Through their API strategy, organisations can streamline processes, automate tasks and thereby improve overall efficiency. This section explores the different ways in which API Strategy and API management can lead to cost savings in organisations.

1: Better integration and automation.

Programming interfaces enable the mutual exchange and processing of information. This is across systems, software, tools, departments, suppliers, customers and partners. They can be used wherever process continuity is driven by the input or update of data silo information. It eliminates the need for manual transfer, review, maintenance and management of information. The further API-supported data exchange is diffused, the smoother, faster and more error-free it becomes.

Here is a practical example for a company that is active in the field of e-commerce and uses API-driven integration:

·       The e-commerce company has a number of systems for its core process between shop website, inventory management system, API gateway for payment processing and CRM system. Instead of tightly integrating all tools with each other via classic EDI interface, the company implements an API-led integration strategy and creates a set of programming interfaces for each system. When a customer places an order on the website, a coloured indicator shows whether the item is currently available in the warehouse. This indicator is controlled via the API of the inventory management. After the order is placed, the next step is to use the website’s API to send the order data to the inventory management system’s API, which then updates the inventory and sends a confirmation back to the website’s API. The website API then sends the order data to an API gateway to process the payment. This API gateway sends a confirmation back to the website API. Finally, the order data is sent to the API of the CRM system to create a customer record and track the order history.

2: Less coordination effort.  

Programming interfaces bring a standardised code kit including documentation to the publication. There is no need for the complicated process of initiating the exchange of information. Instead of an active bilateral organisation with each interested party, the API provider opens its system to all and at the same time explains how to gain access – on its own security terms of course.

3: Variable operating costs.  

API-based integration enables scalable integration between systems, departments and external partners. If the traffic increases, the programming interface simply grows with it. The technology remains the same, only the infrastructural performance requirements expand. But since these can now be scaled almost seamlessly via cloud servers, previously fixed operating costs are transformed into variable operating costs.

4: Easier maintenance.  

The decoupling and multi-layered nature of API systems increases their maintainability. Because, logically, it is easier to maintain smaller components than an entire system.

5: Improved reusability of existing systems.  

It is never easy to upgrade “old” systems in live operation in order to simplify data exchange. Such approaches resemble invasive surgery on the system landscape. APIs, on the other hand, can simply be attached to systems in operation, act as communication points and integrate existing system landscapes.

6: Increased adaptability.  

Through client-server separation, multi-tiering and decoupling, API-driven integration creates a loose architecture that makes it easier to change or replace one component – without affecting the functionality of the others! This technology significantly increases adaptability to changing business needs and is an important asset in an agile API strategy.

7: Accelerated development of new applications.  

A programming interface that was previously defined and went live can be reused or combined for different use cases within the framework of a resource-saving API management. At the same time, API standards such as REST enable a uniform and well-documented interaction with systems and applications. API interfaces allow developers to enable and test the different components of an application or system independently of each other. For example, the tracking status of a parcel, which is output via API to the end customer’s parcel service app, can also serve as a controlling point internally. How long does the shipment take after the parcel has left the ramp? This means, one and the same data point offers many possible uses – the fixed costs of development and ongoing operation are thereby distributed over several applications.

8: Support for microservice architectures.  

API interfaces are an essential part of building a microservice architecture. A microservice is a service that maps individual functionalities as modular and separately executable software components of an application of any size. In contrast to a monolithic application whose components cannot be separated from each other, the individual functionalities in microservice architectures are subdivided into smallest service modules that can be called up separately. As so-called back-end-for-front-end services, these can then communicate with each other via APIs as needed. The main difference between a microservice architecture and a monolithic application architecture is that the individual components or microservice building blocks can also be held, operated and maintained in different clusters.

9: APIs leverage innovation and growth potentials. 

The above-mentioned opportunities for rationalisation alone are good news for any API strategy and API management in organisations. But an API strategy becomes particularly exciting when greater importance is attached to it. Namely, not only as a cost reducer, but also as a growth driver, focus and business model innovation. If the core function of an API is understood as a scalable coupling point between systems, departments, partners and customers, the potential of this technology can be exploited.

