Over the course of the last five years we have seen increased innovation in the area of the application programming interface (API), particularly in terms of functionality within software. This has resulted in the rise of many third-party API companies that has led to a change in how software is both created and introduced to the marketplace.

Of course, APIs have been crucial in software development as a means to develop for specific platforms for many years, with organisations like Microsoft offering APIs that essentially make developers dependent on the interfaces if they wish to release software via such platforms.

However, in more recent times a new wave of APIs developed by third parties are reducing this dependency, making it easier for developers to bring their products to the market in the process. This has resulted in the traditional API model slowly giving way to more modular variations that rely on smaller microservices that can be integrated into complex software easily, allowing developers to place more focus on offering less restricted functionality while surrounding their offerings with functional processes that have been created by other developers through the use of these more open APIs.

Increased Efficiency

The time spent on creating functionality within an app is often time wasted in the modern environment, which has led many companies to make use of APIs from third-party developers and larger platforms to expedite the process.

This has led to a boom period for APIs, with websites like ProgrammableWeb being able to offer access to more than 15,500 APIs that can be incorporated into projects by developers. In most cases, these APIs allow for software to be brought to market quicker, which is beneficial both to developers and users.

Such APIs also offer a range of benefits, including lower costs, faster development and the fact that they are often simply better than the APIs that developers may create for themselves. Furthermore specialised third-party API developers often have access to larger data sets that allow for more comprehensive APIs to be developed and the creation of a network effect.

This increased access to data can manifest as benefits in a number of ways, such as the ability to curate retail transactions across hundreds, or even thousands, of different retailers, which can be used in the development of a wide range of software.

The Evolution of the Software Company

This shift towards API development has led to the evolution of software companies that are now releasing software as APIs, thus allowing them to offer a number of adoption routes. It allows for the creation of a scalable sales model due to the fact that the customer is often also the developer, leading to increased sales as customers’ usage of the API increases.

This is a trend that has not gone ignored by large companies. The likes of Salesforce and eBay have adopted API development to the point where this software now accounts for half, or more, of the revenue that they develop. This, in essence, alters the product offered by such companies from application to platform.

This model is also attracting enormous interest for entrepreneurs and investors, as developers are often more focused on creating APIs that offer tools to other developers, thus creating a more scalable source of revenue than trying to create the latest must-have app from scratch would.

Assuming the model is successful, developing APIs allows for efficient scaling and the development of networks that can be leveraged in a number of fashions.

A Shift in the Value Chain

The increasing popularity of APIs has led to an evolution in the value chain whereby the most successful companies are those that can bring together as much data as possible and make it accessible to others, which is a marked shift away from the previous model that saw the most successful companies aggregating this data and staying close to it, while imposing restrictions on those who may aim to use it.

It is likely that this proliferation of APIs and the popularity surrounding this model is only going to increase, especially as interest in microservices, big data and artificial intelligence grows stronger.

Furthermore, third-party APIs are increasingly being embraced within enterprise software development, which is likely going to result in the emergence of a number of large companies in the coming years that are more dedicated to this model.

In essence, the rise of the API has created a more attractive and efficient environment for developers, while also allowing for the creation of unique functionality within apps that can benefit users and the delivery of products.