Last Friday a colleague of mine from many moons ago messaged me on LinkedIn and asked me where I foresee API’s in the next 5 to 10 years. The question really got me pondering. Back in 2011 when the API movement first started I put together a business case to get my IBM executives to invest in building an API management solution. In this business case I stated that every company will have an API management platform, because APIs will soon be like websites. Every company will need an external API of some sort in order to compete and survive. Now almost 5 years laters, I must admit I am pretty shocked at how long it is taking for companies to deliver external APIs. The movement is still there though and it is gaining speed. I do think in the next 5 years external APIs will be as commonplace as a website and here is how it will play out.
Industries that are heavily regulated are being mandated to provide public access to their data via APIs. This will force the adoption of APIs faster than in unregulated industries. Personally I think this is a very good thing and will foster innovation in industries that have otherwise lagged behind.
Banking, Financial Services, and Insurance (BSFI)
I was presenting at a cloud conference in Europe on APIs a couple weeks after the European Commission of Banking and Finance published the revised Directive on Payment Services (PSD2) in August of 2015. The buzz it generated amongst the conference attendees was quite amazing to witness. The buzz, the discussions, and the planning have not slowed down. In fact the impact of PSD2 has carried over to the United States as I work with our US Banking customers. They are watching closely and are beginning their own digital transformations.
PSD2 is an update to the Payment Services Directive (PSD) of December 2007 aimed to harmonize the European payments market and make the Eurozone a Single Market. What the PSD2 revision added was the Trusted Third Party Account Access that is represented by two acronyms in the directive: Third Party Payment (TPP) under the Access to Accounts (XS2A) rule. These two acronyms lay down the foundation for Open Banking APIs. The Open APIs will open the door and level the playing field for innovative contenders to capture revenue that has been long taken for granted by the incumbents. This digital transformation will disrupt the banking sector we know today. The banks will need to change their business and operating models to compete. I really like this blog by innopay that highlights that this isn’t just about complying with a government mandate. This is about innovation, digital transformation, and the unbundling of the universal banking model.
PSD2 is still a pending legal obligation common to all EU banks.
This past March I attended HIMISS in Las Vegas where the breakout talk of the whole conference focused around APIs. The healthcare industry is full steam ahead on Meaningful Use Stage 3. Meaningful Use is a government mandate devised in 2010 that requires all healthcare providers to use certified electronic health record technology. The overall objectives of the Meaningful Use mandate are to: have better clinical outcomes, improve population health outcomes, increase transparency and efficiency, empower individuals, and conduct more robust research data on health systems. The mandate is comprised of 3 stages. Providers should be well onto stage 3 that focuses on healthcare interoperability. Part of stage 3 mandates that a patient has the right to their electronic health information via APIs. HL7 is leading the way with its Fast Healthcare Interoperability Resources (FHIR).
Think about that. Yeah okay there is a government mandate that providers offer an API into their EHR data, but it also signals how the traditional healthcare institutions need to change their business and operating models to compete. Just like in the BFSI case I wrote about above, a new ecosystem is opening up. New contenders are emerging chasing their share of the traditional revenue streams. Start up companies like DR on Demand, PillPack, Text4Bay, and HealthVault. HealthVault allows a patient to manage their own healthcare records. This gives patients more power then they have ever had before. Healthcare providers are seeing patients as customers that they need to attract and nurture for the first time in history.
Internet of Things
I was just at the Gartner Enterprise Architecture summit in National Harbor, Maryland and listened to several amazing talks. The key message of the conferences was that people, business, and things are equal peers and that we need to architect a mesh of connectedness. APIs provide the foundation for this mesh of connectedness. APIs enable the economics of Connections.
For companies investing in the Internet of Things, API adoption will be their key to success. The thing to remember is that the more connections you have the more value the device has. We have all heard it before and I will say it again, you can’t have IoT without APIs.
Startups will have an easier time adopting APIs because they do not have all the legacy political, regulations, and technical debt that long standing institutions do. The startups difficulty will be establishing a business model that can disrupt or play in an existing or new market, and generating enough visibility so that they can grow their business ecosystem.
Without government regulation or the currently known ongoing disruptions fostering digital transformation, other industries may feel they have time to sit back and wait to define their API strategy. This will not be a good thing, especially if you are only watching your traditional competitors. More than likely, you will be disrupted by someone in an adjacent or unrelated space. I use the story of Uber disrupting a DUI attorney’s business. Imagine that.