you need to execute your API strategy successfully.

Joining the thousands of businesses driving revenue growth through APIs isn’t going to happen overnight, but don’t be put off from exploring if APIs could help you reach more prospects, better support your customers, and make a meaningful contribution to your organisation’s bottom line.