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Dion Hinchcliffe's Next-Generation Enterprises

Dion Hinchcliffe

Open APIs Mature Into a Next-Generation Business Model

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I've been bullish for several years now on the potential of using open APIs as a new channel to the online business world, in particular using them to scale up new business relationships quickly and cost-effectively.

Internet technology has made this possible for for a decade or more, but it's taken a while for awareness to grow on both the provider and consumption side about how fundamentally valuable APIs are to modern businesses today. We're now seeing financial firms (TransUnion, JPMorgan), retail (Best Buy), media (MTV, Warner, Guardian), consumer services (Blockbuster, Netflix), telecom (Orange, Alcatel-Lucent), and many others now use open APIs as part of their business offerings. While APIs are just about to hit the mainstream, as we'll see, that's because the necessary infrastructure to make them widespread is just arriving.

In the last year or so we have started to see a genuine industry grow up around open Web APIs, which in their simplest form is Data-as-a-Service (DaaS) that allows any authorized external entity to access a predefined set of business data programmatically over the network.

A Brand New Channel for Economic Advantage

It's frequently said that most businesses today are literally awash in high value data that they are usually under exploiting. In these often trying economic times, having highly valuable strategic assets lying fallow that could be put to immediate business utility doesn't make sense. Enter open APIs to provide a way to unleash the business value of strategic sets of business data and directly turn them into rapidly proliferating new product partnerships and innovations.

Elements of An Open Web API

And given that open APIs are essentially a public SOA with a business model embedded in it, many organizations are often closer than they realize when it comes to making APIs a reality, at least technically. In fact, it's one of the few ways that SOA approaches can go from being an overhead cost to being a direct creator of new business value and is also part of the closely related discussion about Web-Oriented Architecture (WOA).

The business of open APIs itself has become an interesting intersection between the freewheeling participatory aspects of Web 2.0 and the more staid classical business pursuits of business development, product development, and supply chain management. At these important crossroads, APIs offer a way to combine all four areas into tight, effective new delivery model in an OEM manner.

Put simply, a business offering up its services in a highly consumable, repurposable, and online form enables anyone to "onboard" themselves and begin innovating on top of the business data that the API provides. These relationships then embed the provider's data feeds deeply into 3rd party products. And don't forget that APIs are typically integrated to live databases, literally connecting together the supply chains of the API provider and consumer in real-time.

This self-service onboarding model is very similar to what we saw with the Windows platform and 3rd party applications in the 1990s or the more modern version of it such as Apple's App Store for the iPhone. Actual examples of successful open APIs include companies like Salesforce, Amazon, and Twitter, which in all three cases the public API -- and not the traditional Web user interface -- comprises between half (Salesforce) and 90% (Twitter) of their real-world use today by their customers.

Key Aspects of Open Supply Chains (aka Web APIs)

As a business, there are a number of implications for opening up an API over the Internet to existing and potential partners and customers:

  • Asymmetric partnership scale. With the API model, you do the partnership work one time and then partners onboard themselves going forward using their own resources as often as they like for marginal additional cost to the provider. Done right, an API is essentially a turnkey partnering program where the API provider does the upfront work to create the infrastructure (see diagram above) and each partner does the technical, business, and legal work on their end. This makes it easy to support tens of thousands, or in the case of large providers, literally hundreds of thousands of partners with just incremental resources.
  • APIs can create direct growth in revenue and market share. Because APIs provide the technical and legal framework for reuse in other products and services, a businesses providing APIs gets embedded across the network in often countless 3rd party applications (mashups), internal IT systems, and destination sites. Depending on how valuable your data is (if it's close to best-of-breed you can even charge for it), this will grow marketshare as well as directly drive revenue. Look at Amazon's revenue curve for their API as of last year to get a sense of how powerful a driver APIs are for growth.
  • Success with APIs involves business and legal support, as much as capable technical implementation. It's increasingly appearing that APIs are an important new business channel in the same vein as storefronts, the telephone, and even Web sites were in years past. While it's almost exclusively a B2B story, APIs require the same investment as older traditional business channels. This includes marketing, relationship management, partner support, and legal permission to create derivative works, to name just a few.

