“At the end of the day, delighting customers is job #1. An open platform is how we achieve that.” Those were the words of Alex Barnett, head of Intuit’s Developer Group as he explained to ProgrammableWeb what really drives his organization’s thinking when it comes to the accounting platform provider’s strategy for monetizing APIs.
Intuit is well-known for turnkey solutions like QuickBooks Online that focus on accounting, payroll, payments, and invoicing. Less obvious to the naked eye however, is how Intuit views QuickBooks as a platform rather than just a turnkey offering.
Customer Experience Trumps API Strategy
Thanks in part to articles in the business press that exalt APIs as though they’re key to any organization’s success, many companies and lT leaders are feeling the pressure to get an API strategy into place. But, as Intuit (and increasingly other successful companies) are proving, APIs are really just a technological means to specific business outcomes.
Back in 2013, in a post titled Why You Probably Don’t Need an API Strategy, Netflix’s director of edge engineering Daniel Jacobson wrote “Most companies should be focusing on their core business and then designing APIs that support the larger strategy...In pursuing that route, most companies should not be discussing their API Strategy, they should be talking about their API as a tactic in support of their broader business strategy and objectives." In other words, it’s the business strategy that comes first, and the APIs, as a tactic, that fall in line behind that.
Of course, tactical as they may be, once the business strategy informs the API tactics, the actual API plan will be viewed more as strategy by those responsible for making it happen.
In Intuit’s case, the business strategy started with the right customer experience. According to Barnett, when it comes to the sort of information that Intuit’s customers keep about their customers, the company knows exactly what it has to offer and when it must partner to co-create a more all-encompassing end-to-end customer experience.
For example, in the course of delivering its core accounting, payroll, payments and invoicing capabilities, QuickBooks maintains a modicum of customer information. Mainly contact data according to Barnett. “But if you have a customer relationship management (CRM) system — not just contact management data but you want to manage opportunities, sales, etc. — QuickBooks doesn’t do that” said Barnett. According to him, customers are absolutely entitled to an end-to-end experience that seamlessly integrates the accounting data with the CRM data. Or any other data or functionality that the customer views as being complementary to QuickBooks. Health insurance and 401K solutions are other examples.
"The customer wants a seamless experience; the right app for right job at right time and for the data to be flowing seamlessly throughout that experience” said Barnett. “We know we cannot solve all problems alone” said Barnett. “But with an army of developers, we’re able to provide a lot more value as opposed to a single product that’s silo’d, leaving customers alone to cobble together something that meets their requirements.”
According to Barnett, that so-called army of developers also had to include the developers that were already working for customers; ones that are looking to incorporate the core QuickBooks capabilities into other applications they’re developing.
Once Intuit had an idea of the end-to-end customer experience it needed to enable, next came some strategic platform and ecosystem decisions. This is where Intuit, like other successful API providers, instinctively knew that that there should only be one platform representing all functionality, whether that functionality is served to Intuit’s own developers, external developers, or both (simultaneously). According to Barnett, “Platform thinking is central to the way we work. We believe we’re going to be a platform-as-a-business.”
To support Intuit's single platform-oriented thinking, Barnett has a technical partner — Rajashree Pimpalkhare —who lives between the developer group that Barnett leads and Intuit’s internal engineering group. Organizationally, having someone in her role is a best practice that other API providers should consider. According to Pimpalkhare, whose official title is director of engineering for Intuit’s developer group, her role is ensure that the company’s internal engineering team is building the singular platform in a way that’s wholly consistent with the needs and requirements of the external developers who will be accessing it.
“There is a platform of capabilities. My job is to make those capabilities available to third parties as services” Pimpalkahre said of her role. "I have peers in the engineering department that power those features. So when they are developing capabilities, my job is make sure they are developing them with the third-party developer in mind.”
As Barnett and Pimpalkare drew a mental image, for ProgrammableWeb, of an ecosystem that revolves around a single platform that's leveraged internally as well as externally, ProgrammableWeb put that image to pencil and paper (shown below). Across the center of the ecosystem lies Intuit's core capabiliites and compentencies expressed as a platform and exposed by both public (above and below) and private APIs (below). Whereas the public APIs are consumed by both external and internal developers (an approach often referred to as eating your own dogfood or "dogfooding" your APIs), there are some private APIs reserved only for Intuit's consumption by the Web, Mobile, and server-side applications it develops (for customers and itself).
