API Provider Plight: Pitfalls Despite Potential

By Michael Vizard
API providers in the channel

The role of the API provider in the channel has yet to be defined fully. However, the potential for those able to carve out a share the burgeoning, yet complex API economy is significant.

On the plus side, the channel could potentially be more relevant than ever in the API economy, but on the downside, the path to success is apt to be rife with technology and business disruption.

For the channel, the API economy manifests itself in two ways. The first involves applications that use APIs to share data and simplify integration. In fact, that ability is driving a wave of digital disruption that is now keeping almost every business executive up at night to one degree or another.

At the other end of the spectrum is the way APIs are transforming how IT solutions are crafted at the infrastructure level. While not nearly as visible as the API of an application, it may very well be infrastructure APIs that have the most profound impact on the channel.

API Provider Challenge: Speed Project Time While Adding Value

The reason for that is that APIs are fundamentally changing the rate at which IT solutions are expected to be delivered. The impact of that change on those providing services in the API economy will be significant. Instead of taking months to deliver an IT project, solution providers in the age of the cloud are now expected to be able to weave various components together using APIs that enable those solutions to be delivered in a matter of days and weeks.

The speed at which a project can be completed is often the difference between winning and losing new business, said Paul Jacoby, senior vice president of sales and client services for Logicworks, a managed service provider.

"We tend to do very well when they start asking our engineers how they can do something," Jacoby said.

However, as the amount of time it takes to complete a project shrinks, IT solution providers need to increase the volume of projects they are working on in any given time period.

At the same time, those providing services in the API world will continue to face increasing pressure from vendors to add value by delivering unique applications for use in a particular vertical industry. The challenge they face on that front, however, is complex.

While the first is finding an application that generates enough demand to be worth developing in the first place, the second is making sure the API provider can make enough of a profit from the endeavor. Some cloud service providers expect as much as 30 percent of the revenue generated by a third-party application that makes use of its APIs and associated software development kits (SDKs) to be passed back to them. Other cloud platform providers, such as Zoho, don't charge anything to use their APIs.

"We don't charge any commissions at all," said Raju Vagesna, chief evangelist for Zoho. "We think the rest of the industry is headed in the wrong direction. Whoever builds an application is already adding value to our platform."

Channel Disruption Despite the Potential

Put it all together, and it becomes apparent that APIs in all their forms will drive a level of channel disruption that most solution providers probably don't yet fully appreciate.

"The channel is still coming up to speed on the API economy," said Diana Krakora, CEO of PartnerPath, an IT channel consulting firm. "A lot of them haven't figured out what it means to their business just yet."

Despite the potential for channel disruption, major vendors have already seen the writing on the wall. Many are racing to establish a dominant position when it comes to managing APIs. Red Hat, for example, last month acquired 3Scale, an early pioneer of API management delivered as a service.

"APIs are becoming first-class citizens of the enterprise," said Mike Piech, vice president and general manager of middleware at Red Hat. "We want to integrate API management with the rest of the enterprise."

More recently, TIBCO Software announced an API Lifecycle platform, spanning both the creation and management of APIs based on a Mashery platform it acquired from Intel. Kevin Bohan, director of product marketing for integration technologies at TIBCO Software, noted that in many ways APIs represent a double-edged sword for solution providers.

"APIs make it simpler to integrate things," Bohan said. "But over time, things can get more complex as the number of things that are integrated start to grow."

Driving that complexity will be the emergence of microservices architectures that promise to make it even simpler to weave together more granular sets of IT services than ever using APIs, Bohan said. Containers that invoke APIs to expose a service promise to reduce the time it takes to develop a service by several orders of magnitude.

For IT service providers, that means that in the future the amount of time an end customer will allot them to complete a project will likely be even less than it is today. In fact, before too long, solution providers may have to consider ways of billing customers based more on the value of a given project than the amount of time it took to complete it.

APIs are a de facto requirement within any modern IT solution, said Jeff Kaplan, managing director for THINKstrategies, a consulting firm that specializes in business models in the cloud.

"These days, everything has to be open," Kaplan said. "APIs are now just table stakes."

The challenge facing solution providers will be understanding how those APIs ultimately conspire to transform their business models. The good news is that standardization often plays to the strength of the channel, Kaplan said.

Rather than having to hire integration specialists for low-level tasks, the API makes it possible for even more solution providers to offer integration services, including the management of the API themselves. Arguably, as solution providers become more comfortable with those APIs, it's probable that the channel will wind up being more relevant than ever, Kaplan said.

On the downside, however, the pace of change being driven by those APIs might very well overwhelm solution providers that fail to understand both their technical and economic implications until it's too late.

Mike Vizard has covered IT for more than 25 years, and has edited or contributed to a number of tech publications, including InfoWorld, CRN and eWeek. He currently blogs daily for IT Business Edge and contributes to CIOinsight, Channel Insider and Baseline.

This article was originally published on 2016-07-29