We Don’t Talk Anymore: The API Economy

Richard Chatterton

Application programming interfaces (APIs) are the glue of the cloud, mobile, and Internet of Things (IoT) revolution. And because they are now part of the enterprise-standard business model, APIs have created the API economy.

An API is the code that allows two software programs to communicate with each other. APIs ensure that the data extracted from one software application is formatted and passed to the next application without changes, even if the associated software or application feature sets are updated. (An API is not to be confused with a web service, which is a medium for one or more APIs to communicate with each other.) While API tools have always played an important role in software development, increased demand for data integration has encouraged enterprises of all sizes to break complex software components down into smaller, containerized components called microservices.

APIs have been extended to connect enterprise applications as part of a larger data-integration strategy and can be used effectively by organizations to abstract out legacy, monolith systems or internal business logic to provide API consumers a clean, well-documented interface.

Why are APIs important for business?

There are well over 2 million mobile, software, and “as-a-service” applications available in the market. Cloud computing, software designed to process and exchange information via the web, and the transition to microservice architectures are some of the factors that have increased interest in APIs and web services. They are becoming the expectation for integration technologies.

APIs facilitate the creation of user-focused applications that support line-of-business goals and end-user operational efficiency. They enable enterprises to innovate faster and reach new audiences. And they have proven to be the perfect conduit for mobile and IoT devices due to their lightweight implementation and the simplicity of their data-exchange format.

What are open platforms and public APIs?

The digital economy, the IoT, and the increasing volume of software and applications in the market have led companies to double-down investments in their core competencies. Today, companies are offering open platforms that allow other best-in-class, niche, or related product/service applications to connect with them via web services.

Open platforms are becoming increasingly common, most notably with open banking, which is a seismic shift in retail banking driven by regulatory changes, changing consumer preferences, and technology-enabled innovation. An open platform enables partnerships that can facilitate an exceptional, easy, and convenient user experience while helping businesses gain a competitive advantage. In spend-management terms, this means they can have a completely electronic, cloud-enabled invoice and accounts payable/receivable solution.

In November 2017, the Australian government introduced the Consumer Data Right standard to provide rigor and control around digital and open data. It will apply first to open banking, then energy, with the telecommunications industry to follow.

What are the risks?

Data privacy and sensitivity are at the forefront of media and regulators’ minds, and APIs are an area of security risk. Inadequate validation and layers of security can lead to hacking and data compromise. Once there is a breach of integrity, it is very difficult to regain the trust of API consumers. Encryption is key to protecting APIs.

Implementing web services, configuring APIs, and writing code require a certain level of technical skill and can be an expensive aspect of systems architecture – especially if they’re done poorly and lead to a breach. Well-documented code, peer review, and similar API design best practices can help avoid buggy code and decrease the risk of problems.

Quality assurance is a critical aspect of any API ecosystem. Understanding the terms of service, data ownership, and overall accountability, as well as monitoring API utilization, are all key to ensuring robust, safe, and efficient API integrations.

Closing thoughts

Organizations of all sizes should embrace the API revolution to remain competitive. A great way to maximize return on investment and operational efficiency is to partner with software and solution providers that embrace web service integration and open data platform approaches, while maintaining rigor and control around IT development processes. If you don’t have the resources internally, consider engaging a consultancy that specializes in this area to minimize technology and integration risk, and to ensure best practice in your data integration and enterprise architecture strategy.

Thank you to Yun Zhi Lin, head of engineering at Contino, for his thoughts and input.

Please listen to the replay of our “Pathways to the Intelligent Enterprise” Webinar, featuring Phil Carter, chief analyst at IDC, and SAP’s Dan Kearnan and Ginger Gatling.

Richard Chatterton

About Richard Chatterton

Richard Chatterton is senior solutions consultant at SAP Concur, based in Sydney, Australia. Richard is a full member of the institute of Chartered Accountants ANZ and has over 10 years of commercial finance experience across various industries as a finance and accounting manager and senior finance systems analyst in organizations ranging from private equity to ASX listed. Richard's areas of expertise are finance operating models, processes, and alignment with the associated systems. His interest in technology and digital transformation has seen him lead a number of global finance system implementations, integrations, and application upgrades. His current role at SAP provides the opportunity to promote the intelligent enterprise as part of the SAP Cloud Business Group.