by Ross Mason

How the API economy is igniting a cultural shift in businesses

Aug 23, 2017
APIsDigital TransformationIT Leadership

As the fast eat the slow, CIOs need to redefine the role of IT and enable the broader business to speed up the pace of innovation through self service.

We are in the middle of a generational shift in technology. The convergence of digital forces—namely mobile, SaaS, cloud, big data, Internet of Things (IoT) and social—is creating a massive disruption in the market and altering consumer expectations. Today, everything needs to be personalized, dynamic, always on and always mobile.

As a result, there’s no shortage of organizations hoping to reinvent themselves for the digital age. Success in today’s fast-paced economy relies on continuous innovation and adaptation, leaving no room for disjointed technologies and stagnant processes.

However, most organizations are struggling to adapt to this new, rapid way, which may be one of the reasons why 52 percent of the Fortune 500 have fallen off the list since 2000. It also explains a key reason why the likes of Amazon, which is manically focused on moving faster than competitors, has climbed the ranks in under eight years.

For Amazon, winning is about speed, agility, inventiveness and an ability to try many experiments rapidly and fail fast. Recent experiments by the once-exclusively internet company include opening its first brick-and-mortar retail store and soon opening its first convenience stores.

It’s clear the big no longer eat the small; the fast eat the slow. Speed is one of the single most important characteristics that determine a company’s success today. It’s critical for bringing new products to market, establishing new global presences, changing existing processes and onboarding new partners—all faster than competition.

However, speed is proving to be a struggle across industries as new digital forces converge. So, how can companies speed up to win in the API economy, which is simply the sum of digital exchanges between two or more parties?

The IT delivery gap

A big barrier for companies looking to achieve speed is the IT delivery gap. IT has a relatively fixed set of resources and a constrained capacity to deliver on new projects. Yet, as new digital forces enter the workplace, the business wants to move faster and continuously evolve to meet new market and consumer needs. All of a sudden, project backlogs build up and overwhelm central IT teams, who then hold back the business.

In this frazzled state, IT teams often resort to creating shortcuts to complete projects on tighter timelines and smaller budgets. These shortcuts often mean creating point-to-point connections between systems, usually with an outsourced workforce. However, each point-to-point connection creates tight dependencies between applications so any future changes require extensive and costly downstream work.

The resulting technical debt compounds the problem with little thought given to long term manageability or reuse. Eventually, business users don’t feel a strong partnership with the IT team, leading them to take matters into their own hands and purchase their own technology tools. This is known as shadow IT, and it puts mission critical customer and product data at risk, putting more pressure on central IT.

The reality for established enterprises is that the centralized IT model is no longer working. IT teams can’t keep running faster on the project hamster wheel. With today’s digital forces knocking down the door, central IT needs to evolve and operate under a new model that caters to ever-changing business needs.

The new IT operating model

To close the IT delivery gap, IT needs to shift away from the traditional project-based approach—where they try to deliver all IT projects themselves—and toward an approach that allows IT to build reusable assets that are consumable by the broader development community within the organization.

The modern API is the core enabler behind this approach. Modern APIs adhere to standards (e.g., HTTP, REST, JSON) that are developer-friendly, language agnostic, and easily accessible and understood broadly by developers. These modern APIs are more than code. They are  products; they live beyond any one project; they have a strong discipline for security and governance; and they have their own software development lifecycles (SDLC) of designing, testing, building, managing and versioning. These new API characteristics completely change the disrupt-or-be-disrupted game.

Now with API-led connectivity, rather than connecting everything point-to-point, key assets become managed APIs that can be discovered by developers in an environment still tightly secured by central IT. Central IT essentially “Lego-ifies” the business, as teams compose, recompose and adapt these building blocks to address changing needs. Then, the speed with which every subsequent project is delivered begins to accelerate because the new operating model eliminates the work needed to build future projects and processes from scratch.

The internal API economy

The web has proven how effective APIs can be in driving speed and innovation on top of self-service capabilities. With approximately 16,000 open APIs on the web, developers can build an idea in days and scale it or kill it just as quickly. Almost all of us use these services every day. Almost every popular mobile app we use leverages building blocks on the web, so app developers don’t need to build their own maps, communication services, data services, and more. Developers can focus on building value and innovation on top of these APIs.

To participate in the external API economy, businesses need to drive an internal API economy first. Innovation at the edges doesn’t work unless a business can unlock its core, which is often made up of big, monolithic infrastructure. By opening up APIs internally, businesses can free themselves from the limitations of their legacy systems, changing the way they deliver digital products and services to customers, partners and employees.

To drive this innovation, organizations are shifting to an IT-as-a-Service operating model, where IT-owned capabilities are being offered as a service to the business. With this strategy, businesses are creating internal API economies, where assets are consumed and built upon to drive new value internally and externally.

A successful internal API economy requires IT to decentralize and democratize application development and data access to the business as a whole. In addition, central IT needs to invest in enabling a broader set of developers internally to discover, use and self-serve these assets, so the business can deliver more of their own projects. This changes the relationship between IT and the business.

To win in the digital era, companies need to play a larger role in the API economy. We’re all used to the instant connectivity that puts the world at our fingertips. Today, it’s difficult to imagine standing in a long line at the bank to cash a check, or waiting more than 10 minutes for our taxi to arrive. Whereas a mere five years ago that would have been a normal part of our daily lives.

The unsung hero of our connected world is the modern API. It’s what makes possible all the interactivity that we’ve come to expect and rely upon. It helps drive the speed with which new technology products can be brought to market faster than the competition, establish new market presences quickly and change processes and workflows to fit evolving consumer tastes.