8 Jun 2018Blog

A 360-Degree View of the API Economy

The notion of an API economy has formed in recent years, but it is still often overlooked in favour of API management and more technical talk. In Finland, the matter is discussed actively and seminars on API attract listeners who are curious about this new topic. APIs are seen as success factors and a competitive advantage in the digital world. However, very few are clear on what APIs and the API economy are, and what their connection is to the creation of Amazon Web Services.

Data is the main fuel of the API economy

Easier ways to share data between organisations, developers and users, i.e. customers, are the motive for the API economy. While data becomes an increasingly valuable asset for companies, it is also becoming an instrument of exchange. The personal data of consumers is valuable, and many actors are ready to exchange goods and services for the data released by users.

In the API economy, automation works for companies to offer and exchange data without user interfaces or human interference.

API users are typically other companies or independent software developers that utilise the data or services offered through the APIs. It should be noted that this is only one part of the API economy.

APIs enhance both external and internal functions

The significance of APIs for the economic success of companies is not limited to external functions. APIs are a great opportunity for companies to improve their internal efficiency, utilise data across organisational boundaries and ensure that digital investments can be reused, doing away with the need to reinvent and rebuild the wheel in different departments.

Amazon Web Services is a classic example of the efficiency of an internal API economy.

It started with Amazon’s CEO, Jeff Bezos, who ordered all teams to offer an interface for the parts of the information system that they developed. This allowed every investment to be fully exploited. The requisite functionality that already existed in the company’s system architecture could be accessed by API calls and used for building new services. This gave rise to Amazon Web Services, as extra capacity could be offered to customers as a cloud service.

This example illustrates what the API economy has to offer. Amazon had capacity and software that it used for its business and since the architecture had a loose, API-style structure, developers could utilise the company’s internal systems in flexible ways. This approach also allowed that capacity to be sold to customers. In October 2006, Amazon launched the Elastic Computing Cloud, its first cloud service. The rest is history: Amazon Web Services is now worth billions and in the vanguard of the cloud transformation.

The majority of companies and public entities possess services and data that they can use to gain new customers or a competitive advantage – or to serve taxpayers.

Furthermore, they can improve their internal efficiency by allocating their resources better. Using APIs to free data for use and reusing software investments in new solutions and services is the 360-degree API economy at its best.

By understanding the significance of APIs as external and internal success factors for a company, we can form a 360-degree understanding of the API economy. If we focus on external APIs as products, we overlook a key part of the API economy.

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