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Why no one can be a 'passive consumer' in today's API economy

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Increasingly, innovative businesses are being built around application programming interfaces (APIs) -- which provide pre-built cloud resources for the underlying forms and functions for new businesses and concepts. This is helping to accelerate the time new businesses and new concepts get to market, versus re-inventing the wheel every time someone gets a new idea.

'APIs represent the second digital revolution,' says Ross Mason, MuleSoft founder: Photo: MuleSoft.

A small business or startup can now build its entire operation on public online APIs, which provide every conceivable function from credit card transactions to finance to procurement to human resource management -- whatever it is, there's an API for that.

Ross Mason, founder and vice president of MuleSoft, outlined in a recent webcast how the rise of the "API economy" can be considered to be "second digital revolution." Currently, there are about 13,000 open APIs businesses can tap into, and millions more being created internally within enterprises.

It's notable that larger organizations -- including the Fortune 1,000 -- also are taking part in the API economy, Mason observes. Nike, Coca-Cola, Target, and even the National Basketball Association are leveraging APIs to open up new markets and advance product innovation. "If you think about it, none of these companies need to be innovative -- they’ve got very sturdy brands on their own," Mason says. "Coca Cola really doesn’t need to innovate; why are they even investing in this area?  It's simple. The old business models are starting to erode. People are moving to newer channels of engaging with their suppliers."

Both the United States and United Kingdom governments have stated that they will be making data and transactions available via open APIs. APIs are key to unlocking legacy applications and data that may have been locked away for years, Mason says.

To a large extent, because they are so accessible and provide enterprise-class functionality, APIs are dramatically leveling the playing field. "Everyone is under pressure to move quickly," Mason says. "Everyone in the API economy can start springing up and start creating new businesses." For example, a business service such as that offered by Square -- a credit-card transaction service for extremely small businesses -- wouldn't have been conceivable 10 years ago, when the payments world was dominated by MasterCard and Visa. API technology has opened up this restrictive market, he observes.

"In this API economy, anyone can do it," Mason continues. "Once someone exposes an API, your competitive advantage is how you can stitch all these APIs together to create new advantages."

There is another element of the API economy that separates it from the status quo, Mason adds. That is, everyone will be participating, both as consumers and as publishers of APIs. Producing APIs will not be the exclusive domain of software companies or large enterprises. "The key thing about the API economy is you can't just consume APIs. It's not just about consuming data, connecting to Amazon or Salesforce. You publish your own APIs as well. This is a key part of the economy -- you’re not just a passive consumer."

Innovation "starts with an API strategy," says Mason. "That’s really the place you can open up opportunities,  and trade with customers and partners. As you open up to your partners and to your consumers and developers, they’ll also help drive innovations for you."

— By on August 4, 2013, 2:33 AM PST

Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure