APIs: five opportunities and threats for SMEs

APIs (Application Programming Interfaces) are being rapidly adopted by large companies, public bodies and small tech start-ups with equal amounts of enthusiasm. But that’s not the case for small and medium enterprises (SMEs).

Tech startups and large companies have clear justifications and well-documented commercial incentives for constructing an API. Something else they share in common is the presence of a strong internal advocate, or API evangelist, who will personally back the API initiative and put dedicated time and energy into implementing their API strategy.

In small and medium companies the justification is less clear. The barriers to adopting API technology appear larger and the business benefits appear smaller.

In many cases the decision maker is the CEO of the SME who may not fully understand the potential opportunities or threats that APIs may mean for their business. This lack of understanding about API technology represents a significant commercial handicap for SMEs.

Here are five API opportunities and threats that every SME should be aware of:

1) Companies with APIs enjoy competitive advantage

Companies with a well thought through API strategy are better positioned to compete in online markets. Many large organizations assess the cost of implementing a deal as part of their due diligence.

A business partner who can fulfil part or all of their contractual obligations through an API will enjoy a competitive advantage over a rival organization that has no such API. The presence of a supplier-side API will indicate to the ‘buyers’ technology team that no custom integration or software development work is needed by the other partner to execute the deal.

That means faster implementation time and reduced costs for everyone.

2) APIs give good economies of scale

APIs really justify themselves not when the first business partner integrates, but when the second, third or fourth business partner integrates. A well-designed API should be able to support unlimited partner integrations with the same structure and functions each time.

The per-partner cost of implementing deals using an API exponentially falls each time a new partner subscribes to an API.

3) The simplest API can still solve many different business problems

Simple APIs that share data are a good starting point for SMEs to explore the potential benefits of APIs. Read-only data sharing is a simple API function that is relatively inexpensive to implement. Importantly it’s a one-way flow of information outbound from your organization.

This means other organizations are not given permission to change your data via your API.

Read-only data sharing API technology can be used in many different ways:

  • To update content in real time on multi-platform mobile and web applications.
  • To expose product catalogues and stock levels to suppliers or business partners. If your business is concerned with the supply and ordering of physical stock then your suppliers could use your API to automatically monitor your stock levels and trigger product re-orders when supplies reached a given threshold.
  • Publishing companies who service their clients with editorial and statistical information could also expose their content via a read-only data sharing API. That content could simultaneously be published to their traditional business channels (such as websites and mobile apps) but also made available directly to their clients business systems via an API.

4) APIs simultaneously increase the value of data, and strength business relationships

The value of receiving data from an API is that the recipient of the data has the flexibility to use that data in the best way they think for their business. This simultaneously increases the value of the data and also strengthens the business relationship.

For example, it’s easy for clients to terminate a recurring subscription to a suppliers website which is accessed by a small number of their employees. It’s much more effort for clients to switch off a system integration, which they have paid to put in, and which impacts an internal system which is visible to a larger number of employees.

5) APIs can be used to help sales and lead generation

Have you ever thought of a Software Developer in a customer’s organization as being some one you could target and advertise your company’s services to? Unlikely. But with an API that is exactly what you can do.

Software Developers understand APIs and are able to immediately see how the data they provide can be accessed and re-purposed within their company. Market the presence of your API to your industry and consider offering free access to your API for a limited period to potential customer companies. Let them sample your data before buying.

Spotting opportunities for APIs in your business is not rocket science. Anyone can do it, and in the future everyone will be doing it

You shouldn’t need an external consultant to be able to spot the business process efficiencies in automating data transfer between business systems. The trick is to spot the common requirement among all your partners (past, present and future) and think about their common needs. It’s relatively easy to carry out a short self-assessment into whether there is a case for using a read-only data API in your business.

Firstly, find a business process that involves the transfer of information from your company to a business partner. If more than one business partner uses the same information then you have a strong candidate for justifying an API.

Secondly, approach your partners and discuss the use of API technology with them. Get an understanding of how they currently use your data, for what and why. If they have to manually load your data into their business system, or they want to do this but cannot because of how you currently deliver your data, then you could be looking a very strong business case for the creation and adoption of an API. It’s entirely realistic that in this scenario your business partners will pay to integrate their systems into your API so they can immediately benefit from time saving efficiencies.

Ask yourself what are the business dynamics concerning the flow of information between your organization and your business partners? Where are the drivers coming from to exchange data? Does your company want to send or receive that data more than your partner, or vice versa? This is an important factor when considering an API.

There’s no point in making an API if your business partners don’t feel it’s necessary for them to pay for the IT integration costs on their systems necessary to gain access to your data through an API. They may flip the situation on you and ask you to pay for the cost of integrating your systems into their API.

The important thing for SMEs is to get started and start talking about APIs with your business partners. APIs are an emerging technology tool for effective business-to-business information exchange.

Their impact on your business could be disruptive or sustaining depending on the economic dynamics of the industry, trading network and market in which your business operates. As a small business owner you have a responsibility to investigate and find out what the possible scenarios are which face your future business. If the current rate of API adoption is sustained then APIs are very likely to feature in every future business scenario your organization faces.

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APIs: five opportunities and threats for SMEs

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