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December 19, 2014

Could the API Economy Revolutionize Global Business?

Whether your favourite buzz phrase de jour is Web 2.0 or the Internet of Things, there’s little doubt that APIs are driving a revolution in the way we interact with the Internet and an increasingly connected world.

An API or application programming interface is the set of programming instructions and protocols that allows one piece of software to access the services of another. These instructions allow the program to interact with systems and files beyond its own limitations and the potential utility, if not quite limitless, is certainly wide-ranging. If you’ve ever looked at a Google Map embedded into the ‘find us’ section of a website, tracked a flight or even ordered fast food online, you’ve used an API.

APIs bring benefits to consumers but they can also provide innovative ideas for businesses. Speaking at the WS02con 2014 in Sri Lanka, Rana Peries, head of innovation and digital financial services technology Asia at the Commonwealth Bank, said: “The API economy is an economy where companies expose their business services in the form of APIs to external parties in order to generate additional revenue. Today’s customers are demanding a more personalized service which is integrated to their lifestyles [and] this is translating towards delivery of next generation services such as taxi services.”

He also mentioned the hotel industry, highlighting two perhaps surprising areas that have been turned upside down by APIs. The taxi booking service Uber — which allows customers looking for taxis to connect directly with drivers — has caused a storm worldwide and been banned in some territories and cities. When Seoul announced it was looking to join those that had banned the service, Uber responded that the city was “in danger of remaining trapped in the past and getting left behind by the global ‘sharing economy’.”

Airbnb, meanwhile, is at the forefront of a new breed of companies challenging traditional hotels and bed and breakfasts by providing a service that puts the owners of houses and apartments in touch with short-term renters and vice versa. Both these business models would have been impossible without the use of APIs.

There are numerous other ways that APIs are impacting different businesses and the way they operate. Translation APIs can easily connect a website’s CMS with a translation platform. Product names, technical manuals, user generated content and other materials can easily be uploaded through the API, considerably reducing the time needed for translation.

Social media APIs are everywhere, from simple follow and share buttons that can be embedded on any website to more extensive systems such as Facebook’s Graph API, which is designed to give developers access to every object in Facebook’s database and the Google+ API. This can be used to tap into G+’s own social graph and to integrate features such as cross-device sign-on into external sites or apps.

As well as public APIs there are also estimated to be tens of thousands of private APIs that provide a language-independent interface for selected and allowed developers to use. Some of the more common uses of private APIs are in the medical field, where they are increasingly used to securely document and share medical records, and within and between financial services such as credit card providers, where they are used to share financial information.

As with most new developments there are potential risks. Various components of the system could be vulnerable to threats such as distributed denial-of-service (DDoS) attacks, session hijacking and message paring. When the PlayStation Network was hacked it exposed the data of millions of online gamers and Sony was hit with a record fine by the Information Commissioner’s Office. It’s essential that developers know what kind of security they need and test early and often.

As revolutions go, of course, this one has been in the works for a long time. It’s been more than a decade since Amazon became the first major player to open up its API, allowing external developers to easily establish an Amazon presence on their own websites and laying the foundations for Amazon Web Services to become a multi-billion dollar business in its own right.

You could call it more a gradual evolution than a revolution but it’s only in the last few years that APIs have really exploded. In 2011, programmableweb, the world’s largest API repository, listed around 3,000 registered public APIs. By 2014 it was more than 11,000. Every day sees new APIs registered and, while many of these are from small companies and developers, there are also some huge names involved. Just this week at the Connected Car Expo preceding the 2014 LA Auto Show, Google and Hyundai unveiled an Android Auto API that will allow third-party developers to adapt their apps for in-car use. Hyundai has said it expects to offer this functionality to drivers of the 2015 Hyundai Sonata and Honda will also offer Android Auto in its vehicles starting in 2015.

APIs can be used to extend the value and life of applications, to create entirely new platforms and to come up with innovative models that challenge the established way of doing things. They’re already revolutionising the way many businesses work and so far we’ve only scratched the surface.


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Article by Christian Arno, the Managing Director of Lingo24. Follow Lingo24 on Twitter @Lingo24.

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