Why enterprises should open their APIs

By | 08/11/2010

The information system of any enterprise is generally a closed system. This is not necessarily for fear of intrusion, or malicious, but because the basic philosophy of the industrial world is that there is life in the company, and a life outside of the company, and that the boundary between the two should be simple: as closed as possible, with only few crossing points well monitored. This was the birth of IBM who, in 1912, invented the time clock, some sort of prehistorical information system. On a temporal vision also, the logic was based on schedule, which allows a temporal barrier between an inside and an outside.

The world has obviously changed. All usual boundaries, between inside and outside the company, between private and professional sphere, have soared. On the temporal plane, nobody is really concerned with the duration as a measure of value creation, except employees who work in shifts. The ability of companies to restrain as much as possible their information systems, from firewalls to banning social networks through the blocking of any video (worse than the Chinese government …), sends employees working from home, where they have much better IT equipment and condition than at work.

Information systems, traditionally closed, were impacted by the open philosophy of Internet. It took several years before companies started making public up part of their information system. I remember the revolution when UPS decided to open its intranet on the web.

In 2010, it would be suicidal for a B2C company not have a website which, at least, offers information and can perform transactions. But this not enough, and I think enterprises should open APIs, which are programming interfaces, of their information system.

Let us observe what is happening in the world of politics. The movement of the Open Data is born from the desire of some politician to publicly open government data, or rather, to use the excellent statement of Nicholas Gruen’s report delivered to the Australian government, to move from a logic where “the government protects its data, except if he wants to publish them”, to a logic in which “the government opens its data, unless there is a compelling reason not to do so.” Thus the U.S. government has opened its data portal; it was also the first decision of Cameron when he was elected, leading to the UK portal, followed by many countries or jurisdictions. Even the Russian government has opened a portal making public the expenses of his administration.

When government open their data, they are delivered in several formats, from simple pdf documents to excel spreadsheets. Publishing data is interesting, but making them useful is even better. The logic has been to go from opening the data to opening programming interfaces that allow programmers to build applications interacting with information systems.

The principle is the following: let us imagine a municipality who opens the APIs of its information system. Then, to start the process, it creates a public competition, rewarding the best applications using these APIs. The community is motivated to create such applications. The city has multiple interest in doing so: it focuses on its core business, which is to manage the city; it does not have do develop a lot of applications, since they are made elsewhere, the taxpayer’s money is better spent, and services are becoming very numerous.  A set of municipalities moreover decided to standardize these programming interfaces, giving rise to Open311, site where you can see the list of applications developed by third parties.

The business world should learn from this movement. Consider Home Depot. They have developped an interesting iphone app. These applications costed money, and forced Home Depot to create an app, which far from their core business. Now imagine that Home Depot decides to open its APIs. There will be for sure programmers, amongst the community of customer, who will develop applications user oriented, because they are customers themselves. People can invent usage that Home Depot had never thought of, and, as a consequence, increase usage, and buy more to Home Depot.

Another example: would banks open their APIs, the community could develop innovative applications, to better manage their accounts, conduct transactions, etc. from within the application. The bankers would benefit more flux, and customer would have a greater diversity of services.

Is this utopian? This is what Amazon is already doing with the Amazon Web services, some of them accessing directly the ordering part of the Information system, and the Amazon widgets that allow anyone to put a little part of Amazon on its site. It is also the latest innovation from paypal, paypalX, a set of open APIs associated with an economic model of revenue sharing. One might think of other applications in the automotive world or all industries, or all services.

The Internet world is an open one based on cooperation, collective intelligence, and value being in the flux more than the stock. Opening the APIs is, for companies, a good way to understand where value lies and how to exploit it intelligently. I remain convinced that the first one who will do so will have a competitive advantage. Following what I wrote in 2008, the concept would be “Business as a platform”, to follow “Government as a platform“, as coined Tim O’Reilly. The french writer Auguste Detoeuf, in ” A propos de Barenton O.L., confiseur”, wrote in 1936 : “it is not your patents, but your speed of execution, which will protect you from the competition“. Opening the APIs would certainly be good way to improve speed of execution. Corporate companies should consider crowdsourcing not as a ressource, but as a partnership.

 

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