API as a Product: From Middleware to a Strategic Asset for Creating Long-term Business Value

There is a treasure trove of data piled up within enterprises. Often untapped and underutilized, it lies around gathering dust, and business leaders are not even aware of its monetization potential.

Capitalizing on digital assets and multiplying opportunities is possible with the concept of API as a product (or API as a service). For quite some time now, more than just technical utilities, application programming interfaces have connected business ecosystems, opening up new revenue streams.

But even though businesses tend to realize the value APIs can deliver, most are frustrated by how to unlock it. 

API characteristics to distance your product from the rest of the pack

One of the unique aspects of API products is that they cater to multiple audiences — not just developers enhancing their applications with your API, but also those applications’ end users .

Thus, the success of your API hinges on your ability to create a go-to product for developers and communicate its value to potential partners. 

So, what kind of  application programming interface becomes a top pick?

Easy-to-use

Developers want to integrate an API with minimal fuss. The easier it is to use — thanks to intuitive endpoint names, smart defaults, etc. — the faster they’ll reach that “aha” moment. And if they don’t? Well, they may just switch to your competitor’s product.

Google Maps API and Twilio are sound examples of easily consumable web APIs. Their endpoints are logically structured, and operations are generally executed using simple HTTP requests.

Safe

Making sure your API is safe to use is all about protecting the sensitive data your users trust you with and keeping your business on the right side of legal requirements. A secure API helps to avoid the headaches of breaches and downtime, which can cost you big time.

Well-documented

However big the potential of your API is, it won’t matter much, if developers fail to understand how it works. Clear, comprehensive, scannable documentation that outlines functions, classes, return types, arguments, etc. will encourage developers to use and recommend your API.

Good API documentation is backed up by interactive code samples, step-by-step tutorials, SDKs, use-case scenarios, etc. 

Take Spotify API, for example. Along with in-depth descriptions of each endpoint and its parameters, its well-organized documentation provides an interactive console, where developers can experiment with making API calls and view the responses in real time. The perfect combo of blow-by-blow guidance and practical tools helps developers handle integration more deftly, minimizing the odds of misuse.

Reliable

Reliable APIs don’t stagger under the number of requests, whether it’s one user or a thousand. Even under heavy load, be it due to a growing user base, seasonal spikes in usage, or intentional overload attacks, APIs stay available and work consistently.

Building your product that is reliable and performant includes but is not limited to implementing the following:

• API infrastructure that dynamically allocates additional resources to handle the load without manual intervention;
• extensive caching strategies to reduce latency;
• advanced load balancing to distribute traffic across multiple servers and data centers.

For instance, thanks to sophisticated scaling and load balancing technology, Google Maps API’s infrastructure ensures near-perfect uptime, fast response times, and global availability.

API product vs. API project mindset: detailed comparison

The mindset you adopt towards APIs can make all the difference. Considering them as mere afterthoughts — a project mindset — won’t get you far. But when you see them as self-sufficient products, the odds of building revenue-generating powerhouses soar.

Let’s recall the good old Stripe. From the start, they invested heavily in a customer-centric approach. In fact, API was their only product. Treating Stripe API as a product helped the company meet technical and business goals. Stripe is now one of the best payment processing services delivered by a great API that developers adore.

Here’s a detailed comparison of the two mindsets:

What holds companies back from drawing on the value of API products?

“We have all this data. But making money from APIs? That’s been a challenge.”

These concerns are far from rare among our clients. The uncertainty and hesitation touches different parts of API product development, but they hit hardest when it comes to data security. It’s something on the minds of just about everyone considering APIs, no matter the angle.

Be it an automotive giant thinking of opening up their APIs to particular vendors or a leading SaaS company seeking to provide opportunities to build APIs upon their platform, both struggle to set an effective plan in motion due to roughly the same cogs in the wheel.

User data at risk

Even the most successful API-first leaders are not immune to security incidents.

The #1 API security hazard, revealed in talks with CTOs and Chief Enterprise Architects, and also backed by industry surveys, lies in improper user authentication, authorization, or access control. Facing additional obstacles like business logic flaws, data overexposure, insufficient rate limits, DoS and DDoS attacks weaken the confidence of complete data protection.

However, despite the multitude of risks, data can still be safeguarded by employing meticulous security strategies such as:

• Implementing robust authentication and authorization mechanisms. Use multi-factor authentication, follow authentication protocols like OAuth/OpenID Connect in conjunction with transport layer encryption (TLS), etc.
• Ensuring fine-grade access control. Manage what certain users are allowed to do thanks to role-based or attribute-based access controls. If you provide access to API via API keys and tokens, make sure they are rotated regularly — at least every 90 days.
• Implementing rate limiting mechanisms. Over 15 million lines of Trello users’ data — emails, full names, etc. — were scraped by bots due to a flaw in the platform’s API rate limiting. Limit how often a user from a single IP address can make API calls within a given timeframe (rate limiting) and slow down API responses after a certain threshold is reached (throttling) to prevent DoS and DDoS attacks. Tools like CloudFlare help guard against bots, their brute-force login attempts, and other API abuse thanks to advanced rate limiting and DDoS protection.
• Encrypting data with up-to-date security protocols. All API communications should be secured using HTTPS. Given that HTTPS is built on TLS, make sure you use the latest version (currently TLS 1.3), as older versions have vulnerabilities that attackers can exploit.
• Limiting data exposure. Expose only minimum necessary sensitive data in a tokenized, anonymized way.

Puzzling (and costly to neglect) data privacy compliance

Taking care of data security goes beyond implementing security measures at your discretion, as it also involves strict compliance with various regulations. 

