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Making Sense of APIs and the API Economy

This article introduces APIs, both old and new, with a particular focus on microservices that have become a key part of the API economy. So, what are APIs and how are they classified?

Classifying APIs by Type

Here’s a simple method of classification for APIs. First, there are the “older” types of APIs, which refers to APIs used for access methods and performance management. The Queued Sequential Access Method, (QSAM) was released in OS/360. It offered device independence to the extent that the same API calls (e.g., get and put) are used for different devices. The VSAM is in the same class as QSAM.

The Application Response Measurement (ARM) API is another older programming interface. ARM focuses on application response measurement and has the function “arm_init” which is used to define an application. This command must be made before any other ARM API calls related to that application (such as “arm_start” and “arm_end”) are initiated. This is a brief glimpse into its programming interface.

In addition to the older APIs, there are new APIs that have been around since the dawn of the web. Three examples of new APIs are those focused on data, monetization and microservice-type APIs.

Data access APIs are becoming common and are available on sites like that are supported by the U.S. Federal Government. Agriculture, climate, consumer and health are all examples of data sets available on Data is also available in many forms (like .xls and .tar) for both human viewing and program use. Financial APIs accept online and mobile payments. PayPal payments and Square online and in-person payments are examples of financial APIs.

Newly emerging application programs in the form of a microservice are the most important new type of API. These programs are created from a variety of API Management tools, some of which are automatically generated. This produces a new kind of application running on top of the legacy applications that are non-disruptive to the existing application.

Zooming in on Microservice APIs

Microservice APIs have dominated since the creation of cloud computing. M-type APIs are special a kind of small data program. These small data programs are grouped into applications. They’re created in an integrated development environment (IDE) and provide a connection between the legacy world (called the systems of record) and the new world of engagement of mobile devices. These microservice APIs are surrounded by support capabilities, including a management console, security, analytics and logging, all of which are used for governance. The most complete API management programs have a necessary full lifecycle approach because microservice APIs need to be handled as company assets.

There are two main perspectives when it comes to microservices. One view characterizes it as an architectural style while the other uses the term describe the data programs created with API management software products.

  1. An Architectural style: Initially, microservices was an architectural style used in different programming environments. Through adoption of the microservice architectural style, companies use several small modules, communicating using lightweight protocols that combine to provide an application for any company’s business needs.
  2. A kind of program: As API management products evolved, the automated outputs of their IDEs, small data programs, began to be called microservices. These data applications can stand on their own or be combined into applications by making important data and processes available in new ways without disrupting the system of record.

The microservices architectural style and the API program are not exactly the same mechanism, but they’re close enough in usage to share a name. However, when discussing microservices it’s important to provide context.

Introduction to the API Economy

According to Gartner the API economy can turn a business or organization into a platform. How is this possible? As reported by Gartner, the API economy is a set of business models and channels based on secure access of functionality and exchange of data. These new models and channels turn a business into a platform.

According the Harvard Business Review, “Today, a firm without application program interfaces (APIs) that allow software programs to interact with each other is like the internet without the World Wide Web.” When describing the API economy, IT consulting companies reference M-type APIs rather than old or new type APIs. The meaning of API has been appropriated by the small data programs created with API management software tools.

Unlocking Business Capabilities

You can group the motivation behind creating new microservice applications into four categories:

  1. Generating revenue. Early technology companies got off to a fast start with financial transactions but now other companies are using APIs to monetize their applications.
  2. Lowering costs. Insurance companies are lowering their underwriting costs by providing support for mobile applications that add a self-service character to filing a claim. Manufacturing companies are using API programs to bring retailers on board, making functions available within their current in-house systems.
  3. Improving efficiency. Government agencies are making data available to be used by commercial applications. An example of this would be live airport status.
  4. Responding to competition. Financial services companies are using APIs to unbundle functions within their legacy applications to compete with Fintech start ups, which support low-cost money transfers without using a traditional bank.

The Story Continues

It’s interesting and useful that APIs have been reinvented and brought forth in a completely new way. Old APIs, with access methods like QSAM and VSAM, are still indispensable. New APIs have found their use in the data-sharing setting to save costs and improve efficiency.

Microservice APIs are supplementing applications in many businesses to do what existing applications and systems can’t. Microservice APIs are also making their impact by providing powerful levels of integration in an application context without the need for changes to existing systems of record.

Microservice API programs are not without their challenges. Just like conventional application assets, once you design and build an API program, it gets deployed, managed, made highly available as necessary, backed up and eventually retired. These disciplines must be given the proper level of attention in order for APIs to carry out their purpose.