The need to collaborate to innovate and accumulate through this trend for openness is part of what is referred to as the API economy – with the likes of eBay and Expedia creating 60 percent and 90 percent of their revenue respectively from APIs. It’s also central to the new global, data-driven ecosystem connecting people, objects and processes inside and outside the company, which Orange Business Services refers to as the new “Internet of Enterprises” era.
APIs basically provide the glue between applications. Most applications today use APIs to connect to third-party data services and applications. With the arrival of IoT and the increasingly connected world, APIs are going to get even more important.
Kristin Moyer, Vice President at Gartner, says that APIs basically turn a business into a platform: “Platforms multiply value creation because they enable business ecosystems inside and out of the enterprise to consummate matches and facilitate the creation and/or exchange of goods, services and social currency so that all participants are able to capture value.”
APIs were initially developed as closed entities to enable business processes for internal end users and used in web applications and mobile applications. Today, in the new age of open APIs, businesses can co-innovate to pursue shared revenue and growth targets through the use of freely available APIs that give access to open data and enable the integration and use of third-party services.
Take eBay, for example, which has been focusing heavily on the OpenAPI specification to make it faster and easier for developers to integrate with eBay’s RESTful (Representational State Transfer) public APIs. This approach, eBay says, makes it easier for its developer ecosystem to create new eBay experiences. Today, eBay generates over 60 percent of its revenue from its API.
Banking is driving open APIs
The new open banking European Directive, PSD2 (Revised Payment Service Directive), which was ushered in at the beginning of this year, is designed to promote innovation, competition and efficiency in the banking sector. It will also promote more choice for consumers in the EU retail payment market.
Under the PSD2 directive, EU banks and financial institutions must provide open APIs to other EU companies authorized to use the service to develop innovative financial services on top of those already being provided by the banks. Like GDPR, PSD2 comes with teeth, and those that don’t comply will face hefty fines.
Open Banking will open up the market to fintechs and smaller players. Banks will be able to collaborate with third parties for their mutual gain by enabling fintech innovators to create applications that will create differentiating services. Metro Bank in the UK has created a developer self-service portal for Financial Conduct Authority (FCA)-registered third parties looking to build services on top of its APIs, such as budgeting apps.
A big advantage of open banking is that it will create an enhanced collaboration ecosystem in the finance industry as a direct result of sharing data between traditional providers, banks and fintechs – each bringing to the table something that the others cannot, which is crucial in driving the “Internet of Enterprises” era of connected workflows and systems across business ecosystems. At the same time, it will help players to survive and thrive in an increasingly competitive marketplace.
Opening up other industries
Apple has shown the power of opening up its APIs, and it continues to be a pathfinder in this arena. It recently opened up its Health Records API to developers to create an ecosystem of apps that use patient data to better manage medication and nutrition plans and monitor diagnosed diseases. Developers building health apps have an option to personalize and individualize the experience, with the user’s permission, based on their unique health history – one example would be a diabetes management app.
Or take Uber, which uses an open API strategy to enable external partners to benefit from Uber technology. This includes the ability to request Uber rides from within other apps.
In addition, open APIs can solve business problems. Restaurant delivery service Deliveroo is a case in point. It has opened up its point of sale (PoS) integration to restaurant partners via its API. The integration is designed to free up front-of-house staff who have to manually input food orders into the restaurant’s sales system. Around 500 restaurant sites and a number of PoS companies have plugged into the API.
Building blocks for the future
With more than 21,000 open APIs now available, according to ProgrammableWeb, the largest API directory on the web, the API economy is in it for the long haul. It is rapidly transforming the way organizations deliver value to customers through differentiated services. The result: an agile and collaborative business ecosystem that is truly flexible to market demands, while providing a solid foundation for the “Internet of Enterprises.”
Discover the Internet of Enterprises, the third wave of the Internet, from the perspective of our CEO, Helmut Reisinger.
Jan has been writing about technology for over 22 years for magazines and web sites, including ComputerActive, IQ magazine and Signum. She has been a business correspondent on ComputerWorld in Sydney and covered the channel for Ziff-Davis in New York.