Why The API Economy Is Exploding


Tom Taulli, Contributor

December 7, 2015

APIs (known as application program interfaces) have been around for decades. The technology essentially allows software to move data across systems. Kind of prosaic, right?

Perhaps so. But with the surge in cloud computing and mobile, APIs have become strategically important for growing successful businesses, as seen with breakout operators like Google, Salesforce.com, Facebook and Amazon.com.

Although, perhaps the most notable recent example of the power of this technology is seen with Slack. In just a few years, the company has transformed the collaboration space and has attracted substantial amounts of venture capital.

“We are moving into an age of extensible apps and Slack is likely the new norm for software businesses,” said Jack Berlin, who is the CEO of Accusoft. “In the earlier days of the Internet, applications could stand alone, but now they are expected to not only connect and share information, but extend their functionality by connecting with other apps.”

The trend has been so important that Jack has pivoted his own business from using SDKs (software development kits) to APIs (the focus for Accusoft is primarily on enterprise applications for document, content and imaging solutions). “In the 80s and 90s, you were lucky if a project could be done in three to six months,” he said. “Everything was written from scratch, but now we’ve seen that change as we’ve moved into the cloud and away from development platforms like Microsoft’s .NET.”

He notes that APIs have become increasingly important, for example, in regulated industries. “They allow you to bypass the need to be an expert,” said Jack, “and meet stringent data protection and privacy regulations. Instead, a third-party provider can solve those issues and save you time and effort.”

Ok, then what about monetization? How can an API provider gin up cash from customers? Well, interestingly enough, a thriving business model is micro transactions. This has turned out to be quite lucrative for companies like Stripe and Twillio.

In other words, there should be no upfront costs, so as to maximize adoption. “You entice users with a basic set of functionality and then offer the ability to customize via the API,” said Jack.

Actually, to get a sense of the growth of the API economy, take a look at Apigee Corporation (APIC).  In the latest quarter, product revenues shot up by a sizzling 51%.

But of course, an API must be super easy to implement – and provide a clear use case. “It all goes back to this change from monolithic applications to interconnected and extensible apps,” said Jack. “The idea now is a form of instant gratification, but it’s all in the effort to build a better, more useful solution for your customers, rather than spending months on something they won’t use. You need to figure out what problem you can solve and make sure there are enough potential customers that want that problem solved. Then, you need to prototype rapidly, test every hypothesis with real users, fail fast, and repeat. You can build the world’s greatest mousetrap, but it’s useless if you can’t find a lot of people who want to murder mice.”

Tom Taulli (@ttaulli) is the founder of OptionExercise.com, which offers both a free web and iPhone app to analyze your employee stock options.

This article was written by Tom Taulli from Forbes and was legally licensed through the NewsCred publisher network.

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