How can open API adoption be beneficial to your SaaS business?

Closed API vs Open API for SaaS startups and companies

Summary

API, also known as the application programming interface, acts as data pipelines that connect the front-end with the back-end. That is, it connects the applications to the database. APIs, being more than just data pipelines, are also used in improving digital experiences, decreasing churn rates and expanding product lines.
8.5
SITE SCORE
7.5
USER SCORE

Good

  • Publishers can expand their number of customers with open APIs by building industry-level software.
  • A third-party developer can earn by licensing the new program.
  • Different developer teams need not completely rely on one another.
  • Open APIs save a lot of time by seamlessly integrating with the front and back-end and also with other applications as well.
  • Developers can easily use their preferred tools to work with open APIs.

Bad

  • The API must not contain any software bugs.
  • Must be able to perform well and fulfill its purpose.
  • It should not contain any security flaws that can compromise the users’ data.
  • It should not be able to access users’ private data.

In the past couple of decades, the world has been swiftly moving towards a more digitalized environment. This paved the way for the production of devices with massive computational power and has created higher expectations among consumers related to digital experiences. This forced the companies to adopt APIs.

API, also known as the application programming interface, acts as data pipelines that connect the front-end with the back-end. That is, it connects the applications to the database. APIs, being more than just data pipelines, are also used in improving digital experiences, decreasing churn rates and expanding product lines.

It is found that enterprises with the advanced API management process experience 47% better business results compared to the enterprises with basic or no API management processes and more than 89% of the organizations have improved their digital environments using APIs.

APIs in general, are categorized into two as open APIs and closed APIs.

Closed API vs Open API

Closed APIs, often referred to as dark APIs, are APIs that are protected by being accessed by the public. These private APIs can only be invoked by making calls through highly secure firewalls or VPN networks.

Closed/private APIs are confined within highly secure environments. Hence they do not allow any form of public user authentication. These closed APIs are used for internal services like micro-processes and all the resources within these APIs originate from highly secured and trusted locations as well.

Open APIs are only limited to access restrictions in order to maintain the source code as they are available to the public. These APIs can be invoked/called from anywhere on the internet by anyone. Open APIs are capable of providing user-specific services and can also be integrated with third-party applications.

For instance, If you are looking for a shop/store on their respective website, they usually provide a map that shows the location of the store. This is because the website uses the API of google maps to provide the location of the store.

Advantages of open APIs

Though the source code of APIs is maintained by the organizations that produce these APIs, they still offer so many benefits to API publishers and developers.

  1. Publishers can expand their number of customers with open APIs by building industry-level software.
  2. A third-party developer can earn by licensing the new program.
  3. Different developer teams need not completely rely on one another.
  4. Open APIs save a lot of time by seamlessly integrating with the front and back-end and also with other applications as well.
  5. Developers can easily use their preferred tools to work with open APIs.

As much advantage as open APIs provide, there are some drawbacks that come with utilizing these APIs.

Drawbacks of using open APIs

While implementing open APIs in your business applications, it is important to know that it is open-source and might contain some defects that might cause errors. Any error caused on the customers’ end could affect your company’s reputation. Hence before utilizing an open API, look for the following:

  1. The API must not contain any software bugs.
  2. Must be able to perform well and fulfill its purpose.
  3. It should not contain any security flaws that can compromise the users’ data.
  4. It should not be able to access users’ private data.

In some cases, even if you could identify the flaw in the API, it might not be possible to rectify it as the API provider might have restricted the access. Additionally, if the API provider alters the terms of use, such as increasing the fee for licensing or remove tools that were already available in the free versions, it could be difficult for a third-party developer to utilize the API further.

Reasons to adopt APIs for your SaaS business

APIs are widely being used across various business verticals these days. When it comes to SaaS verticals, these APIs are used to develop a platform or upgrade the existing environment or for digital transformation. With more sophisticated features and tools, open APIs offer enormous advantages. Some of the key advantages that an open API offers are mentioned below.

1) Higher return on investment

API management for SaaS solutions usually requires a lower initial amount of investments. The operation cost is also very less compared to the traditional on-premise platform where the companies had to take care of everything individually. Also, most SaaS solutions these days only charge depending on the services used.

2) Easily manageable

By implementing API management solutions SaaS vendors need not be concerned with setting up the environment and configuring and managing the solutions. This is because the API solution provider offers readily available solutions that are already configured to meet your needed. API solutions also enable seamless integration with other applications or solutions irrespective of the location of the main server.

3) Flexibility

Keeping customer satisfaction in mind, most SaaS providers these days, offer 24/7 support via mail or live chat to assist the customers with any issues. SaaS-based API management solutions are helpful in computing resource utilization. Based on the usage, companies can scale up or scale down.

With the popularity of APIs keeps increasing, SaaS-based API management solutions are being adopted by many companies across the globe. This makes it important to implement an effective API management platform that can offer numerous advantages to your business.

Another most flexible feature that an API provider offers is the payment methods. With the increasing demand for APIs in the market lately, API providers offer their services at very low starting prices. Some of the most popular payment methods are charging only for the services offered and the pay-as-you-go model.

4) Security

Security is generally a major factor when it comes to utilizing open APIs. The security issues can be addressed by implementing hybrid API solutions. These APIs can then be accessed using VPN and VPC. This can also tighten the backend security.

According to a report, the API management market that includes API platform, analytics, security and implementation, will generate revenue of around $1.5 billion by 2023 with a CAGR of 32% from 2018 to 2023.

Open APIs are absolutely beneficial for SaaS-based startups and SMEs as they could develop their company and business without having to invest in developing on-premise tools and resources. But it is advisable to think twice before completely relying on open APIs. With proper security measures, open APIs can make your business highly collaborative with others to form new opportunities in the business vertical.

Expersight is a leading market intelligence, research and advisory firm that generates actionable insights from certified experts globally.
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Expersight is a leading market intelligence, research and advisory firm that generates actionable insights from certified experts globally.
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