Private, Partner or Public: Which API Strategy Is Best For Business?

Mark Boyd, February 21st, 2014

Businesses exploring an API strategy are asking themselves: private, partner or public? Since the start of the year, there has been a lot more thinking aloud about how businesses decide whether to start with an internal (private) API; use partner APIs to manage specific business relationships; or jump straight into designing external, developer-facing open (public) APIs.

“APIs will be the pipeline for the 21st century gold: data,” Cyril Vart, of French business consultancy FABERNOVEL, told ProgrammableWeb. At API Days Paris in December, he presented research conducted in Japan that studied how both established and innovative businesses across a number of verticals determine how open to make their APIs when creating new products, entering new markets or driving new customer engagement.

More public discussions about how APIs are being used across the private/partner/public spectrum make sense to a wide range of industry players, says Vart:

We wanted to find some examples where APIs were being used to re-create growth and customer dynamism without talking about the usual champions. We looked at Japan as a land of discreet and hidden innovations, and have shared five examples from businesses there. These case studies are really getting traction in the industrial world. If I come from a business that is not a pure player, these case studies make much more sense than the LinkedIn or Box.net API stories.

Other API industry leaders believe there must be more of these public forums to discuss the topic with business. “Discussing when to use private, partner or public APIs has never been taken on as a theme of a conference,” says Andreas Krohn, co-organizer of the Nordic APIs event series, which will hold business conferences in Stockholm, Copenhagen, Oslo and Helsinki in April to dig into these three types of APIs. (Disclaimer: I am writing a series of blogs on the subject for the Nordic APIs website in the leadup to the event.)

Krohn’s co-organizer of the Nordic APIs events, Travis Spencer, explains why it is so timely to discuss the three types of APIs available to business. “There is a common misconception that an API is something that everyone can consume. Every business needs to have APIs but don’t think of them that way because it’s for internal use or connections with partners. But by thinking about design, best practice and security, they can take advantage of the API industry knowledge and be more prepared for future development. They could even be leveraged in an external way not currently being thought about.”

Why start with private?

One of Runscope CEO John Sheehan’s favorite slides is the PW classic depiction of how open/public APIs are merely the tip of the iceberg, while below the surface, businesses are using up to eight times as many private APIs to route data and communications internally in their organization. Sheehan has made a drinking game of it, challenging API conference participants to take another shot each time a presenter uses the tired graphic, and he has good reason to publicly eye-roll on Twitter about the continued use of this analogy.

After all, if APIs are enabling businesses to enter new markets, speed up product development and make better use of data, then the comparison with an iceberg is unfortunate. Last week, Jason Harmon, API Architect at Paypal, instead likened private APIs to dark matter. Although it’s a fun analogy that does describe something we often can’t observe, it might not be an improvement to frame private APIs as such a destructive force!

Harmon’s article has been a hit among the API developer community, which is showing strong interest in more public discussions of how APIs are being implemented within businesses’ own walls. It has been a knowledge area with a business appetite for more discussion for some time. For example, API Evangelist Kin Lane once described how Amazon uses private APIs to manage its business operations. Although two years old, the article continues to be regularly circulated on social media.

FABERNOVEL’s Vart shares the example of Seven and I Holdings, the world’s largest franchiser, best known for its 7-Eleven convenience stores. Seven and I already uses internal APIs to review data and optimize store product display stands up to three times a day, and to manage stock deliveries across outlets. The company is collecting and analyzing its sales data via APIs and applying frequent pattern mining to replicate the big data decision-making advantage that online retail usually has over brick-and-mortar.

Mark O’Neill, VP of Innovation at API management provider Axway, says many business customers feel more comfortable starting with a private API strategy before opening their data assets externally. “A lot of our customers started deploying SOA inside their organization and moved on to using APIs beyond the firewall in the so-called omni-channel world,” he says. “[Often] the first thing people do is the internal integrations, then they might have a partner that wants to integrate and then you have requirements for an API across the firewall and all the security that comes with that.”

Three benefits of partner APIs

In Vart’s presentation, he also shared the example of Japanese health technology company Omron’s approach to implementing a partner API model. Omron collects data from e-health and medical devices, and sells the aggregated datasets to partners for activities including state government epidemiology patterning, home monitoring of hospital patients and provisioning of real-time health data to practitioners. These functions are all provided via specific partner APIs.

