Google buys small companies all the time, but it only occasionally makes an acquisition large or important enough to merit its own blog post — and it did so last month, when it acquired the enterprise software firm Apigee for about $625 million. In buying Apigee, the search giant highlighted the importance of application programming interfaces to modern business.
As a leading provider of API management, Apigee’s services are already used by hundreds of companies, including Walgreens, AT&T, Bechtel, Burberry, First Data and Live Nation.
Why are APIs so crucial? They are the software middlemen that connect applications, including mobile apps, to back-end office IT systems. APIs, as the Wall Street Journal observes, “serve as the conduit for automated communication between companies’ digital systems and their partners and customers.”
As companies of all sizes, including small to medium-sized businesses, become more digital and incorporate mobile technology, APIs are likely going to grow in importance.
“An increasing number of companies are shifting towards communicating programmatically through APIs via the internet, augmenting or even supplanting traditional communications via phones. For example, physicians these days can communicate prescriptions to pharmacies electronically on a dedicated platform, rather than by phone,” analysts at Trefis Research wrote in Forbes. “Apigee’s comprehensive API platform works as an enabler for this sort of communication, offering secure, stable, multi-language, dev, test, publish and analytics capabilities.”
The Importance of APIs
Diane Greene, senior vice president of Google's enterprise cloud businesses, noted in a blog post that APIs are “the hubs through which companies, partners and customers interact, whether it's a small business applying online for a loan or a point of sale system sending your warranty information to the manufacturer.”
“It is stunning how almost every customer is bringing up [APIs] when I’m in meetings,” Greene told the Journal, adding that companies see sales increase after they deploy APIs.
APIs make business processes simpler and smoother and help connect firms’ customer-facing digital infrastructure, especially via mobile apps, to their IT systems. As the Journal reports: “For example, when a person buys a pair of jeans on a mobile app, that app typically uses an API to send the sale to the retailer’s computers, which in some cases then use other APIs to connect to suppliers and shippers.”
Greene cited Walgreens as a firm that uses APIs from Apigee “that enable an ecosystem of partners and developers building apps using Walgreens APIs, including the Photo Prints API (enabling mobile app developers to include the ability for their app users to print photos at any Walgreens store), and the Prescription API (enabling users to quickly order refills of prescriptions right from their mobile app).”
A Growing Market for APIs
Last year research firm Forrester predicted that U.S. companies alone will spend nearly $3 billion in total on API management over the next five years, with annual quadrupling by the end of the decade, from $140 million in 2014 to $660 million in 2020.
There are now nearly 16,000 different APIs offered by firms today, according to ProgrammableWeb.
“APIs allow firms to expand into markets they may never have previously considered,” Bala Iyer and Mohan Subramaniam wrote last year in the Harvard Business Review.
They cited the example of IBM’s Watson, the firm’s artificial intelligence platform.
“In the old days, IBM may have opted to leverage Watson’s unique potential on its own and used it to reinforce the company’s prevailing position in software and technology,” they said. “But recognizing that the world had changed, IBM opened access to Watson through APIs to the entire world. IBM expects this move will allow it to attract an extraordinary range of ideas and inputs from all kinds of third-party firms and develop an unprecedented range of new services. Through APIs, IBM also hopes to create multiple ecosystems that allow it to access many new markets.”
In IBM’s case, that is oncology care, and “IBM’s APIs have connected Elsevier and its expansive archive of studies on oncology care to both the medical expertise of Sloan Kettering and Watson’s cognitive-computing prowess.”
The writers conclude: “While many may see APIs as just a technical concept, they clearly overlook the rising strategic significance of APIs. Particularly with the Internet of Things bringing digitization to all kinds of products and services, the influence of APIs is growing far beyond technology firms. All CEOs may soon need to find ways to align APIs with their growth strategies.”