Does your Business Need an API

Does your business need an API?

API, API economy, API strategy, etc., are words that are being increasingly used in the world of technology. Generating profits is the primary goal of any business and tech-enabled organizations worldwide are resorting to APIs in order to achieve this goal in a rapid manner. But does your business need to embrace this technology? Will it be beneficial? Is it hard to implement? In this post, I will try to break down these difficult questions into simpler ones.

What is an API?

API stands for Application Programming Interface. Right, but what does this mean to your business? In a single sentence, an API allows you to expose the digital assets of your business to software applications developed in-house or by other developers in a controlled manner. The digital asset can be pricing information, customer records, sales lead data, client orders or any other data having business value. The applications consuming an API is termed as an API client. A client can be a mobile app, a web application, an IoT device or any other device connected on the internet.

Extending use cases, satisfying customers

Your organization's data sitting in your database is useful to you for your business use case. But it might be useful to other organisations or developers in some other manner according to their use cases. For example, say you own a hotel located at a well-known tourist destination. Record of every customer checking in to your hotel rooms is stored in your database. Now you expose this customer data via an API to a cab agency operating in your area allowing the cab agency to connect to your customers and offer transport services. This results in a more fulfilling experience for your customers. And as business owners, we know that a happy customer is capable of bringing more customers leading to more profits.

Building partnerships

Now let's think about the cab agency. The cab agency gets more leads and sales conversions because of the customer data you provided to them. As a result, they are more likely to recommend your hotel to their own customers who are not aware of your hotel. Thus, by just sharing your data, which earlier served good only for your business is now benefitting another organisation which in turn is generating more leads for your business. Here, the API just gave rise to a profitable business partnership.

API Monetization

In the partnership example, the API acted as a marketing vehicle for both the organizations (the hotel and the cab agency), thus indirectly increasing revenue. Another way is to directly charge your consumers based on API usage. This is termed as API monetization (yet another API word). API monetization can be implemented in multiple forms depending on what kind of business cases your API will serve. A common way is to charge your API consumers based on the number of requests they make to your API. Here, you will have to measure and charge your customers as per their usage.

Conclusion

Building APIs comes with its own set of challenges. I will discuss these in a later post. But can your business benefit from APIs? This depends on the following questions:

1. Does your business possess data that can be useful for organizations operating in other industries?

   • If not, then exposing public APIs cannot do you much good. However, in today's connected world it is difficult to not find another use case for your data apart from your own business case.

2. How much can other organizations benefit from this data?

   • You can monetize your API. But is it valuable enough for others so much so that they pay for it?
3. How much can your business benefit by sharing the data?
   • Can you leverage your partnership with other organizations to increase your own customer base? Or can you directly monetize your API and generate revenue directly by just sharing your data?

Answering these much simpler questions can help you better in making the decision.