In these cases, Omron is identifying the specific value of its data assets first, then forming industry relationships and finally developing products that create a business model from this data chain. The business benefit of using partner APIs for Omron is that they get to monetize their data exhaust: this was data they were collecting for other aspects of their operation, and by forming strategic partnerships, they have found ways to create new business streams using the data they were already collecting.

In other cases, the benefit is simply a matter of making it easier for external partners to get the information they want from a business. O’Neill recommends businesses start with the low-hanging fruit when designing partner APIs:

About 50% of B2B will be done with APIs by 2016, and we are really seeing that now. B2B want ways to go in and look at the status of a shipment, for example, or to look up your price catalog, or to track an order. Often these are the clear interfaces that make sense with partner APIs: so price catalogs, order status lookups, shipments … they are a little mundane but very useful for the supply chain.

A third benefit of partner APIs can be seen among players who have an emerging product or service that could lead to new business models. In these cases, businesses want to control who has access to the data they are exposing and have a greater say in how the data gets used. In the past few months, Twitter and Pinterest, for example, have taken a submission-based approach to providing access to new data services via API. Partners must submit a request detailing how they would like to use the API, and the underlying data it would grant them, before being provided with access.

Other businesses with new products and services are also taking this approach. Swift IQ’s Frequent Pattern Mining API (which provides any business with a similar way to analyze their sales data as 7&I are able to do), is another API that is being openly promoted, but requires a partnership agreement before API access is granted.

Public APIs offer a global advantage

Public—or open—APIs are the classic model we mostly talk about, and these make up ProgrammableWeb’s bread-and-butter coverage. But the lines are becoming increasingly blurred, as Adam DuVander has described when urging businesses to take advantage of the innovation opportunities created from open APIs.

For many businesses, an open API can create new customer markets that cannot be accessed via other business strategies. This could be as simple as providing services via an open API which enables many startups to compete against more established players by being available 24/7 (in a global market), with a ready-to-use service.

DuVander provides the example of how Intuit was able to use Twilio because a company decision-maker could go home on a Friday, test the API, and return to the office on Monday with a plan for integration. Swedish e-commerce powerhouse Fyndiq has a similar example. The company specifically chose its anti-fraud analytics supplier based on the quality of the API documentation and the ease with which it was able to sign up for the API service on the spot. Having access to an open API that did not delay Fyndiq’s implementation of the service because of a to-and-fro application process was a deciding factor, according to Micael Widell, CTO and Co-founder of Fyndiq.

Confusion about the various API models has prompted the newly formed API Ratings Agency to approach leading API economy stakeholders with the goal of shepherding an industry-wide definition of what exactly is collectively meant when people say “Open API’”.

For businesses in markets like Australia and New Zealand (where Axway will be hosting a series of business events starting from 24 February) and in the Nordic countries, public APIs enable greater participation in a global business marketplace, removing the barrier of time differences that in the past created delays to global business partnerships. “For our business customers in the Nordic countries and in Australia and New Zealand, what we’ve seen is a real understanding of the importance to address a global market,” O’Neill says. ”For businesses to reach suppliers, channels, markets globally, this feeds into their understanding that they need APIs. These customers are not just selling to local markets, and that means connecting with resellers, suppliers and channels all over the world, at any time.”

Not an EITHER/OR decision

In truth, for many businesses it will not be a matter of deciding which API strategy to use—eventually they will have a mix of private, partner and public APIs. But being clearer about the options allows reluctant and hesitant businesses to start with a practical API approach that matches their organizational culture and helps them start thinking about how APIs can be used as a business advantage. Increasingly, businesses are becoming aware that they need APIs, but are unsure about where to begin. Answering the private, partner or public question can start them on that journey.

IMAGES used with permission from FABERNOVEL, Why Should I Care About APIs, December 2013.

By Mark Boyd. Mark is a freelance writer focusing on how we use technology to connect and interact. He writes regularly about API business models, open data, smart cities, Quantified Self and e-commerce. He can be contacted via email, on Twitter, or on Google+.

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