In the early months of 2019, publications worldwide featured the news of Salesforce acquiring MuleSoft for a hefty price of USD 6.5 billion. So, what did MuleSoft do to command such an impressive purchase price from one of the world’s tech titans? The company makes software that manages APIs – one of the key pillars of today’s digital transformation movement.

But are APIs a new thing? Most technology enthusiasts will know the answer is No. APIs have been around for decades helping connect applications and systems and enabling them to work together to achieve specific functionalities that demand interoperability.

Then why is this interest in API peaking now? And what role does it play in the digital transformation journey of businesses?

Let us explain the backdrop a bit.

APIs are the central component in a new framework for software systems and applications. The API economy is one where different competencies of a digital application are shared and accessed by numerous business systems and enterprise process workflows through a programmable interface i.e., API. This unified technology ecosystem, driven by powerful integrations and seamless information exchange, is becoming the driving force of digital adoption among businesses and consumers alike.

The API economy facilitates businesses to be more open to integrating the services of a diverse range of applications and systems to ensure sustainable growth for all stakeholders while enabling superior customer experiences across all channels they operate. The API economy could allow linkages across the boundaries of department, function, and even business units to enable synergies that allow many innovative new services to be opened for users and consumers.

Some of the most prominent examples of the API economy include ride-hailing and food delivery apps leveraging the Google Maps API to help customers pinpoint their exact location for pick up or delivery.

So how does a growing focus on APIs help businesses? Let us examine the top 3 possibilities that can be realized by businesses through leveraging the API economy:

Diversification of Business

As APIs open the technology capabilities of businesses and allow other businesses to collaborate seamlessly through digital channels, avenues to diversify lines of business for an organization could open too. They can monetize new capabilities by integrating the services offered by another organization into their own offerings. Traditionally, this diversification would require building the new capabilities in-house and then scaling them up to reach competitive levels. With the API economy, it is more like a plug-and-play model that helps launch new business services faster and more completely.

Lower Cost of Service Expansion

Adding to the previous point, launching new business services digitally becomes more cost-effective with the API economy. Rather than having to invest in setting up the digital backbone, hiring resources, and maintaining separate teams for scaling up new digital services, all that a business needs to do today is to leverage an API call to have numerous capabilities brought into their technology ecosystem with minimal expenditure. To explain the scale of cost savings, imagine the money and effort Uber would have to incur if they had to build an efficient global mapping service that can match the abilities of Google Maps. The scenario is virtually unimaginable. APIs eliminate the need to build expensive digital services that are already in the market and offer a secure channel to build expertise and capabilities on top of it.

Faster Innovation and Time to Market

APIs allow companies to build new business models by combining a host of digital services from different providers faster and scaling them efficiently. There is no need to worry about the interoperability of services as APIs today can handle multiple data formats. API management platforms can help orchestrate the right workflow for information and data exchange between different business systems through their APIs. This will enable enterprises to bring innovative features faster to the market and help democratize secure data access across their technology landscape. This is precisely the reason why today’s IoT sensors and smart devices are increasingly being able to connect to mainstream apps launched by companies worldwide. The end benefit is that consumers get the best experience across all their devices.

Enterprise Operations

APIs also allow enterprise tools and systems to play better with each other. This enables smoother and more complete data analytics by eliminating data silos. It becomes easier to create workflows and automation that spans business functions and the boundaries of point systems. The unification and simplification of the enterprise tech ecosystem help deliver greater operational efficiencies and lays the ground for future-ready initiatives like AI and ML.

The API economy also poses some challenges that enterprises need to solve before realizing their full potential. One of the biggest challenges is ignoring security measures while opening up API access to other companies or developers. Enterprises need to guard their sensitive data and establish protocols and authentication controls to ensure that their APIs communicate only with legitimate and trusted services. Another challenge is picking the APIs for use in a business environment. Getting it wrong can impair the working of your entire digital operations. To prevent this, there should be a proper API assessment and requirement matching exercise that needs to be undertaken to prevent any mishaps.

Overall, the API economy is impossible to ignore for businesses that want to grow in an increasingly digital-first world. To ensure success, it is important to have the right guidance and roadmap in place to leverage the right services via APIs for your business. Get in touch with us to know more.