An equation to understand the API Economy
We've seen an explosion of APIs being offered to developers in the market. You, your competitor and that kid in his garage are all building APIs to implement their products and services. The reason why we have seen such an explosion in APIs is because of this economic principle -
Any competitor in your business will pose a serious challenge to you when its marginal cost of providing the same service is lower than yours. The same competitor would totally disrupt your business if this marginal cost is reduced to zero.
As a platform, you sell services to your consumer. To avail these services, the consumers must integrate with you. There is usually a cost associated with such integrations. In the old days, businesses had to pay consultants and integrators to integrate multiple systems. The scalability of your platform was therefore constrained by the number of integrators. With REST APIs you would simply open up your platform for anybody and everybody to integrate with. Through these integrations, your platform's capability improved and your service catalogue grew, at no cost to you.
That's exactly what the iOS platform benefited from (with all those apps being created on them). That's exactly where facebook founds its growth (remember FarmVille and AngryBirds). When you open up the right APIs, your marginal cost of adding a consumer/provider on your platform becomes zero. Your consumers benefit from a new service or even competing providers of the same service (which drives the cost down). With message queues, you are still dependent upon adding and maintaining this integration channel, which might add to the cost.
MarginalCost (integrating new service/consumer) ~= ZERO
That's the equation to drive your decisions and your API strategy. It'll help you answer the most critical questions - Which APIs should I prioritise? How do I evangelise my APIs? Who is my competition in this space?
This article is excerpted from the detailed article published on Unfuse Blog
This got me thinking where all are we have still not moved to APIs!
Damian Thurnheer, Rhys Spong I would love to hear your views on what else drives the API Economy. Besides #apigee that is 😁