The Emergence of the API Economy and the Role of Analytics

22-01-2015
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The emergence of technological trends including social media, mobile computing, cloud services and the Internet of Things has fueled an exponential growth in APIs, both public and private. APIs now serve as building blocks for building new applications, allowing developers to focus on the core or unique part of their offering, while tapping into the API ecosystem for all of the non-core parts developed by others with the relevant domain expertise. The availability of a vast number of open APIs is fostering innovation, enabling developers to build new web applications quickly, and reducing the time-to-market.

Companies are adapting to new technological trends by using APIs more strategically. By exposing elements of their core capabilities as APIs, companies are taking advantage of new market opportunities or to better engage with customers or partners such as application developers or third party service providers, to drive business growth. Salesforce.com, for example, derives 50% of its revenues from its APIs. Facebook, Twitter, Google and Amazon have been exposing their APIs for a while to drive increased use of their services. Examples include Amazon’s store API, Facebook’s and Twitter’s login API, and Google’s Analytics API.

So, what does this mean for developers of APIs? It is imperative for a company to know how its APIs are being consumed – how others are using its APIs to build applications. This is where analytics can help immensely. Insights gained from collecting API usage data can serve as a feedback loop to the API development lifecycle to further refine or enhance the API, and drive more adoption. At the most basic level, analytics involves mining of usage data to determine which APIs are being used most frequently, how they are being used and by whom, which applications are the biggest consumers and if there is any surprise pairing of APIs that was not foreseen. At a more advanced level, analytics could be used to predict what may happen next and when. Examples of predictive analytics include foreseeable changes to the API ecosystem, potential increase or decrease in traffic, the magnitude and timing of the same, as well as the ability to gauge customer loyalty and retention.

APIs have helped companies enter new markets or extend their reach. For instance, Evernote, a leading digital note taking app, is focused on ensuring that its app can integrate with other third party apps via APIs, and thus can be used in various industry verticals and with different types of users. Due to the wide variety of devices now available in the market, Evernote uses analytics to figure out which screen resolution and devices to test on, to ensure a good user experience irrespective of device type or screen configuration.

Another area that analytics can help is in identifying complementary APIs, that together can drive growth e.g. travel services and maps. API consumers may be using the API in ways that the provider had not envisioned, allowing the provider to capitalize on that opportunity. Enhancing APIs so that they can add more value to others who are building applications using them or to their end users, can increase consumption.

Analytics therefore are one of the drivers for growth in the API economy. Expanding the use of analytics to fine tune API design and development can help a company reap benefits.

Salil Godika is Chief Strategy and Marketing Officer, and Industry Group Head at Happiest Minds.



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