Saugatuck research among both enterprise IT buyers and IT providers indicates that application programming interfaces – APIs – are becoming increasingly relevant to the future of business IT, especially in today’s Cloud-enabled, loosely-coupled environments.

Enterprise IT buyers are looking to APIs as one of the next major trends in enterprise IT, though many are having difficulty with defining and formulating strategies around how best to use these new capabilities. IT providers recognize that both offering and enabling APIs increase the value of their solutions as APIs enable greater flexibility for how a product can be consumed, sold, or integrated. Providers have been active in the API management space over the last 18 months, with acquisitions like MuleSoft’s purchase of ProgrammableWeb, CA’s purchase of Layer7 Technologies, and Intel’s purchase of Mashery. The market for API management is becoming one of the next major areas of enterprise IT, and much less of a niche market.

Why is it Happening?

In what increasingly appears to be a near future of multiple devices, sensors, applications, tools, services, and technologies, APIs are one of the most cost-effective means of connecting these components of business IT together. APIs are a key enabler and foundation of what Saugatuck sees as the loosely-coupled model that enterprise business IT, and enterprise business itself, will be built upon.

The concept of APIs is far from new. In fact, the technology itself is really an evolution of previous IT architectural concepts such as CORBA and SOA (among others). What makes the API trend developing today different is that the overall IT landscape has shifted significantly with the advent of Cloud, and this has made easy to use, standardized connectors between applications much simpler to create. Additionally, as Cloud applications have developed, vendors have frequently needed to develop APIs very early on to support data loading and synchronization. Now that many of these applications are matured, the amount of services available via their APIs is only growing. Last year, for example, Salesforce announced that they were increasing the number of APIs available by 10x, driven by the shift to a mobile-first deployment model as well as requests by developers and organizations that wanted to take advantage of even richer interactions with the Salesforce platform.

As enterprises look at the shifts in IT occurring within their own organizations, many of them are seeing the same benefits that the Cloud providers saw in creating and offering APIs. Enterprise IT as a whole is becoming increasingly focused on providing and supporting the business through the creation of Mobile applications, the use of Cloud technologies, and the integration of traditionally silo’d IT assets – for use both internally and externally.

Market Impact

Through their cost-effectiveness – including their ability to reduce the skills and knowledge required to link systems – APIs are a key enabler of both IT and business innovation, by making it easier and less expensive to assemble rather than build.

Even though the tools to manage and monitor APIs are more capable than ever though, that doesn’t mean that it will be easy to take advantage of APIs, or that users or providers creating and deploying them will be instantaneously successful. There is still significant work do be done to determine what APIs to offer, to whom, and possibly, how much to charge for access. Businesses will need to define specific goals for their APIs, and then be prepared to evaluate and reassess whether their APIs are meeting their business needs.

Saugatuck is developing a series of Strategic Perspectives and a API Market Framework for our ongoing premium CRS subscription research clients that examine the API trend (including what’s often termed the emergent “API economy”), which will guide enterprise leaders and IT providers into and through the thicket of opportunity to the path of success.

As part of our current research, we have developed the following list of representative key issues to help all parties develop and refine API strategies. Saugatuck Clients can expect more detailed Strategic Perspectives to continue to address these topics in depth.

APIs vs Data Integration. Data Integration Platforms such as Dell Boomi, Informatica, or MuleSoft, and APIs go hand in hand. There are multiple use-cases for both, such as connecting CRM and Marketing systems, or automatically loading sensor data into analytics software, or normalizing and transforming data as it moves from one system to another. Though the Integrations and APIs serve different purposes, they are becoming increasingly complimentary as companies embrace more complicated Hybrid Cloud approaches. APIs and Integrations help ensure that companies don’t end up creating new data silos, and instead are able to take advantage of complex interactions between on-premises and Cloud solutions.

Who is the Audience for your API(s)? APIs are not difficult to create, but in order to be able to extract value from the API Economy, companies need to have purpose in creating them. Understanding the audience that a specific API is targeted toward will make it much easier to define the API’s capabilities, requirements, risks, and potential rewards. Some examples are: Internal APIs for connecting legacy systems to analytics, External API to share data with partners, Product API to monetize a company’s data or service, and Mobile API to deliver backend services to a corporate mobile application. Each of these APIs would require specific considerations such as Billing, Authentication, and architecture, and would require documentation targeted at different consumers of the API services.

APIs are an Application Network. Now that APIs are part of the core technology stack for most Cloud applications, the possibilities for sharing data and services between applications are growing exponentially. Already, many core applications use their APIs to communicate with hundreds of other services, and many Cloud vendors such as Salesforce and Workday consider their APIs as the primary way to interact with their platforms. Pervasive API availability lowers the cost of creating integrations, and reduces the barriers to using best-of-breed Cloud solutions to create de facto business suites.

APIs as a front door to your business. Not every business will have an API that it can directly monetize, but APIs will still be a Front-door for your business. APIs will be a key means of interacting with partners, providers, supply chains, and customers. As data itself becomes increasingly valuable, and every business operations is tuned for efficiency, sharing information in a seamless manner will deliver tangible benefits. Some businesses may find that as their partners look for more information to run their business, their APIs and the data that they deliver might become a new line of business. Trends around the Internet of Everything (IoE) make it even more likely that all companies will become either producers or consumers of sensor and machine data.

APIs and Channels. Many companies have traditionally purchased software through VARs, SIs, and Consultancies. The Cloud challenged those relationships initially, specifically for existing ISVs who wanted to be able to deliver applications as SaaS, but had difficulty in involving their existing channel routes to market because the predominant method of selling SaaS was direct to consumer. As APIs become more prevalent and available, this trend is likely to swing back the other way. Cloud applications are becoming less and less isolated (see bullet 3 above) and as systems are becoming even more complicated, the role for channel and support intermediaries/aggregators only gets more necessary. Users of software will need help integrating APIs, as well as connecting into those APIs to offer add-on services like Single Sign-on. (see http://blog.saugatucktechnology.com/appdirect-evolution-api-economy/)

Security Requirements. Obviously, we can’t talk about sharing data without addressing risk. The primary focus here is ensuring not only that data is secured and encrypted appropriately in transit, but also that companies remain aware of how regulations may govern the data that is moving, and ensure that all endpoints and intermediary systems comply with the way that specific data must be stored (e.g. HIPAA and FINRA both concern not only security but also additional concerns such as data retention and PII). Data being moved in or out by API may need to be partially obscured or modified to ensure that compliance with regulations is observed.

This blog was originally published on Saugatuck's Lens360 blog on April 25, 2014. Published with permission.

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