APIs are the fastest growing, business-influencing technology in the IT industry today. This chapter provides insight into the world of APIs, and how APIs are transforming the IT industry.

We explore the business and opportunity aspects of APIs and how business are driving real success with exposing various business functions to extend their reach.

This chapter describes the following topics:

This section introduces the application programming interface (API), provides a comparison of APIs with the traditional web sites, and describes the values and benefits of using APIs.

With an API, developers can exploit functions of existing computer programs in other applications. APIs have existed for a long time, since computer programming first started.

Over the years, APIs have evolved based on advances in technology (such as network speed, security, and dynamic integration), and also maturation in business that allows for thinking of business functions as discreet, consumable entities. Competition is now possible for business functions based on business value as opposed to technology foundations.

API architecture has also evolved over the years, most recently with the advent of service-oriented architecture (SOA). SOA provides for an architectural model to manage consumer and provider relationships in a dynamic environment. This paved the way for producing and exposing APIs with better business enablement capabilities including request access, entitlement, identification, authorization, management, monitoring, and analytics.

Today, progressive companies are exposing APIs to allow others to consume their business functions, for a profit. Where Windows and Linux have been traditional development platforms of the past, Google, Facebook, Twitter and other companies are becoming the development platforms of the future. All of these companies built a functional platform of business capabilities and extended their business models by exposing APIs so that developers can exploit their functionality. Google Maps is a great example. Many developers write mashups on top of Google Maps for various reasons, for example retail store locator, traffic reports, road conditions, and so forth.

The way we work and reach customers is evolving. Figure 1-1 on page 3 shows a fundamental shift from websites as being the information technology access mechanism for the majority of businesses, to the rapidly growing ecosystem of internconnected devices that require APIs to consume business function. Today, we have applications in cars, appliances, smartphones, game consoles, and other devices, that communicate with back-end business functions through APIs.

This “interconnected revolution” is here today, as in the following examples:

All of this is possible through APIs.

The following saying is actually true:

With the advent of e-business, many companies exploited their newfound capabilities of World Wide Web connectivity by establishing websites to further their business ventures. Based on the maturity of technology at that time, most companies were cautious and most if not all of their functionality were enclosed within one website. This minimized the risk and exposures of fraudulent use.

Today, advancements in technical security capabilities have paved the way for companies to expose finer grained business functions as APIs that can be consumed by or incorporated into larger applications to extend and enhance the business value of the functionality. This provides for a competitive environment for business capabilities.

Various categories of APIs are emerging:

It is conceivable that standards for categories will begin to emerge, just like web services standards emerged for common functions such as provisioning, mediation, and security.

One important business reason to enable APIs in your business is to monetize your business capabilities. For example, if you are a credit reporting agency and you produce an API that establishes credit scores and facts regarding a consumer's credit history, then many banks, loan companies, insurance companies, and solicitation companies would be more than happy to use (consume) your API for money. It provides them with the ability to perform the API functions, yet avoid having to develop and maintain their own API functions. In addition, they can easily disconnect yours if a better one comes along. This is the differentiator for APIs in an API economy: the ability to quickly subscribe to or unsubscribe to business functionality. It makes business more agile by driving a healthy competition for business function.

The term API economy refers to the opportunities associated with productizing the exposure of your business functions as APIs. Consider that your API is a consumable product, and you need to market and position your product correctly for maximum profit. So API economy deals with the additional channel opportunities associated with the proper exposure of your consumable business functions.

As part of the API economy, we also need to understand the role of API marketplaces. Think of API marketplaces as “app stores” for APIs. Many different marketplaces will evolve, from public, to private, to business partners. These marketplaces offer a variety of capabilities including multitenant. Business partner exchanges are good examples of multitenant. Multiple business partners can have access to API catalogs with search and access capabilities being based on the authorization of a partner.

Figure 1-2 depicts the IBM reference architecture for API Management. The reference architecture encompasses the entire API economy, including API consumers, API marketplaces to find APIs, and API providers.

The reference architecture figure shows the following information:

These are technical platforms that can serve as a route to market and consumption for your APIs, such as smartphones, tablets, desktop computers or laptops, televisions, and appliances with smart applications.

These are fundamental enablement capabilities for managing the consumption of APIs that are exposed to multiple consumers.

These are the ecosystems for APIs, including business support systems, social computing capabilities (feedback, advertising, and so forth), self-service enablement capabilities (such as registration, entitlement, provisioning), and the associated business support services required. Marketplaces provide for the marketing, access, support and socializing of APIs, including communities that can provide support help, abilities to rate APIs, and many other capabilities that provide for fast and easy consumption of APIs.

