Unlocking the value of data with APIs

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2 Unlocking the value of data with APIs

Mobile apps have received much press for their role in driving the API economy. The use of APIs enables the sharing of business competencies, capabilities and products that are at the heart of many mobile apps. However, our research suggests there’s another force also at work—data.

APIs are fast becoming the standard for sharing data, both internally and externally, and are helping make some of today’s most innovative and data-driven services possible.

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What is the value of your data?Data has the capacity to remake industries and enterprises. It can open new revenue streams, create new customer value and strengthen business partnerships. However, many enterprises struggle with how to make their data accessible both internally and externally. Because of this, they’re missing significant opportunities, and not realizing the full value of their data.

Application programming interfaces (APIs) provide the key to helping organizations unlock the potential value of their data. Using APIs, manufacturers can give suppliers real-time insight into inventory levels and production forecasts to avoid produc-tion slowdowns. Retailers and consumer product companies can partner to create compelling online shopping experiences. Financial services companies can deliver secure platforms to process transactions, such as electronic wallet payments.

In fact, data-rich and analytically driven companies— companies called “Gen D”—are 1.8 times more likely (53 percent compared to 29 percent) to use APIs than their peers.1

About the study

This paper delves deeper into the research originally performed for Inside the mind of Generation D, exploring how these enterprises are using APIs. The study was based on a survey of 1,089 enterprises across 22 countries. As part of the analyses, the application of a k-medoids clustering algorithm revealed four distinct behavior patterns related to data and analytics, highlighting a segment of data-rich, analytically driven enterprises that we call Generation D.

Why is this significant?Through their use of data, Gen D enterprises outperform their peers—anywhere from 6 to 17 percentage points—across six key performance indicators, including wallet share, customer retention and revenue via digital channels.2

While the research doesn’t pinpoint the exact reasons for their increased API usage, it’s likely, given our anecdotal experience and Gen D’s data-rich mindset, that APIs serve as the conduit to realize the potential value of their data.

About the IBM Center for Applied Insights

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Gen D enterprises are 1.8 times more likely to use APIs than their peers

4 Unlocking the value of data with APIs

Integration model to optimize visibility and efficiencySharing data with employees, vendors, suppliers and other business partners via APIs can help companies eliminate barri-ers that may cause operational inefficiencies.

For example, Argentinian systems integrator Ayi & asociados used APIs to help an insurer cut costs and reduce time-to-mar-ket when integrating with new partners. The insurer needed to manage a growing number of partners, each of which had dif-ferent technology platforms and services. Through the use of APIs, the insurer simplified integration of information across internal and external systems, which, in turn, allowed it to cre-ate new products, extend its distribution channels and capture new business.3

How do APIs unlock the value of data?There are three common API models that help enterprises unlock the value of data and stimulate innovation.

Collaboration model to gain new insightsAt its most fundamental, APIs offer a mechanism to share data and collaborate both internally and externally to spur new ideas and insights that otherwise may not have emerged.

Consider the website, Data.gov, for example. This site, which is part of the U.S. government’s open data initiative, provides businesses with a catalog of APIs that enables them to tap into more than 140,000 data sets from U.S. government agencies. New products and even new companies across a wide range of industries have emerged from leveraging this data and these APIs.

What exactly are APIs?APIs have traditionally been a topic relegated to programmers and architects, as they provide a set of technical specifications to efficiently interact with and ultimately integrate applica-tions. APIs weren’t something that business leaders typically thought about, until recently.

Today, APIs assume a much broader—and more strategic—role, creating entirely new business opportunities and business models. They are the connectors that expose services to enable open platforms and the exchange of data. As a result, it’s not uncommon to hear business leaders now discuss APIs.

With APIs, enterprises can make their data accessible and extendable to the widest possible audience. They can attract people to their services using rich data and content. And they can effectively ingest data from a wide variety of sources, such as social media sites, business partners and government agen-cies, to better understand their customers and the marketplace.

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APIs weren’t something that business leaders typically thought about, until recently.

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Sales model to create new revenue sourcesMany enterprises are studying the data landscape across mul-tiple dimensions and combining data and analytic feeds from different sources to create entirely new offerings within their industries. The innovations that emerge are enabling these companies to not only leapfrog their competition but also redefine the marketplace altogether.

moovel GmbH, a fully owned subsidiary of Daimler AG, is a prime example. The company introduced a car-sharing service from mobile devices—a first in the industry. The service, which operates in 30 European and North American cities and has more than one million customers, depends on a backend infrastructure that integrates applications and communicates with mobile users and the cars.4 It was an entirely new market for Daimler, and one that was made possible using APIs.

What is the return on APIs?Today’s motivation for APIs is deeply rooted in fundamental business goals, and Gen D enterprises cite substantial benefits from their use of APIs, including increased reach, agility and speed, improved customer engagement, and tighter integration with partners.

