How to Identify and Prepare Monetizable APIs

Software products increasingly are exposing customers to APIs with the potential to directly or indirectly generate revenue. To participate in this model, software engineering leaders must work with API product managers to identify business capabilities from which they can create monetizable APIs.

Overview

Key Findings

• The pervasiveness of APIs in modern software architecture, SaaS and other cloud services increases the likelihood for monetizable value to be exchanged with customers via the APIs themselves. Software engineering leaders whose teams cannot help advise on best-fit API delivery models, and on how to successfully monetize APIs, put their enterprise at a disadvantage.
• Software engineering teams frequently fail to take API consumers’ needs into account, leading to lower than anticipated adoption. This will be amplified in monetized APIs and will block/inhibit their commercial value.

Recommendations

Software engineering leaders responsible for monetized API products and technologies should:

• Support the process of identifying monetizable APIs by advising on best-fit modern API formats and by delivering the desired API designs.
• Productize APIs by leveraging a customer-partner relationship to ensure the product design and use fit the needs of the market or ecosystem.

Introduction

Few organizations currently use direct monetization with APIs, but fully 80% of organizations responding to a survey about API usage either provide public APIs or plan to provide public APIs.

Software providers continue to race toward being more flexible and scalable for customers, and are architecting their products for more adaptability and innovation. These objectives are being accomplished by exposing more public APIs to customers to deliver function and business value.

Engagement between provider and customer, as well as between business partners, is becoming more API-centric:

• Software products continue to include APIs as entitlements for customization and integration, while some products are primarily delivered through APIs.
• Traditional enterprises are offering APIs to participate in new digital ecosystems. The banking industry illustrates this where large banks, compelled by opportunity and regulatory requirements, are providing monetized APIs to fintechs that have emerged to serve niche and underbanked markets.

Organizations must establish frameworks to identify their data and capabilities suitable for exposure through APIs, which will enable entry into new markets or participation in new value chains.

Analysis

Advise on Best-Fit Modern API Formats and Service Implementation Architecture

Enterprises operate in constantly evolving marketplaces and ecosystems, which in turn drives evolution and change of business capabilities. Organizations should establish practices to perpetually glean information products from enterprise capabilities, and to scout opportunities and trends surfaced through competitors and adjacent industries.

As the enterprise pursues opportunities for growth or needs responses to changing markets, API product managers will have candidates to propose and software engineering leaders will be prepared to deliver them.

Software engineers will help inform on the suitability of using an API delivery model by designing the service implementation architecture and proposing the API format that best fits the customer use case.

Even if API delivery is suitable for the monetization candidate, software engineering leaders must be astute in their design of APIs for monetization by evaluating fluency with the target API format on behalf of the provider, typical consumer and the related ecosystem, including developer portals or marketplaces.

Leverage a Customer-Partner Relationship to Productize the API

Design a product that maximizes customer value by using this framework:

• Address the customers’ business and technical stakeholder concerns.
• Compose packages of APIs that satisfy customer use cases with optimum value.
• Identify a customer-partner to expedite product refinement and testing.

Monetized APIs have direct budget impact for customers, which creates two buyer personas — business stakeholders and technical stakeholders.

“API product managers are the leaders of API product teams that oversee the strategy and roadmap for APIs managed as products for internal or external consumers. They are responsible for understanding API product consumers’ needs and prioritizing enhancements.”