API Economy Starts to Sort Winners and Losers

While many people doubt that there is such a thing as sustainable first mover advantage, it’s starting to look like organizations that have embraced the API economy are starting to put some distance between themselves and competitors. A new survey of 200 IT and marketing executives conducted by the newly formed Apigee Institute finds that organizations that identify themselves as being proficient in the use of APIs and data have more revenue than competitors, enjoy faster time to market speeds and overall have higher levels of customer satisfaction.

Virtually all the executives surveyed says API would have a substantial impact on their business in the next 12 months, which would only increase over the next five years. To make matters a little more interesting the survey also found that top performers are more confident that their company will be in a stronger market position five years out. Top performers are almost one-and-a-half times more likely than the average and more than twice as likely as the weakest performers to be very confident the company will win a much stronger position five years from now.

According to Bryan Kirschner, director of the Apigee Institute, organizations that investment in APIs tend to have much tighter alignment between their marketing and IT organizations, which may also be one reason that aligning marketing and IT has become such a high business priority.

Driving that alignment is that customer relationships that span APIs tend to be deeper and more beneficial to both parties, says Kirschner. As a result, at a time when the highest CEO priority is to get closer to the customer it stands to reason that APIs have become a strategic element of the any customer service, sales or marketing initiative.

While the volume of most API activity has been focused on business-to-consumer applications, Kirschner says it’s apparent that business-to-business applications are starting to increase substantially. As such, Kirschner says it’s pretty clear that the long-anticipated API economy has fully arrived.

However, like any economic lift the effects can be a little uneven. It’s pretty clear, for example, that while companies that sell digital goods and services recognize that API are essentially a distribution channel, other vertical industries such as healthcare are just beginning to take advantage of the opportunity to get closer to customers.

In the year ahead it remains to be seen just how widely APIs will be applied across and within different vertical industry segments. But as APIs evolve it’s also well within the realm of possibility that companies that are now considered to be in different industry segments will find themselves participating in a common ecosystem that may lead to some previously unlikely mergers and acquisitions.

In the meantime, like most emerging economies the API economy is fragile. There’s a lack of consistency in API deployments that often leads to APIs suddenly breaking whenever an application is updated. Partners that depend on that API can also suddenly wake up one morning to discover that an API that they depend on to generate revenue no longer exists for any number of reasons.

Like any business relationship those issues need to be worked out using best practices and lawyers. But just because something is fragile doesn’t mean that it isn’t worth participating in.

Be sure to read the next News Services article: API Strategy and Practice Conference Will Kick Off in San Francisco, October 23-25, 2013