Why Every Company Needs an API

January 18, 2012 by

For those of you not familiar with the term, an Application Programming Interface (or API) is essentially the source code that allows two independent websites or databases to communicate with one another via an Internet connection. As I’ll soon explain, it’s an extremely valuable business tool for almost any type of company.

First, a real-life example. Netflix and Facebook want to partner up to automatically tell your Facebook friends about the movie you just watched. The prehistoric way to do this would be to have an employee at Netflix compile a list of every movie everyone watched yesterday and send it over as an excel file each morning. As you can imagine, this process would be time consuming, error-prone, and slow.

Image provided by: Apigee

Alternatively, Netflix can fire up an API an automate the whole process. After verifying that Facebook has the proper credentials, the Netflix API seamlessly transfers Facebook the account data they’re interested in, in real time, with minimal maintenance. Once in place, the same API can be used for other purposes as well.

How does that apply to my business?

You may be thinking an API is a nice tool for software engineers at Internet companies, but has nothing to do with your predominantly brick-and-mortar business and wouldn’t be useful to you in your non-technical position.

This couldn’t be further from the truth.

In my consulting work for Mashery, a company that manages the Netflix API, I’ve come across dozens of traditional companies that have creatively used APIs to accomplish a variety of different business goals. Wherever there’s inter-company communication and lots of dynamic data, there’s usually an API lurking behind the scenes (or at least there should be). Some common use cases for an API include:

  • Allowing 3rd parties to develop Android, iPad, or iPhone applications for your company gets the software to market faster without having to hire an internal team. An API feeds the 3rd party developer the data they’ll need to build and maintain the app (say, today’s stories if you’re a newspaper).
  • Managing a company’s indirect sales model. For companies that have a network of affiliates acting as re-sellers of their product, an API manages what can be hundreds of dynamic relationships, making sure the parent is in full control of the data each affiliate is receiving. For example, Expedia’s APIs make its inventory of airline tickets and hotels available to other travel websites in exchange for a fee per transaction.
  • Allowing for mashups, or programs that bring together data from another source and mix it with their own content. For example, a fashion website might want to show you the nearest place you can buy a particular pair of shoes. The department store’s API would provide them with pricing, inventory, and store location data in order to drive traffic.
  • Internal coordination. At a company with multiple distinct branches, communication between the branches can be facilitated using an API. For example, a client calls customer service to complain about a late delivery. Using the distribution branch’s API, customer service can tell them what went wrong during the shipping process and the new ETA.

The above examples all offer the user of an API some combination of additional revenues and reduced costs. But there’s one thing that ties them all together:

APIs facilitate the flow of information to the people that need it

This allows your brand to penetrate new markets in the far reaches of the Web, and allows you to squeeze every last bit of value out of the data that your company has created. In an age where the Internet and big data have opened doors for companies to scale, an API is the tool that allows you to take full advantage of these developments. In my experience, there are very few businesses that couldn’t in some way benefit from an API.

Think about your own business:

  • Do you have regular communications with outside parties involving standardized information or data?
  • Could you increase sales by exposing your brand to a broader audience?
  • Could real-time data from your business provide value to another company?

If the answer is yes to any of these questions, it’s time to at least start thinking about an API.

Weekly Email Newsletter OpenView Blog RSS Feed

Subscribe with RSS or Email to get the best new ideas for
building great technology companies delivered to you.

Tagged in

Discussion

  • http://twitter.com/StevenForth Steven Forth

    One reason LeveragePoint developed APIs is to allow our customers and third parties to write extentions to our platform. One customer is using LeveragePoint to collect and organize all information they have on competitors and needed some data fields we did not yet support. Our API actually allows one to create a new data field inside the application. Down the road we want our platform to become the general platform that people can use to create pricing and economic selling applications.

  • http://profile.yahoo.com/J4RABLGX5RS5IHL2K2XFKWPPSY Dominique

    Sure !, Every company needs an API. But one of the most important challenge is how to build an API on existing web sites or business applications when these apps were not initially designed to publish APIs….

    Consider you have for example a eCommerce web site working perfectly on the web, and that would like to create a new smartphone application to enable your customers to browse and by products from web site. For this, you will need to build an API on your eCommerce web site and have your smartphone app to use it.

    Building an API is complex process because APIs must be designed to use complex business rules and logic you already have in your eCommerce web site ! Why would you rewrite them for the API ?

    We used in my company a technology that enables any web application to be converted to normalized APIs without rewriting one line of code of the original apps, thus, saving us more than 10 times time and money compared to classical development. check out  http://www.convertigo.com

    • http://www.openviewpartners.com Scott Maxwell

      Dominique, you raise a reasonable point and a business could tactically “patch” their current systems to build an app for prototyping purposes.  The approach might get them to a first app faster, but my view is that all companies are going to ultimately get to well formed APIs as the patch approach is not very good for iterations and is not robust or scalable for multiple entities access. 

      When I designed robots, I liked duct tape and hammers for prototyping, but ultimately needed to engineer the right system for the long term.

      Scott

  • Amelia rodriguez

    Hello Nick
    We use a Cisco video conferencing system that enables our clients to request a language interpreter live on demand. In order to do that, we have to first provide the connection to the client’s and interpreter’s computers by sending them a link to that connection.

    Would an Api be helpful for this? Also would the priprietary nature of Cisco prevent us from utilizing such an api to make it easy for the Client/and the interpreter to connect to us?
    Amelia Rodriguez
    Vocalink, Inc.

     

    • Mike

      Going forward you might want to sign up new partners providing language interpretation services (e.g. for interpretation of some new languages) or you may also want to enable partners to provide your services under “private label” scheme. For both scenarios, a public API would be a very cost effective approach. But it has to be designed on use cases and possibly implemented together with the first partner willing to give a try initially.