Eric Knipp’s fantastic post (Don’t let API Management Wag the Dog) on cautioning clients on selecting a strategy prior to jumping in with an API Management vendor was excellent. It seems that many of the popular API management vendors are doing a great job of marketing, so much so that Gartner’s clients are asking about buying the technology set before thinking about why.
This question of why spurred me to do some deeper thinking on APIs in the larger business context. It’s no mystery that Mashery has a complete API Management product and service (we have the market leading on-prem and cloud API management offering by any measure), and as such, you can expect some self promotion of APIs coming from Mashery and our partners, but I wanted to think a bit more clearly about the business view of APIs in general and that always starts with asking the fundamental question of why.
Why should I expose an API? Any new project costs money. What returns do I expect? Further, there are costs involved in an API program. Aside from technology choice there are a number of human factors, such as hiring the proper developer community managers and new support and service processes to manage and communicate with “finicky” developers. Moreover, if you are pursuing an on-prem program you will have to absorb some changes in internal processes.
Also, given the growth of the space and the realities of competition, it’s likely that my competitors might also have APIs as well. If I’ve lost time to market advantages, how can APIs really help me compete and prevent an API project from being an also-ran? Are APIs a universal good as they are touted by all us vendors?
Of course, there are some very good answers to these questions. In fact, you might hear some vendors tell you just why you need to expose an API. Here are some common answers you will hear. Many are convincing! All are fallacious in some fatal way.
1. The world is moving from a direct to indirect business model, APIs enable that. (If you don’t jump in on API Management you’ll get left behind!)
2. APIs enable third party developers to innovate for you – you can outsource your innovation. (You outsource everything else, right?)
3. The world is changing too fast for you to plan a product, it’s just too complex, open an API instead, let the crowd innovate for you. (You don’t really know your own customers and world is just movin’ to fast)
4. APIs enable a new revenue channel – you can “charge by the drink.” (If you build it, they will come!)
5. Do you have a website? Of course you do. Do you have an API? Of course you do (Musser’s famous argument, one of my favorites)
6. First businesses moved from brick & mortar to web, and now they are moving from web to mobile. Mobile requires APIs, therefore, you need an API management solution. (Can every business benefit equally from mobile?)
7. When your developer community builds potentially thousands of apps, you can reach consumers in ways you can’t even dream of. (Because you just aren’t that good of dreaming of ways to reach your customers)
So if it ‘ain’t’ these arguments, what would make an organization or Enterprise seriously consider API Management? When is it a truly strategic decision?
As a company goes to market, there are two elements of strategy it needs to consider. The first is a strong offense to attain a competitive market position and the second is the ability to defend the source of this advantage against rivals. If we cast the problem in terms of API management the important question is: Is an API program a source of competitive advantage or is it an isolating mechanism, or is it both, and how does it apply for your business specifically? This is the important why question that you should be asking.
For an API program to be a source of competitive advantage it needs to allow the organization to increase value offered to customers and partners, resulting in higher customer willingness to pay or allow the organization to reduce costs so it can reduce price to offer more value. Reduced prices increase buyer’s surplus, or bang for their buck, increasing value offered.
For an API program to be an isolating mechanism, it must either help retain customers and prevent them from defecting to rival products and services or it must help prevent imitation. A strong ecosystem alone is a defensive, isolating mechanism.
In other words, if I have a community of developers developing against my APIs, they have invested in learning my method calls and how to parse my data, as well as how to merge my data into something useful, such as a mobile application. It’s not necessary that the mobile application transform my business or become a source of revenue generation. In the case of the isolating mechanism, you are raising the barrier to entry for competitors, not living out some marketing metaphor.
I think that once you can tie your API program to any these factors you can make a great argument for the business value of APIs. This is why in all of our discussions and interactions with customers we try and get to the bottom of the business side first, and then talk about technology, whether it is a 100% on-prem solution, a hybrid solution, or a 100% cloud solution (Again, Mashery has all three models, plus others).