These are fundamental enablement capabilities for managing APIs that are exposed to multiple consumers. The capabilities include security and management, analytics, and monitoring, API design and integration, and development/operations for APIs. For more information, see the following chapters:

The bottom of the reference architecture diagram, Figure 1-2 on page 5, shows the underlying business and IT services. These can be data services, serving information from databases, or application services that perform some level of processing. These services reside in some level of infrastructure, which can be cloud-based, or on-premises services. The services can be built using an SOA type of service integration architecture and can themselves be SOA services.

This includes business positioning, business strategy, marketing, productizing APIs and processes that drive the success of an API strategy (such as community support and social networking).

Consulting services can be provided by business partners and third parties on the technical enablement of APIs. Examples include security (OAuth), scaling (topology and failover strategies), and aggregation of business analytics.

Several classifications of APIs exist:

These APIs are used exclusively within an organization or company. Although adoption of REST is growing strong among all industries within an enterprise, SOAP/HTTP or .NET still has a large presence. In most cases, REST will wrap an existing SOAP/HTTP or .NET service.

These APIs are primarily available externally to consumers. At this stage of maturity, the growing trend for external APIs are written based on REST/JSON technologies. They provide access and integration capabilities that are easier to use than the more industrial-strength capabilities leveraging web services (for example, WSDLs).

These APIs are specifically designed for partners to be able to access business functions in relation to the business relationship of the partnership. Examples include online catalog, ordering, and reconciliation.

Over time, other categories of APIs might come into being.

This section looks more closely at what it means to drive business values with APIs. It explores the various market pressures, the evolution of APIs, and different business models that apply.

When you start exploring the fascinating world of APIs, you quickly discover how extensive the ecosystem is surrounding API enablement. The reason for that is easy: APIs accelerate business opportunity by extending business functionality with fine grained functional access. This allows merchants to push out their business models and allow partners, suppliers, and consumers to augment the business capabilities of merchants.

Amazon is an example. Amazon started as an online bookstore. With the visionary exploitation of APIs, Amazon built the world’s largest online merchandise retailer. It accomplished this by extending out its retailing provisioning, entitlement, enablement, and fulfillment processes through APIs. Thousands of Amazon business partners extend their ability to sell their items using Amazon’s business capabilities through APIs.

Competitive pressures drive industry segments into adopting API-based technologies to monetize their business functionality and make provisioning of business functions more practical. This enables companies to reach more markets with less investment and allows them to branch out into various markets altogether. Success goes to the companies that can maximize the profitability of their business functions through APIs.

Brand loyalty can play a big part also. Using Amazon as an example again. Amazon has a tremendous brand affinity. The Amazon Web Services (AWS) Marketplace (Amazon’s API marketplace) attracts not only developers and partners looking to exploit their APIs, but other vendors also, such as SAP and Oracle (that provide their own APIs on AWS, to provide analytics and database APIs for additional value).

As mentioned previously, APIs have existed for a long time. Since the first computer programs were written, APIs have been providing “contracts” for information exchange between programs. Early non-web APIs were structured and rigid, requiring strict programming models and structural adherence.

The APIs emerged on the web around 2000, with Salesforce.com producing the first web-based API. That same year, Ebay released its API. Two years later, Amazon started Amazon Web Services.

APIs are now coming of age with the advent of cloud computing, where the ability to host external APIs has matured to a point where cloud service providers have scalable capacity to handle transaction loads and spikes in traffic. Mobile platforms now put application reach on millions of devices, all having access to back-end APIs across the Internet.

Serious API focus started around the year 2000, with a dramatic rise starting around 2008.

The largest repository of API information and mashups can now be found at Programmable Web:

This website provides catalog information, usage statistics, and access information on tens of thousands of APIs.

Trends are beginning to emerge throughout various industries. For example, social media-based APIs, such as streaming video, Multimedia Messaging Service (MMS), and tweets, are being widely used within the telecommunications industry and advertising.

In the travel industry, the vast majority of revenue is driven through API calls from web search sites, such as Expedia, to back-end hospitality providers (hotels, rental cars, airlines). Better analytics for discounting (based on travel habits and time logistics) are driving fierce competition.

Mobile application is currently extremely focused on payment based API capabilities. For example, Stripe, PayPal, and Chargefly are providers that are developing better and more secure ways to pay from your mobile device. Per-transaction fees are usually the norm for this type of business model, where some mobile payment vendors change up to a 2.9% transaction fee.

Previously, we said that APIs should be treated like products, with the appropriate levels of marketing, sales, and support. APIs can drive your brand. With Twitter, for example, the vast majority of Twitter traffic occurs through APIs, and Twitter is synonymous with API usage in the technical ranks.