Meanwhile, its publicly exposed APIs are essentially consumed, sometimes via Intuit-provided SDKs (software development kits) by three types of external developers (in addition to Intuit's internal developers); customers building their own apps and extensions to Quicbooks Online, third-party developers building bespoke apps that are not intended for, or don't qualify for, distribution through Intuit's marketplace (discussed below), and developers (Independent Software Vendors or "ISVs") of apps that extend the functionality of Quickbooks in a way that might appeal to Intuit's broader customer base and that qualify for discovery via the marketplace. Applications must pass Intuit's security and quality requirements before qualifying for promotion in the marketplace. The ecosystem also involves accountants (also discussed below) that help Intuit's customers with their QuickBook's installations and any add-on applications they might need.
Most importantly, the minute any organization starts speaking in services-oriented terms — as in offering its core business capabilities as services that are available internally and externally alike — is finally when the API conversation starts to begin in earnest. But not before the ecosystem and the business models behind it get worked out.
Chicken vs. Egg
Like other ecosystems, Intuit’s ecosystem involves a variety of constituencies and business models, a marketplace, and even a business development component. However, proving that Intuit’s customer experience truly takes priority over everything else including monetization, Barnett explained why Intuit elected not to charge customer- or third-party developers for API access.
According to Barnett, when Intuit first launched QuickBooks Online (the cloud version of the company’s well-known desktop application) and eventually got to the ecosystem decisions, it knew that if it charged for API access or even attempted to take a sales percentage from third party developers, that few if any developers would come. And without an ecosystem of independent software vendors (ISVs) and third party developers helping to co-create that end-to-end customer experience, QuickBooks would have remained a silo of accounting functionality.
So, with the best possible end-to-end customer experience in mind and the goal of attracting as many developers as possible, Intuit dispensed with the chicken and egg question, and decided to make its platform freely accessible to both customer- and third-party developers. This, according to Barnett, amounted to an indirect form of monetization because, as the developer program grew, so did the retention rate (14%) of customers using one or more add-on third-party applications. In other words, QuickBooks customers using one or more third party add-ons are 14% more likely to renew their subscription than customers that don’t use any add-ons. This in turn improved the long term value (LTV) of those customers; a closely watched metric.
Further validation of the customer-centric business model came in the form of a metric known as the “attach rate.” According to Barnett, 20% of Intuit’s customers are using at least one third party application.
To help third party developers market their solutions to Intuit’s customers, Intuit created a marketplace with two entry points; the first of these is through an “Apps” tab built directly into the QuickBooks user interface, and the other is through apps.com; a domain that Intuit owns. But even in exchange for promoting third-party solutions, Intuit bypasses any percentages or cuts in its business model.
However, in another dimension of the ecosystem where accountants are not only reselling (and configuring) QuickBooks for their customers, they are also reselling and configuring third party add-ons, Intuit does take a cut. "Accountants have the ability to resell third party apps that are integrated into platform and present a single bill to the customer” said Barnett. “In this case, we do a revenue share with the accountant and the developer.”
But here again, it’s very much about the customer experience. When accountants get involved with an installation, the accountant is on the front line of defense, making sure everything just works for the customer, including any third party integrations.
And then, there’s a third dimension to the ecosystem; one where the platform serves as the central component of one-off custom business development deals that Intuit negotiates with special business partners like Google. Here, Barnett says, there are no specific terms to cite because every deal is different.
As can be seen for Intuit, as well as any other platform provider, there’s a slew of issues that must be addressed long before the conversation turns to the nuts and bolts of providing APIs. In fact, it’s only after the organization sets certain customer experiences and business outcomes as objectives that the actual API implementation details in support of those outcomes — the API strategy if you will — should start to take shape.
Today, there are over 6,500 developers in the Intuit developer program. Approximately 600 of them are available through Intuit’s marketplace. Barnett says more business models and channels are in the works for Intuit’s ecosystem and looking back, he has no regrets about how it has gone so far. In the name of the best overall customer experience, “open APIs are the way of the future” says Barnett. “There isn’t any alternative strategy."