What is the API Economy – and why it matters


You’ve likely heard of the API Economy – it’s a concept which has grown in recent years to become a vital part of the technology landscape. But what exactly does the term mean, and what impact could it have for your business?

The API Economy defined

Let’s start with some basic definitions: An API, or Application Programming Interface, is a bundle of code that essentially acts as a bridge between digital services, allowing one app to access information or capabilities from another.

IoT, smartphones, and wearables have created an instant-update lifestyle that we’ve come to expect. They’ve also spurred the creation of endless apps and services to meet the needs of today’s always-on consumers. It’s the underlying seamlessness of APIs that pulls everything together behind the scenes.

The sharing, access, and integration of these core competencies with business systems and processes is what we call the API Economy.

It’s big business: Benefits of the API Economy

We’re seeing more and more intelligent enterprises opening up their services and data to others. This gives them the chance to monetize a capability and resource directly, by isolating a small part of their overall offering and exposing it to the world as an API.

As a result, app developers are increasingly creating new digital products by combining these standardized building blocks in a unique way.

A taxi booking app, for example, might combine a mapping API, communication API, and billing API, each from different providers, with their own UX layered on top. This makes it easy to launch new services without having to build everything from scratch – and the result is that successful projects can be built using APIs from emerging providers and established communications-as-a-service (CPaaS) platforms.

It’s not all roses: Challenges of the API Economy

The API Economy is quick, convenient, and levels the playing field for everyone from the smallest developers to the largest companies to add API-driven engagement capabilities to apps. However, because there’s often no direct contact between the API provider and the developer who utilizes it, it can be hard to know which API is right for your needs – and to ensure you’re implementing it correctly and to its full potential.

Get it wrong, and you risk undoing all of those benefits and putting your app deployment in peril. For example, say a project starts out focused on the US, and developers select a communications API that suits their needs for that region. However, as the business expands, the API may not enable the scalability or interconnectivity needed for a global enterprise. At this point, it likely becomes a ‘rip up and replace’ scenario, which is always harder and costs more in time and money than implementing the right API from the start.

As the API Economy continues to mature, more companies will realize that APIs can help them successfully launch new services and transform their business, relationships, and experiences. Leaders need to understand their value and how selecting a trusted CPaaS provider can deliver these key building blocks and measurable results.

Michael Smith is the co-author of this post.

Learn more about CPaaS, APIs, and their role in the communications ecosystem. Download the paper today.

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Uffe Jes Hansen

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