Free Integration… But at What Cost?
So you're considering starting an API program to keep pace with the accelerating integration needs of your growing organization. Perhaps you view this option as a necessary investment to keep up with the pace of rapid change or, as an opportunity to grow the business by allowing your customers to share their data with other providers they choose. Or maybe you’ve been watching the Arizona Legislation carefully and want to be sure you’re ready when those rules reach your doorstep. Sounds familiar?
You have likely estimated some costs associated with building your own APIs, but have you calculated the actual recurring costs of running an API program? What about the ROI on the perceived value it will add to your product? Let’s use an analogy for this discussion - think of these costs to your business in a similar way to those of maintaining a home.
You've recently purchased your first home. In the planning process of the purchase, you took into account direct costs, like the actual cost of the property, and tried to estimate the indirect costs - utilities, interest on the loan, and homeowners insurance. This is a process you probably also followed when trying to decide how much you could afford to spend on an API Program. Based on these numbers, you've made a decision about how much you could afford to invest in a home.
Now you're looking at houses, and eventually find the perfect house. It's in a nice location, within your price range, and it comes with a beautiful pond built 20 years ago. The point of owning a house was not to also own a pond, but the pond definitely adds to the value initially associated with the house.
Think of that pond as the API Program in your business. The objective of your business is not to provide APIs, but having the program certainly does add value to the organization, doesn't it?
Fast forward to today. That 20 year old pond has turned into a massive time sink...
What you failed to anticipate was that the pond required ongoing maintenance and care, even more so than the rest of your house. To keep the ecosystem healthy, it's important to clean the leaves off the top daily, refill water lost to evaporation, clean the filter, and a whole host of other activities that you hadn't considered when acquiring it because you've never owned a pond before. Now you dedicate your time to pulling decaying leaves out of the water so that the fish don’t die.
Similarly, when determining the cost of your API development you need to factor in things like:
- The Program
- The human resources needs to (1) define, (2) maintain, (3) monetize, (4) support, and (5) roll out your API program
- Server-side (and client-side) apps and libraries, preferably with an automated workflow and devops support
- Easy-to-understand documentation and supporting materials
- Set up for authorization and authentication
- Deployment of your API service to a platform that is secure, scalable, and highly available
- Set up logging and auditing to keep your API service up and running
- Balancing and orchestration - Set up for quotas and traffic management policies to control overflows
- Monitoring - Analytics to gather usage insights
- Security - credential rotation and keeping up with other standard security practices
Recurring costs for small programs like these can add up to $150,000 - $180,000 per year and also require constant management; while none of them are adding commensurate value to your core business. As you consider the opting to build your API program in-house, it’s important to keep these things in mind. Businesses looking to integrate with "Open APIs" should be considering that even if a provider says you can integrate to their system for free, there will be indirect costs that are likely being passed off to you.
Don’t let your API Program be like the pond in your backyard. Do what you should have done from the start and invest in someone who specializes in this area and knows what they are doing to take care of it for you, the right way. They can ensure the ongoing health of the ecosystem and involve you only when necessary. This way you can continue to focus on the real value that you provide to your customers.