APIs reshaping the economy – lowering market transaction costs
July 11th, 2014
Mehdi Medjaoui from apiDays published a great article on APIs, and the disruption they are causing.
Web APIs are reducing the cost of external market transactions dramatically – making it more worthwhile for companies to outsource rather than do things internally. Mehdi cites well-known examples like Salesforce, Twilio and Paypal. But read the article for a much fuller discussion…
Focus on one skill
One of the important points that Mehdi makes is that API companies, by focusing on one skill, can build an “API-as-a-product that is better and cheaper than internally created software”. This allows them to take on some of the workload of larger enterprises.
Improvements in Integration
But he also talks about improvements in IT integration in the API era. These have important consequences for improving internal as well as external transaction costs. The world of public APIs is showing in a very concrete way how you can improve processes around internal IT integrations.
Here’s a representation of the API Software Lifecycle.
From the API Provider perspective
And from the API user perspective
Ecosystem of Platforms and Tools
What we are seeing develop is a whole ecosystem of platforms and tools that help with this lifecycle (for some more discussion take a look at the Kim Lane’s APIEvangelist site, e.g. this article on the evolving API Lifecycle).
Reducing Internal Transaction Costs as Well
As companies adopt these tools and processes internally, they will reduce the ‘internal transaction’ costs for core IT related activities in the business. This is why Telcos say APIs deliver internal innocation and agility.
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