As the ingredients of a successful API initiative becomes more and more clear (hint: it's far more than creating a Web service using your favorite development toolkit), we are now seeing infrastructure designed explicitly to enable many of the operational requirements and often some of the support requirements as well.

Related: Expanding Our Notion of SOA and Enterprise Data Services

Over the last year I've been assembling a list of what's available today to create a successful API. In previous years one had to build much of the API infrastructure by hand and it was an expensive proposition. Products did not exist to provide most of the standard functionality such as variable quality of service, rate limiters, hardened end points, usage tracking by account, management tools, service flavors (SOAP, REST, etc), community tools, and other capabilities. That has changed considerably of late and there are now a rapidly growing number of choices you can take advantage of to enable your new API business channel.

Industry Maturity: The API Enablers Arrive

While there is still no one-stop shop for everything you need to do to create an API for your company, some solutions are getting close such as Mashery, while others like XINS and Kapow, focus more on the purely technical side.

The following list of API infrastructure providers is in alphabetical order:

AmberPoint LogoAmberPoint has long been a leader in SOA governance and services management and they now bring that expertise to their Cloud Service API Management capability. For its part, Amberpoint realizes one of the key differences with APIs is that one side of the relationship is outside of the organization: "What [API] solutions have in common is that they are not under the direct control of the teams responsible for the applications that consume them or the transactions that flow through them."

For API providers, AmberPoint can provide monitoring and security capabilities that maintain service levels and meter consumption, while protecting access, business data and privacy. Service-level agreements and consumption can be monitored, and then communicated to API customers via reporting. While more expensive than most of the solutions on this list, AmberPoint also brings one of the largest slice of the API infrastructure pie to the table.

Apigee LogoApigee is a self-service API analytics and governance service from Sonoa Systems. Free for under 10,000 API requests per hour, the service provides an intelligent public proxy around your existing services to provide many of the critical operational elements of an API such as fully defended end-points, usage tracking and metering, policy enforcement, and detailed usage analytics.

Denodo LogoDenodo has been around the data mashups industry for a while and it's also a player in the API space when it comes to B2B integration scenarios. While it's more focused on automated workflow scenarios, it's explicitly designed to make "updating and distribution of information on all the websites and/or extranets of your partners/distributors/outsourcers" easier and more straightforward. While it's not as easy to create the type of open-ended API with Denodo that's described here, some B2B integration scenarios combined with Denodo's data hub approach can often fit the bill for specific requirements or as an intermediate step to full-strength public APIs.

DirectAPI LogoDirectAPI is a service designed to make it as easy as possible for businesses to publish their API, set usage quotas, manage customer accounts, and engage their developers in a community setting. Ease-of-use is one of the core values of DirectAPI though it only currently supports more Web-friendly service models like REST. SOAP support is coming in the future. The service itself is cloud based on Amazon EC2 today.

Infochimps LogoInfochimps may not have the greatest name but it provides one of the easiest on-ramps to APIs in this whole list, requiring just about zero technical skill. Infochimps makes it possible for just about anyone to post data under an open license for the world to share and edit. Or for your company to sell. Infochimps has a built-in full lifecycle business model where they "connect your data to a massive audience of customers. You control the terms, you set the price, we handle storage, distribution and billing."

Kapow LogoKapow has been on the mashup scene for a long time now and is well known as one of the most capable API providers in the business. Their technology can turn just about anything (traditional databases and content) into a service that you can then expose to your internal and external customers. They also have a online service call OpenKapow that can be used to "quickly create, deploy, share, and use Web services that mashup anything on the Web."

