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The App Economy's Special Ingredient: APIs

Enabling outside companies to link to your company's digitized services through APIs will be key to success in the future economy, Hurwitz study finds.

Application programming interfaces that allow outsiders to create applications that link to core company services are likely to become a requirement, not an option, in the future economy.

That's one conclusion from a study of 24 companies that have experience in implementing APIs. The leading example of a successful API implementation is Google's issuance of a public API for Google Maps. The API allowed outside developers to build applications that tap Google Maps to show the locations of businesses and services. Android and Apple iPhone applications are frequent users of Google Maps, and the Maps logo shows up on numerous ecommerce Web sites.

The study concluded APIs also speed up the integration of partners and extend a firm's outward reach for new customers. The report, "The Benefits of APIs in the App Economy," was written by Fern Halper, Judith Hurwitz, and Marcia Kaufman of Hurwitz & Associates, a Web 2.0 and cloud computing market research firm.

The conclusions are not surprising, given the fact the report was sponsored by Apigee, a Palo Alto, Calif., firm that provides API best practices consulting and management. At the same time, little documented feedback from API implementers exists. Sam Ramji, VP of strategy at Apigee, said his firm will seek to regularly finance a survey to serve as a barometer of activity by the community of API implementers.

[Learn more about how to present your company's APIs to outside developers. Read Do's and Don'ts of API Development. ]

An API is a documented SOAP or REST protocol that a registered developer may use to connect his application to a company service. By using APIs, the companies that participated in an online survey said they had "an increase in Web traffic by more than 70% and in Web service usage by 50%" through their APIs.

At the same time, outside developers often complain about the APIs they encounter on the Web as they try to develop applications. In many cases, they are poorly documented or have changed since the documentation was written, causing carefully crafted applications to fail. "Hideously outdated documentation ... that will make you want to slit your wrists," wrote one developer in a survey by Your Trove on how independent developers viewed APIs.

A well-designed, well-documented API can lead to a 30% decrease in the amount of time it takes to connect your systems to those of a new partner. Good APIs also increase the company's reach, allowing it to find and serve 70% more customers and partners than it could previously, the report said.

It also said: "Enterprise can harvest significant value in terms of reach, agility and innovation using APIs to increase distribution through a third-party ecosystem." Outside developers often think of uses and constituencies for services that the company originating the service has overlooked.

"A key finding is that APIs have a major impact on a company's ability to quickly add partners to their ecosystems with a modest investment," the report concluded.

APIs also allow companies to reach new customers through the proliferation of mobile devices without needing to design a service for each brand of device. A company's API, based on standard Web protocols, is a universal gateway to many devices, with the outside application writers configuring their software to the screens and processing power of the device.

Ramji in an interview said: "APIs are so much simpler than technologies used in the past to connect partners into our business ... Integration (with a partner or outside developer) that would have taken three months now takes two months." The predecessor to simpler RESTful APIs are Electronic Data Interchange and, in some cases SOAP, Ramji said.

"SOAP was still very close to Java and the .Net system of languages. The number of developers who could use it effectively was limited to 500,000-700,000," he said. Meanwhile, a new generation of developers has come of age using languages such as Ruby, JavaScript, and PHP, but there's no good way to use SOAP with PHP, which has three million active developers, he added.

The 24 respondents cited in the study completed a Hurwitz online survey and in some cases the report's authors followed up with interviews. The companies involved included large enterprises and small and midsized businesses, including startups.

Netflix has become another major implementer of APIs as its business switched from delivery of movies via the U.S. Postal Service to digital downloads to home computers and a variety of other devices. For more on Netflix's adoption of APIs, see Your Company's Next Secret Weapon: Cloud APIs.

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