APIs are needed for many reasons, including the following reasons:

By now, you have a clear idea that APIs are a good way to expand your business, maximize profit from business functionality, and drive new market expansion. There is nothing magical or mysterious about APIs. They are simply the latest technological advancements for driving successful business models.

A quick Google search on APIs reveal significant amounts of information, from various business models to partner strategies to API catalogs.

Before launching APIs, carefully consider the following information:

Thoughts must be placed into the business definition and also the technical architecture of an API.

There are strategies for different types of APIs:

We cover these strategies and how they apply.

Figure 1-3 summarizes the topics we cover here.

A growing trend is the enablement of internal API Management strategies. Companies are producing APIs for internal consumption, much like business services in an SOA type architectural model.

SOA is not dead. SOA is the architectural foundation for consumer/provider relationship management and API Management is grounded in that architectural principle. API Management is not possible without building on some of the more foundational aspects of SOA governance and management capabilities. API Management does provide a simpler provisioning and entitlement mechanism than traditional SOA. This is accomplished by the use of self-service portals for the discovery, request, access, and provisioning of API access through API Management. API Management is an addendum or augmentation to an SOA architecture. SOA and API Management have many similarities. They both require a catalog, provisioning rights, access entitlement, and usage metrics.

The most widely used partner strategy for APIs are affiliate programs. Affiliate programs drive a symbiotic relationship between partners (consumers and providers). Amazon, for example, has many affiliates that use and promote APIs to extend their (and Amazon’s) business model. Companies like Expedia, Amazon, Netflix, and Rdio all provide affiliate capabilities that allow partners to exploit their business systems and extend their business models. This way, developers use development platforms on these companies (for example, Amazon Web Services) to provide new business markets and niches. In most cases, these companies provide extensive developer support capabilities, including technical support (both at no cost and priced), blogs, communities, tooling (such as SDKs), dashboards for usage statistics, and in some cases marketing.

External APIs are usually publicly available APIs that are readily available for consumption to enhance and promote the company’s business. They can be free for use without registration, free for use with a registration requirement, or for restricted use, which always requires registration. These types of APIs are usually found on public marketplaces (such as Amazon’s AWS Marketplace), whereas private or partner-related marketplaces usually require logging into the marketplace to perform any operations related to APIs

Over the past few years, business models related to APIs have evolved significantly. Major business models for APIs with various granular instances include free APIs, developer pays, developer gets paid, and Indirect.

These APIs are available for consumption at no charge. Facebook is a good example of free APIs. Usually free APIs drive much business for the platform owner and their APIs drive significant usage. To promote its platform, Facebook provides SDKs for iOS, Android, and web-based applications (apps). An example of this is the Facebook SDK for JavaScript, which, among other functions, allows you access to the Facebook Graph API and Facebook Login capabilities. Essentially, anyone can add the Facebook “Like” API to their application.

In most cases, developers pay for usage to drive their own business ventures, analogous to having a cost of doing business. The significant categories of this type of business model are as follows:

Pricing is determined by metered usage, for example Amazon Web Services EC2 Cloud usage. Price is determined by the operating system platform and size of platform on an hourly basis.

Price usually drops with rising usage, for example VerticalResources. Prices drop with consuming more volume (API calls), so after analyzing usage over a time period, users can adjust their tier. This works in a similar way to how cell phone voice plans have worked for the past ten years, where levels of phone calls determine the per-call charge.

Pricing is determined by consuming units of measure, such as calls. An example is Google AdWords, where developers are charged by how many times they call the API.

Pricing is dependent upon the value of the transaction. Example: Paypal. PayPal charges a percentage of the transaction fee as their fee for providing payment services.

In this model, developers receive payments for extending the business model of others. The two major categories for this model are as follows:

Developers receive a small percentage of total revenue based on a business agreement with the provider.

Developers receive scaling revenue (either percentage based, fixed price or tiered scale) based on extending partner platforms. An example is Shopping.com, where developers are paid a small portion of revenue based on the volume of revenue their API helps other merchants.

Predominantly, this business model might not include direct monetary exchange, however the providers benefit significantly from exposing these types of APIs by generating revenue in other ways. A good example of this is Netflix, where providing APIs for growing numbers of devices drives higher subscriptions.

In this chapter, we investigated many important business reasons and aspects of APIs, and how they can significantly drive new business and growth. Many of the API-centered businesses (such as Amazon, Google, Twitter, and Facebook) have experienced tremendous growth over the past several years. APIs have played a significant role in their success, and will continue to do so in the future.

The remainder of the book explores how to build and expose APIs with IBM API Management.