Increasing reach, agility and speedGen D enterprises are 2.8 times more likely to report that APIs give them increased reach and 2 times as likely to find that APIs increased agility and speed. For example, one Gen D bank uses API services over the cloud to give institutional cli-ents access to real-time data, including exchange rates and other market feeds, along with the ability to execute transac-tions directly via bank systems. These API services function as a customer acquisition and retention tool, providing the bank’s institutional clients with a platform rich in content and capabilities.

“We don’t make the shoes or the handbags. We just carry them in our store. If shoppers can’t find what they like, maybe we can share that data with somebody else who can use it.”– CIO, Retail, US

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Improving customer engagementGen D enterprises are also 1.7 times as likely to find that APIs improve customer engagement. For example, social media APIs can enable enterprises to identify emerging opportunities and potential problems, and deliver personalized services based on direct customer feedback. Travel and transportation compa-nies, such as airlines and hotel chains, which heavily depend on customer ratings, are frequent users of social media APIs to help rapidly uncover and resolve customer service issues.

Strengthening integration with business partnersFinally, Gen D enterprises are 2.6 times as likely to find that APIs deliver benefits through tighter integration with partners. For example, instead of manually on-boarding business part-ners to provide access to product or catalog data, retailers can instead use APIs to easily expose the information to all its busi-ness partners and eliminate delays. And these APIs can be easily repurposed, enabling retailers to reduce time-to-market when launching new partner services.

Figure 1. Compared to enterprises that are less focused on data, Gen D is far more likely to be reporting significant improvements from API usage.

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Gen D enterprises improve business outcomes with APIs

Accelerates innovation

Increased revenue from existing offerings & channels

Creates new business offerings and revenue streams

Reduced infrastructure costs

Tighter integration with partners

Improves engagement with customers byadding more value

Increased agility and speed

Provides my organization with increased reach

Gen D

All Others

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Gen D enterprises are 2.6 times as likely to find that APIs deliver benefits through tighter integration with partners.

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Considerations as you get startedAs you move beyond piloting APIs and begin to integrate them into your operations, here are three areas to consider:

1. Developer collaboration Creating an environment that fosters collaboration among internal and external developers is critical in helping you maximize the value of APIs. Fresh ideas often emerge when developers work together to tackle a challenge, and an environment that encourages collaboration can help stimulate creativity and unearth insights in the data that would have otherwise remained hidden.

2. Security and scalability You have a lot of data from a lot of different sources—and it’s only likely to grow. How will you ensure your API infrastructure can support increasing data volumes? Will your environment be able to ingest data as rapidly as needed? And how will you confirm the data is secure? As in any data-driven initiative, it’s important to deploy APIs in a manner that is both secure and scalable.

3. Management and monitoringAs you create APIs across core business processes, how will you monitor performance? How will you track API usage and monitor which data resources are being accessed? How will you make your APIs available to developers? Effectively managing and monitoring your APIs can help you more quickly react to new opportunities and confirm that your APIs are meeting required service levels.

While there’s a lot to think about, the good news is that you don’t have to go it alone. The use of APIs has grown so much that an entire industry has formed to help enterprises manage their APIs—both internally and externally developed and consumed.

As you develop your API strategy, it’s important to understand where you sit on the maturity curve and how you compare to your peers. At ibm.com/apieconomy, you’ll find a survey tool that can help provide that insight. The questions only take a few minutes to complete and the results could shed some light and lead to additional resources.

For more information about IBM API Management solutions, visit: http://www-03.ibm.com/software/products/en/api-management-family

“Our API strategy enables closer integration between us and the client.” – Enterprise Architect, Banking, US

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1 Derek Franks, John Gallagher, David Jarvis, Steve Rogers, “Inside the mind of Generation D,” IBM Center for Applied Insights, 8. October 2014. http://www.ibm.com/smarterplanet/us/en/centerforappliedinsights/article/gen_d_insights.html

2 “Inside the mind of Generation D,” IBM Center for Applied Insights, 4. http://www.ibm.com/smarterplanet/us/en/centerforappliedinsights/article/gen_d_insights.html

3 “Ayi & asociados deploys an integration solution in days rather than weeks,” IBM. July 2015. http://www-03.ibm.com/software/businesscasestudies/us/en?synkey=J757625Z77177H73

4 “moovel GmbH first to offer carsharing from mobile devices,” IBM. May 2015. http://www-03.ibm.com/software/businesscasestudies/us/en/corp?synkey=T488153N20990T73

About the authorsDerek Franks is a consultant with the IBM Center for Applied Insights. In this role, his focus is on research that provides insight into emerging business and technology trends. Prior to joining the Center, his work centered on how enterprises can use technology to drive improved business results. He has been a speaker at global conferences and collaborated with top companies from around the world. He can be contacted on LinkedIn or defranks@us.ibm.com.

Arjun Natarajan is a Distinguished Engineer in IBM Research responsible for Services and API ecosystems research. As Senior Manager and Program Director, he led a number of research projects on the API Economy in partnership with the IBM Cloud and Systems business units. His current focus is on enabling scalable, consumable, as-a-service platforms and ecosystems around industry solutions. He can be reached at arjunn@us.ibm.com.