What is an API?

An API is a vital building block in any digital transformation strategy, and one of the most valuable in achieving scale, reach and innovation. Behind every mobile app and online experience, there is at least one API. At its most basic level, an API is used to integrate diverse systems by acting as the communication interface which allows two different web-based applications to exchange data over a network connection without the need to merge physical operational infrastructure.

Companies of any size can use APIs for many operational solutions, from analytics to online payments. APIs are the set of protocols which make an organisation’s data and services digitally available to external developers, partners and internal teams over the internet, creating a two-way path for data, digital products and services and a seamless cross-channel experience.

One of the most commonly used analogies for APIs is that of a restaurant waiter. It glosses over many of the complexities but it’s useful for understanding the basics.

In a restaurant, the waiter gives you a menu of dishes available to order as well as a description of each item. You choose what you’d like to eat, and the waiter sends the message to the chef who prepares the food. The waiter then brings it straight to your table. You don’t know how the chef made the food or what happened in the kitchen – the waiter is the communication link between you and the kitchen, and he delivered exactly what you ordered.

For developers, an API works in a similar way to that waiter – it is a communication channel delivering an exchange of data or services. An API lists a range of operations which developers can use, along with a description of what each can do. The developer knows he needs a particular function in the app he’s building, so he chooses one of the API components which will deliver that functionality from the API provider and integrates it into his own application.

Just think of the number of applications you use on a daily basis which have an embedded Google map or involve getting directions. Chances are that those applications are using the Google Maps API or Google Maps Directions API, which allow developers to access Google’s static and dynamic maps and street views.

If you’ve ever used PayPal to pay for something online, you’ve done so courtesy of an API. When you click ‘Pay with PayPal’, the e-commerce application sends an order request to the PayPal API with the amount owed and other required details. The user is then authenticated through a pop-up and, if all is ok, the PayPal application sends payment confirmation back to the application.

Amazon released its own API to enable developers to easily access Amazon’s product information so that third party websites can post direct links to products on Amazon.com with the ‘Buy Now’ option. And streaming services like Spotify use complex APIs to distribute content across different platforms.

There are a number of advantages to an API-led approach as a developer, but efficiency and innovation are top of the list.

APIs reduce the quantity of code developers need to write themselves when building software, so the faster approach means greater efficiency, both in time and budget. If, for example, a digital application required a weather forecast function, a developer can simply integrate one of the many weather APIs available online rather than needing to build an entire meteorological system from scratch.

By removing any barriers through the intelligent use of APIs, new functionality, or indeed entirely new digital products and services, can be developed faster for rapid innovation. In an increasingly fast-moving market such as energy, the capability to move quickly, respond to new challenges and stay competitive is crucial.

As we’ve seen, APIs should be a key component of any long-term digitalisation strategy.

APIs can be private or public. Private APIs are used only by a company’s internal developers and are not available to third parties. They are a useful tool to integrating and streamlining your own internal digital processes, creating greater efficiencies and potentially speeding up product time to market through faster development.

So private APIs are useful, but the benefits of making them public have even greater potential.  Public, or Open, APIs allow you to extend your data, digital products and services beyond your own boundaries into new markets, acting as a revenue stream and new sales channel. They enable customers to integrate directly with your systems in a flexible way which works for them, building the foundation for a mutually beneficial commercial partnership.

Let’s go back to the example of Google Maps. Between 2016 to 2018, Uber paid Google $58million for the use of Google Maps in its app to help drivers navigate and visualise the journey for customers. That’s a significant discount on Google’s normal rate for use of its Maps API for a good reason – market visibility. Just think of the millions of Uber customers using Google Maps daily within the Uber app. Public APIs can increase your own reach and attract new customers. Not only that, but by charging for usage of your APIs, you are better positioned to monetise your own data and services.