10: Create or buy

API interfaces free up resources by decoupling manual integration and information exchange processes. Additional working time is available. This would already be a positive thing for any management, but API strategies can go one step further. As more and more companies appreciate the benefits of digital ecosystems in the context of a comprehensive API economy, the range of available and usable APIs on the market is growing. This means that companies can access multi-layered information expertise, which raises the question of “make or buy?” in the context of an API strategy: Where can and should data, competences and information be better sourced from a partner in the future, instead of “making” them yourself? Because outsourcing this knowledge, which is not part of the core business, creates more freedom to concentrate on the actual mission.

A good example of this is in the food retail sector. Many retailers rely on accurate weather forecasts to set orders for their shops. By accessing a weather API, the retailer can automate this process. Real-time weather data is fed into the forecast system. This not only saves time and reduces the manual effort required to obtain weather data, but also allows retailers to select and order food more accurately – especially when the weather changes at short notice! Forecasts can be broken down to branch level and ensure that each shop has the right amount of stock at all times. By using the weather API, retailers can focus on core competencies such as customer service, product quality and shop design instead of spending resources on collecting and analysing weather data.

In the course of increasing digitalisation, the API economy also gives a further push in the direction of division of labour and specialisation. Business competences, for example in highly technical areas such as IoT, IT security or user experience, can be “loaded” from an integrated partner network for a corresponding fee. Each ecosystem participant contributes its know-how and makes it available to the others. This can be either for a short period of time for individual transactions, or possibly on a permanent basis.

11: Business model innovation.

Every company, regardless of industry and size, holds large amounts of data in its systems. This data can – after appropriate combination, processing and consolidation – provide business value as a data service for other companies. API management must therefore ask which data services have so far only been used internally and which it can sell? With this approach, the API-enhanced business model of a Logistics Service Provider (LSP) could look like this, for example:

·       The logistics service provider has a wealth of operational data including information on real-time tracking of its delivery fleet, accurate stock levels and on the loading level of its freight vehicles. The LSP organisation decides to create a set of APIs and API gateways that also allow partners and customers to access this information and charge a fee for it.

·       For example, a retail company that stores its goods at this LSP can use the interface for a fee to build an ordering app for its store managers. This shows the respective store managers in real time whether enough goods are available and from which warehouse they can be delivered.

·       It is also conceivable that another company uses the logistics provider’s vehicle fleet to deliver to its end customers and makes the real-time tracking data available to them. Also for a fee for the LSP.

·       Finally, for a developer who wants to programme a modern freight capacity exchange, information on the current load level of the haulage fleet – subject to appropriate data protection measures, of course – could also be interesting and thus possible for the LSP to monetise.

Therefore, a win-win situation is created through the creation and monetisation of APIs. API management as a digital association of different partners creates the conditions for the transformation of a classic company into a platform. The logistics service provider mentioned above taps into new sources of revenue from its internal information. At the same time, its partners and customers benefit from the API-generated real-time data and functions while optimising their processes and service offerings.

12: Increased business value across the ecosystem.

The business model innovation just described is attracting more and more followers due to its appeal. The more companies network their various business relationships in this way, the denser and more diverse the digital ecosystem becomes. The mutual provision and processing of information building blocks increases the business value that the ecosystem partners can offer to each other and to their end customers.
Let’s take Amazon as an example. Amazon has an established API strategy that enables B2B customers (manufacturers, retailers) to access Amazon’s vast catalogue of products and services via APIs. This API-driven approach has significantly improved Amazon’s customer experience by offering a seamless shopping experience even across multiple platforms, devices and channels – for example, to display product information, prices and reviews on the manufacturer or retailer websites and their mobile applications.

In addition to the benefits for consumers, Amazon’s API management also enables third-party sellers to manage their products and orders directly through the Amazon platform without having to go through multiple systems or processes. This creates an efficient and streamlined process on the seller side, which in turn contributes to the overall success of the Amazon ecosystem and increases business value for all stakeholders.