The API economy has arrived on the back of web-enabled software for business processes. GitHub – the world’s largest code host – uses APIs to great effect for its 11 million developers. The company’s co-founder, Scott Chacon, spoke to us about what the API economy is, how it transforms business models, and why you should care.
A look at the past
Application programming interfaces (APIs) hardly hit the ground running in 2000 when the concept was unleashed on an indifferent world. Partly to blame was the rather technical and dry definition of APIs as a set of routines, protocols, and tools for building software applications.
At the recent Huawei Developers Congress, GitHub’s Scott Chacon offered a definition of the API economy that’s more in line with the collaborative world of 2015: “[It’s an] ecosystem built up around systems that talk directly to each other through automated means.”
After a slow start, APIs began to emerge with some muscle as life started getting more social and mobile. The API news hub ProgrammableWeb reports that the number of open (publicly available) APIs jumped from just over 100 in 2005 to 10,000 by September 2013.
Today the number stands at 14,193 – and that’s just the tip of the iceberg. There are ten times more private APIs (for internal developers) and semi-private APIs (for partners) than there are public APIs. And it’s all about sharing: “GitHub is the largest code host because we focus very hard on making it easy to share, on making it easy to have open source code,” says Chacon. In this nascent era of the Internet of Things (IoT), more things are using APIs to override the underlying complexity of interconnecting with each other.
With a rich financial future lighting up the horizon, APIs are here to stay and multiply. Research analysts Mind Commerce predict that the carrier API market will grow 26 percent annually, with global revenues hitting US$167.5 billion by 2020.
Amazon CEO and founder Jeff Bezos anticipated the importance of APIs to business over a decade ago. As part of a series of other conditions in a company-wide memo around 2002, he threatened to give employees the chop if they failed to declare data and functionality through APIs: “Anyone who doesn’t do this will be fired. Thank you; have a nice day!” Describing the aftermath, tech website apievangelist.com notes that: “Everyone got to work and, over the next couple of years, Amazon transformed itself internally into a service-oriented architecture (SOA), learning a tremendous amount along the way.”
Now, with more businesses following suit, the API economy was born.
Growing a new ecosystem
According to Chacon, “If you have closed systems, then there’s no real way to connect them. If you have systems and services that provide very discreet things, then any company can go in and not have to re-implement all those different things. They can simply combine them all.”
In a nutshell, the API economy flips the model from closed and secretive to open and transparent. When companies invest in their APIs, they are clearly communicating to potential partners how they can work together, which leads to better services for customers.
1+1=3
Chacon believes we will see two types of players in this new ecosystem: those who provide services running at the core level, and those who build on that level to provide more accessible interfaces. “The major players in the economy, at the ground level, would be companies like Huawei, Amazon, and Google. They provide the infrastructure services, servers, load balancers, and data bases. On top of that would be companies aggregating those and making more user friendly ways of using them.”
Regardless of which category an enterprise falls into, the API economy will inevitably change the way it runs its business. In Chacon’s opinion, “API economy transforms business models by making companies focus on providing discreet [or unique] services.” This represents a paradigm shift from the past: “Instead of buying a whole platform like ten or twenty years ago, if you use Huawei or Amazon Web Services (AWS) now, you will only probably be using four or five out of the hundreds of services they provide. But everybody will use a different four or five.” So how will this transform business models? “Every company has to think about what core value [it] might be providing,” says Chacon. To some extent, this liberates companies by making them focus on their best idea or core competency.
Rather than re-inventing the wheel for common capabilities, businesses can combine the best solutions the industry has to offer, which in turn extends their services and adds value for end users.
With high-end taxi services as its core competency, Silicon Valley darling Uber is the perfect example. It weaves its magic by piecing together a composite of APIs from different companies like Google Maps, Braintree payments, SendGrid e-mails, Twilio texts, and Checkr background checks. Using these APIs as building blocks, Uber has been able to drive down costs, shorten the development cycle, and accelerate time to market.
In August, 2014, Uber launched its API, allowing other businesses to embed Uber into their apps. By opening up its data assets and resources, Uber has synthesized an external R&D lab, reached new partners and customers, and established new revenue streams.
Why you should care?
The API economy is here, and it’s here to stay. In the connected era, it’s not about what you can do on your own; it’s about how you can smartly pool the services offered by other suppliers and arrange them as a new value-added proposition. It’s also about how you can share your assets through APIs, let other businesses build on your platform, and build a sharing ecosystem for mutual success.
“Software is the raw ingredient of innovation,” states Chacon. “An API-driven economy increases speed, enables better partnerships, and delivers better experiences for customers. The only risk is in not participating.”
Making developers smile
Chacon is positive about how GitHub and Huawei can work together, “GitHub knows a lot about the software development world… [but] we don’t know China well. Huawei obviously does. If there were some way for us to work together, we can say, ‘Here’s how to make 11 million developers happy’, and Huawei can say, ‘Here’s how to make Chinese developers happy’, which is something very difficult for American companies to do. It’s definitely something that we’d love to be involved in.”
So don’t sit there over-thinking it – jump on the API economy train and start exploring what API can do for you.