Mashery LogoMashery is one of the leading API provider companies in operation today in my opinion. They understand the full strength vision of APIs as a true business model of the 21st century and the service shows it. It provides a one-stop-shop for API infrastructure including API management, usage throttling, business rules, API usage tracking, business intelligence, developer community, and much more.

3Ccale Logo3scale is another relatively complete service to create an robust business-class API for customers and partners. It offers API management, monitoring and analytics, developer community features, as well as billing and payment functionality.

Strikeiron LogoStrikeIron has been around for a number of years as a provider of services, but their new IronCloud product takes them into the realm of managed infrastructure for cloud APIs. IronCloud provides "self-service provisioning for service consumers, a redundant and load-balanced architecture, ongoing service monitoring for performance and reliability, Web service normalization for minimizing consumer complexity, usage metering, multiple protocol support."

XINS LogoXINS stands out as the only open source product on this list. It's an open-source Web services framework supporting HTTP protocols such as REST, SOAP, XML-RPC, JSON, JSON-RPC, and more. While it only supports Java today, it does provide a robust way to create many endpoints for Web services for those that intend to roll most of their API functionality themselves.

There are many other API tools and platforms coming out in the next few months, but this is a good start on what is becoming a pretty hot space. Please e-mail any additions to this list of API infrastructure providers and I will review and add them as appropriate.

Note: Open APIs are on my list of the Top 18 Emerging Topics at the Intersection of Business and IT in 2009.

1 TrackBack

A Web-Oriented Architecture (WOA) Un-Manifesto from Dion Hinchcliffe's Blog - Musings and Ruminations on Building Great Systems on December 14, 2009 2:33 PM


How dare you! Infochimps is a great name! :) In all seriousness, thanks for the kind words and I think you've characterized our approach to the niche quite well.

Besides being the simplest (and cheapest) way to get your data online, we're the best option for allowing users a global perspective on your data. A traditional call-response API has many advantages, but a waterfountain's no good if what you want is to play in the pool.

For those seeking a traditional API solution, you're right to single out Mashery: I've yet to hear anything bad about their service. I'd also add Gnip.com to the list, though I'm not sure how enterprise-oriented they are.

We will be rolling out early next year a service that allows the enterprise to put data into a cloud cluster we supervise. End users can rent time to perform compute jobs across the enterprise dataset, while we enforce your rules about what data comes off the server. So for example, they can roll up your sales data by geolocation, combining it with their web analytics and with demographic information from the infochimps commons, all without either party having access to the other's at atomic scale.

-- Flip Kromer
President, Infochimps, Inc

Great article and as always a great diagram to summarize what's happening - and thanks for including us! What's great to see at the moment is the huge variety of business models which are becoming possible right now - and a strong convergence between techniques from APIs, widgets, mobile apps and affiliate models at the same time. We already provide a pretty flexible set of tools to set up different kinds of access models for APIs but we're still often stretched by new things customers want to do.

It's also not just data access but read/write that's growing (Digg launching theirs yesterday) which multiplies the potential.

If people are looking to launch an API I'd definitely encourage them to look at some of the providers on the list (us of course :) - but the others have great products too) since it can make getting off the ground quick and easy + have a sound long term strategy built in.

--- Steven Willmott
Tech Lead / 3scale (http://www.3scale.net)

This was a great read Dion.

It does a really good job of conveying what's already out there as a success story and the reasons why people have started to open up their information. It also makes me happy that we at Best Buy have already been doing this for nearly a year.

We are seeing some really interesting internal and external implementation results. As our service matures and we enable more features I'm looking forward to see what comes out of the Remix API as well as the Open API space in general.

Joe Zwack
Best Buy Remix Community Manager

I love APIs and data, they butter my bread.

End users can rent time to perform compute jobs across the enterprise dataset,.

NOT Sure I agree with the article but I am a fan of your writing style! :D

How to translate it in german soorry i dont understand english

Dion Hinchcliffe

Dion Hinchcliffe is an internationally recognized business strategist and enterprise architect View more

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