APIs as a Competitive Advantage

Guest Author
Jan. 09 2013, 11:16AM EST

This guest post comes from Lorinda Brandon, Director of Solutions Strategy at SmartBear Software. You can follow her on Twitter or find her blogging regularly at SmartBear.

I recently had the opportunity to moderate a panel for the Massachusetts Technology Leadership Council where the subject matter was “The API Revolution.” In the hour long discussion, the panel, which included members from industry leaders like Brainshark, Akamai and Constant Contact, wrestled with several topics that I think most companies are grappling with - 1) which APIs do you expose, 2) to whom do you expose them, 3) do you make the investment to build new ones, and 4) how do you leverage any of them for revenue.

I was relieved to see that many of the attendees have the same frame of reference for APIs as I do. Despite its sexy new clothes, the API has had more birthdays than most of its current fan base. There are times when talking about API strategy feels somewhat surreal, but I see it as a natural evolution (as opposed to “revolution”) of the new connected world of software. Instead of having just the power of one software development team at your disposal, you have the whole world of software development teams at your disposal. In that sense, APIs are a limitless business strategy if you can figure out how to leverage them.

Making the most of what you have

Not everyone has the luxury of working with a fresh code base; in fact, few of us do. So what do you do with your legacy APIs? You may have built your APIs for internal use only and you may have built them using SOAP because SOAP was the cool kid on the block years ago. These days, REST has replaced SOAP as the most popular type of API and, in fact, Chris Caruso (CTO of Brainshark) told us that when they replaced their publicly available SOAP APIs with REST APIs, their adoption rate increased dramatically. But if there’s one thing we can all count on, it’s that technology never stands still. Today REST is the popular kid that everyone wants to play with… who knows who will be our favorite in 5 years? If you are going to expose your APIs, you have to consider whether your current APIs will meet a market need or if you need to invest in a little re-factoring.

In the end, the panel members all agreed that the most important asset they were exposing was not the actual API, but the data it accessed. You need to have APIs that are easy to use and adopt, but if the data those APIs acted against was of little value, then you didn’t really have anything to offer. If you think about this as a user, you know what I’m talking about. If you were building an application and you had the opportunity to use an Apple Maps API or a Google Maps API, both of which were easy to implement, which would you choose?

Where does the money come from

Okay, so you have your nice neat REST APIs and a powerful platform behind them with lots of valuable data. So, how does this help you make money? That’s one of the biggest questions companies are struggling to answer. How to make money in the age of robust open source offerings and free apps is a difficult problem to solve and some companies are looking to their APIs as a way to generate income. When I asked the panel, however, none of them were charging (or planning to charge) for API usage. This surprised me, I’ll admit, so I polled the audience too. Only two hands went up when asked who was monetizing their APIs. So, the question remains – how do you justify the investment costs in exposing, maintaining, and documenting your APIs if you don’t charge for them?

The answer seems to be that you can derive income from them indirectly. Brainshark sees an uptick in their professional services engagements as developers integrate their APIs into their own applications. Tom Mistretta of Akamai pointed out that they only expose their APIs to known and trusted partners, but those partnerships bring in revenue. Kevin O’Brien, Sr. Director for AppConnect at Constant Contact, agreed wholeheartedly with that approach. “We’re not feeding back into our professional services – we’re feeding back into our ecosystem of partners and developers.” But where they all agree is that there is a ripple effect of exposed APIs that can make other income generators more profitable for a mature business.

And in order to generate that additional income, you need to have the APIs people choose – your APIs themselves become a competitive advantage over your competitors.

A competitive advantage? With no marketing?

Interestingly, all of the panel members agreed that having easy-to-use, well documented APIs can be a competitive advantage in today’s market. But not one of them had an actual Go To Market plan, no promotions or marketing strategies. When I asked Chris Caruso how Brainshark promotes their easy-to-use RESTful APIs, he paused for a moment and said “You know what’s interesting? We don’t.”
If you think about it, APIs are a challenge in the marketing world – they are a technical construct, designed to make it easy for components to talk to each other. But suddenly they have a value in the market and are seen almost as a product themselves. How do you market a technical construct? What are you selling really?

This conundrum has led to the rise of a number of companies whose purpose is to help you design a marketing strategy for your APIs. Companies like Mashery, Apogee and Apify are reminiscent of the website companies that popped up everywhere in the 90’s when all of a sudden, every company needed a website but nobody knew why. So, while everyone in the panel agreed that they need an API business strategy (as Tom Mistretta of Akamai said, “It’s not as evolved as we’d like it to be but we know we have to do it”), none of them had an answer for how they were going to address the need to promote what they saw as a competitive advantage. And what good is a competitive advantage if no-one knows about it?

“May you live in interesting times”

And we do. I don’t know about you, but the fact that so many of these questions remain unanswered is exciting to me. Even more exciting is that so many of the questions remain unasked. We’re just at the beginning of this “Golden Age of APIs” and it will require a true balancing act to keep the innovation but still make it profitable.

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