API adoption: Traditional industries lag

Businesses need to adopt APIs to connect systems and be more customer-facing, but the energy, logistics, packaging and banking sectors have a lot of catching up to do

At the close of 2016, Gartner Research Director Mark O’Neill presented at both API Strategy and Practice (in Boston) and APIdays Global (in Paris) to share his insights into this year’s API trends. Top on his list was a discussion about how, while everyone talks about building APIs, the much larger impact of APIs is with their consumption. O’Neill predicts that 2017 will see some maturing in product offerings that support businesses with their API consumption.

APIs are often the central tool used by a business embarking on their digital transformation journey. OK, digital transformation may be a jargonistic term. But I mean to use it as a shorthand for the reorientation of business towards being available 24/7 via mobile and internet channels, as well as the emerging customer-centric focus of many industry sectors where data is connected across various systems to better understand and pre-empt customer needs.

+ Also on Network World: APIs abound, but challenges remain +

Often this digital reorientation journey begins with marketing departments and sales operations. Both of these business units are focused on interacting with customers or potential customers, so their digital needs are more urgent.

According to other Gartner research, quoted by Scott Brinker, this digital positioning is strengthening the influence of CMOs internally, with an increasing leadership and governance role over sales, customer experience and even IT business units. Certainly, the introduction of shadow IT (where business units start using their own choices of SaaS tools without asking their IT department) has arisen from marketing and sales teams getting away with doing their own thing because they can show revenue impact. That’s how Slack grew so big so quickly in the enterprise.

As CMOs get a grip on their new responsibilities and try to leverage the SaaS tools they have already chosen to use, APIs and integration tools become essential to help them navigate the complexity that arises from the newly digitized business operations. It’s little wonder, then, in this context, that Cloud Elements secured Series B funding as 2017 started. (Meanwhile, Henry Peyret of Forrester Research says integration platform products still have a lot more work to do to meet market needs.)

What Brinker says he is seeing is that APIs are being used to create best-of-breed marketing stacks. Meanwhile, O’Neill says more departments consume a selection of APIs relevant to their operational needs, whether that be marketing, sales, logistics, payments or HR.

APIs used by traditional industries

Today, I want to riff off the work of both of these analysts and look a bit deeper at some of the best-in-breed API stacks that more traditional industries are taking up. For my analysis, I used Clearbit’s Discovery API to dig into technologies four traditional industry sectors (energy, logistics, packaging and banking) are using and mapped them into key domain areas of capabilities.

api tech stack industry uptake Mark Boyd

For regular readers of Network World and other tech press, it may be a given that APIs are being used across industry sectors to digitize operations and bring the business closer to customers, suppliers and potential partners. But the truth is that regular readers of Network World and other tech press are still very much part of a leadership group within their sector.

I was reminded of that twice in 2016. In a conversation with a precision agriculture sensor and software maker, their founder remarked that they were ideally suited to the market because APIs and microservices architecture were beginning to become the way to build software these days. From his position in the agricultural industry, he was seeing APIs as only just becoming mainstream. And at the MuleSoft industry summit in London in October, I spoke with one retailer who managed over 40 store locations in the U.K. and was beginning to enter the U.S. domestic market with a handful of stores. He was attending the API management provider’s business event to learn what APIs were all about.

The initial data analysis I conducted using the data collected by Clearbit shows that for traditional sectors, the two areas where APIs are most consumed are to enable digital commerce and to manage IT operations. In areas such as customer experience, automation of workloads, and even business and channel development, APIs are used as a tool by only a very small, select group within each industry sector. Even so, in these traditional sectors, less than 10 percent of businesses leverage APIs for elements of their customer-facing digital engagement.

It is both a worrying and exciting analysis. Worrying because, as McKinsey Global Institute pointed out at the end of 2015, the most digitized sectors are generating a considerable lead over the rest of the U.S. economy. Exciting because it suggests that those businesses providing API-related products and services still have a lot of opportunity to grow. The API sector has a lot more to offer, as O’Neill’s prediction for a maturing of API consumption tooling suggested.

The majority of businesses need to consume power, receive or transport goods, package their products, and manage finances in some manner, which may be why these four sectors don’t see a need to embrace digitization just yet. But McKinsey’s study showed that the speed at which a business adapts to digital solutions is a predictor of their long-term success.

It would suggest that these four industries are ripe for further disruption in 2017. Unless savvy API companies can get them on board with their products before that happens.

Copyright © 2017 IDG Communications, Inc.

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