Five Business Drivers for API Management

Guide

March 1, 2018

TABLE OF CONTENTS

Introduction

This guide can be used by organizations’ strategic leaders to drive digital transformation. The guide provides API Management techniques via five business drivers and a sample business case.

Business Drivers

Seamless Legacy Modernization

  • Migrating from legacy systems that utilize SOAP, ERP Backends, or even third-party systems is a challenging task for any organization. API Management solutions allow organizations to create an abstraction layer over these systems that enables a consistent experience for an organization’s API consumers, both internally and externally.
  • An API Management layer allows an organization to migrate priority systems to new technology choices seamlessly by placing all tools under the same, unchangeable contract. Because the new implementation and the existing legacy system will have the same contract, no changes are required to consumers when the underlying solution is ready for public release.
  • A seamless transition to the organization’s consumers helps reduce costs by removing downtime, reducing support costs, and diminishing fees associated with errors generated by the new technology solution.

Improved Developer Productivity

  • The implementation of an API Management solution creates a consistent experience across any development organization. Whether an organization has 20 developers or 200, consistency breeds quality and reduces the surface area for failure across technology solutions.
  • It is a relatively common mistake within large technology organizations for IT teams to produce duplicate copies of APIs simply because they are not aware of which APIs already exist. An API Management solution enables organizations to build an API catalog. This helps to reduce the cost of duplication by giving business unit leaders a full view of the APIs available across the entire organization.
  • The implementation of an API Management solution can reduce the cost of implementing security and compliance by locating all security and compliance rules in one location. This prevents every new API from having to implement the same set of rules repeatedly, saving months of effort. Inevitably, the organization’s security and compliance rules will be changed, and implementing large scale changes across 500 APIs can be a monumental and expensive task. With API Management, organizations can implement these changes one time and all APIs will be compliant.

New Revenue Streams

  • 3Scale and Apigee both have built-in solutions for monetizing APIs. Most organizations have valuable data and integration points for public consumers or for an organization’s partners. Upon implementation, API Management solutions can provide brand new revenue streams to an organization in just a matter of a few clicks.
  • Many organizations have a data monetization strategy. API Management is the perfect tool for executing on that strategy. Organizations can provide the valuable data, while the API Management solution supports all the heavy lifting for customer onboarding, payment processing, throttling, and more.

Faster Vendor Onboarding

  • All organizations have partners or vendors that they integrate with. In legacy systems, or even most modern systems, the onboarding process of a new vendor or partner for integration can take weeks or months. API Management solutions provide onboarding out of the box and can allow partners to begin interacting with data in a matter of minutes.
  • API Management solutions like Apigee and 3Scale also provide documentation portals to an organization’s partners. The self service tools and documentation available in these portals can result in a cost reduction to the organization’s partner management budget, as the partners can gain insights into the complexities of an organization’s API on their own.
  • In addition to providing faster onboarding to an organization’s vendor or partners, an API Management solution can provide faster onboarding for the acquisition of third-party systems. Typically, technology merges can be time consuming and costly, but the abstraction layer creation tool within an API Management solution enables a seamless integration into any new system from an acquisition.

Driver for Innovation

  • Innovation can take many forms in business, but the reduction of barriers within an organization is a cornerstone to driving digital transformation and innovation. Using API Management will save your staff time on new development, onboarding, maintenance, and support. The development time saved will allow organizations to focus on other strategic initiatives. In addition, the API catalog now provides a tool for strategists, product owners, and others to use during the ideation or planning of projects.

Business Case

The following business case demonstrates a simplistic view of the benefits of a new revenue stream that is quickly exceeding the cost of implementing an API solution. This cost/benefit analysis only takes one of the business drivers into consideration rather than all five for demonstration purposes. The main goal of the study is to quickly demonstrate the cost benefits of an API Management solution, but all variables should be considered by an organization when developing a full business case.

BenefitsYear 1Year 2Year 3Year 4Calculation
New Revenue Stream$150,000.00$216,000.00$294,000.00$384,000.00“=Number of APIs * Number of API Calls * Revenue per API Call * Months per Year”
Costs
API Management Solution Cost$90,000.00$129,600.00$176,400.00$230,400.00“=Number of APIs * Number of API Calls * Cost per API Call * Months per Year”
Implementation Cost$50,000.00$0.00$0.00$0.00
Net Cash Flow$10,000.00$86,400.00$117,600.00$153,600.00“=Revenue - Cost”
Total Net Cash Flow$367,600.00
Metrics*Year 1Year 2Year 3Year 4Calculation
Number of APIs50607080
Number of API Calls per API per Month5000600070008000
Revenue per API Call$0.05$0.05$0.05$0.05
Cost per API Call$0.03$0.03$0.03$0.03
Months per Year12121212

*Metrics are based on common industry trends

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Authored By

Keith LaForce

Managing Director

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Meet our Experts

Keith LaForce
Managing Director

Keith LaForce is a Managing Director at Levvel responsible for managing processes and people to ensure quality work is delivered to Levvel’s clients. Keith has 15 years of engineering consulting experience that ranges from application development, enterprise architecture, devops, and leadership. Keith has worked in Fortune 10 insurance and financial services organizations setting the standards for architecture, delivery, and implementation processes. In previous roles, Keith specialized in providing digital transformation solutions for clients across a variety of industry verticals. Through Keith’s extensive consulting experience, he is influencing how Levvel delivers consistent engagement models across all our clients to ensure a great client experience.

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