API Economy: Upstarts Bite Into Established Rivals

A ‘second digital revolution’ is under way in the global marketplace which is helping to bridge business administration software with increasingly sophisticated data delivery and management systems.

The shift is being driven by an increase in the use of application programming interfaces (APIs) which creates a new economy of information where many different organisations may exchange data, or access services, with minimal friction.

Ross Mason, founder and vice president of MuleSoft, suggests the ‘API economy’ can be considered to be a “second digital revolution.”

Large organisations, including Fortune 1000 companies as well as the US and UK governments, are immediately well-placed to use these services but the valence of the API economy is rooted in its appeal to small- and medium-sized businesses as well.

“In this API economy, anyone can do it,” Mason said in a webcast. “Once someone exposes an API, your competitive advantage is how you can stitch all these APIs together to create new advantages.”

Global brands have already started using API services as part of their business as usual. Nike, Coca-Cola, Target, and even the National Basketball Association are leveraging APIs to open up new markets and advance product innovation.

“If you think about it, none of these companies need to be innovative — they’ve got very sturdy brands on their own,” Mason said. The difference from previous trends in data transportation is that software developers are able to integrate both B2B and B2C data, creating integrated SaaS and PaaS solutions which work ‘out of the box’ with existing brands to expand the value chain exponentially.

“Coca Cola really doesn’t need to innovate; why are they even investing in this area? It’s simple. The old business models are starting to erode. People are moving to newer channels of engaging with their suppliers.”

Ultimately, however, for both established brands and startups the primary driver for adoption is a Darwinian survival instinct: today’s successful companies are those which can adapt best – and fastest – to change.

“Everyone is under pressure to move quickly,” he said, highlighting how APIs are being employed by businesses of all sizes because they are so accessible and provide enterprise-class functionality without the correspondingly large investment in infrastructure or personnel. “Everyone in the API economy can start springing up and start creating new businesses.”

Case Studies

Practical examples of this are already here. In the consumer space, Square — a credit-card transaction service for extremely small businesses — is only possible thanks to APIs which have opened up a world of payment services previously dominated by global providers like MasterCard and Visa.

Similarly, in the B2B arena, new technology providers like Karma Platform are redefining the ERP service model. These new entrants are attacking traditional providers by promising to deliver enterprise-grade software in a fraction of the time, at a fraction of the price of large-scale installations.

It is an attractive proposition for weary corporate procurement officers keen to avoid horror headlines of delayed systems integrations costing millions. Karma Platform CEO Anton Kovach says Boards are becoming increasingly sceptical towards these potential ERP black holes.

“The risks now are too great for most businesses,” Kovach said, pointing to the high-profile failures of ERP systems implementations in both the US and UK which had a direct impact on profits and share prices. “What we’ve found with our customers is though they may say they use a large ERP system, the business in fact relies on a core set of spreadsheets for day-to-day operations, which is scary.”

Top-tier consultancies furiously build increasingly comprehensive solutions to compete for the largest contracts in a global B2B software arms race but Kovach says this only compounds the problem. “We tell our customers: don’t waste money on a system you won’t use. Instead, look at the tools you’re already using successfully and then intelligently adapt those through fast, iterative design.”

Kovach’s software offers open APIs to his customers and other developers, thereby reducing fears of expensive lock-in and future incompatibility while encouraging innovation and experimentation.

An Increase in Participation

Experimentation is a core benefit to the API economy which will continue to change the marketplace by increasing the overall participants, bringing together business, governments and citizens. Everyone will participate, both as consumers and as publishers of APIs, Mason said, and creating APIs will not be the sole domain of large enterprise.

“The key thing about the API economy is you can’t just consume APIs,” Mason said. “It’s not just about consuming data, connecting to Amazon or Salesforce. You publish your own APIs as well. This is a key part of the economy — you’re not just a passive consumer.”

Innovation “starts with an API strategy,” says Mason. “That’s really the place you can open up opportunities, and trade with customers and partners. As you open up to your partners and to your consumers and developers, they’ll also help drive innovations for you.”

Karma Platform is a SaaS and PaaS solutions provider helping enterprises improve business performance through superior agility and flexibility. To find out how Karma Platform™ can help deliver competitive advantage for your business, contact us.

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