Regulations like GDPR make it tricky to collect self-identification data, requiring adherence to specific rules even when data is anonymized. And that’s just the tip of the iceberg — industry-specific regulations impose further obligations.

For instance, companies that manage card payments face substantial financial penalties if they fail to comply with the latest PCI DSS v4.0. 

In other highly regulated industries, such as healthcare, every little thing, right down to the APIs that move sensitive electronic health information between systems, is watched closely. The FTC warns about severe fines for failing to address data privacy risks.

So, rather than being just about protecting data, it’s, on top of that, about playing by the rules — or facing the consequences.

Data inconsistency

Companies may encounter issues with duplicate data. 

If we consider the automaker’s case, who’d like to create an API to share information about their vehicles, their knowledge base may potentially have two different values specified for one engine volume in different instances: 1.4 liters and 1.390 liters. The API should be smart enough to detect inconsistencies of that kind and return the correct value.

Eliminating such inaccuracies requires various data transformations, including matching, normalization, outlier detection and removal, etc. For this, business analysts determine the key data attributes transmitted through the API and develop rules to ensure consistency. Failing to do so leads to errors, longer development times, and poor user experience.

Here are some other tips we recommend not to ignore:

• Choose the appropriate data format (JSON, XML, CSV, etc.) and stick to it to maintain consistency across different API endpoints
• For live data, include timestamps or version keys to signal API consumers about any data changes

Staying resilient at scale

To ensure smooth and reliable API performance, we suggest using scalable cloud services allowing for flexible resource adjustment. 

When it comes to handling traffic spikes or sudden drops, autoscaling, available in cloud computing deployments, is indispensable. By automatically adding or removing capacity on as-needed basis, this approach offers significant wins, including high availability, improved resource utilization, and cost-effectiveness. Besides, you’ll only incur minimal service fees during periods of zero load, based on your subscription plan. 

In the case of a standalone setup, keep an eye on your logs to catch when incoming requests start maxing out your capacity. If you’re anticipating frequent overloads, it’s a good idea to upgrade your machine’s resources to maintain the stability of your API product. Additionally, having DevOps engineers on board from the get-go is non-negotiable for isolated configurations to implement efficient scaling strategies and guarantee your API stays unshakable, no matter how much traffic comes its way.

Beyond technical issues like server overloads, you also need to be prepared for logical errors, caused by API incorrect usage. The impact of unexpected disruptions can be minimized through:

• Continuously monitoring API usage, performance, and error rates;
• Setting up alerts to notify relevant teams of critical issues or anomalies;
• Providing users with informative error messages that clearly indicate the problem cause and suggest potential solutions, using appropriate status codes.

Maintaining order and control in the API ecosystem

Managing APIs can be a tough, non-trivial game. Integrating a slew of various systems, safeguarding API data transfer, and making sure performance is on point require dedication and systematic, tailored approach.

Within our API management undertakings, we seamlessly connect to various databases, enable or disable APIs as needed, and monitor metrics, such as performance and usage. Unlike standard platforms, we customize ready-made tools to align perfectly with client expectations, providing pre-configured components and user-friendly documentation. That way, our partners get precisely what they need, without unnecessary complexity.

— Ivan Petrukovich, Senior Software Engineer, *instinctools

How to create an API product?

So how to take your buzzing API idea a step further and build a product with not only high profit-making potential but which is also ultra-secure? Here’s a detailed, from-inception-to-launch API development cycle we came up with and polished up while working on similar projects.

Define the API product strategy

At that point, you basically need to find out the following about your API:

• The business goals and objectives it will support
• Your API’s target audience, including partners and external developers
• The problem or problems your API will solve and how will it benefit users 

While it might seem like pure product marketing, the implications outlined during this stage are fundamental for making the majority of technical decisions as well, be it defining API architecture or choosing appropriate frameworks or programming languages from a dizzying array of API-related tech. For instance, the selection of standards and protocols (REST, SOAP, gRPC, etc.) is driven by the peculiarities of data routing.

Architect your API

Data-related aspects are among the first things you have to focus on. Consider the type of data your API will handle, where it’s stored, and whether it needs cleansing. If you’re going to turn to a software development vendor, decide to what extent third-party engineers can be involved in the data transformation process.

Next, choose an architecture that aligns with your needs. In most cases, REST API is a go-to choice due to its simplicity and performance, but your specific requirements — industry- or project-wise ones — might tip the scales to other, better-suited approaches. For example, in domains like telecom, healthcare, and finance, SOAP is prevalent. The chosen architecture will dictate your tech stack, including programming languages and frameworks.

Once the architecture to build on top of is defined, tools like Swagger, OpenAPI, or Postman are used to automatically generate the API’s interactive documentation, code stubs, or test cases directly within the browser.  

Proceeding with the example of the car manufacturer, let’s say, backend developers, when dealing with a ‘car body type’, which describes the car’s design (like sedan, hatchback, etc.), specify that only a limited set of values can be used for this field. Tools like Swagger can automatically incorporate these constraints into the API documentation, ensuring external developers are aware of the valid options. This helps prevent them from using inappropriate values, thereby reducing errors.

Another big technology decision revolves around the API gateway. Establish its proper governance, as gateways are like a front door to all critical API-related activities. They handle traffic management and analytics and allow developers to ensure the product adheres to security policies.

Remember to consider how you will handle API versioning. When rolling out new product versions, make sure to keep things backward-compatible without compromising the functionality for clients still using older versions. A rule of thumb is to automatically reflect any changes or updates in the API documentation to loop everyone in.

Build and test

With architecture in place, you can knuckle down to building your API within an agile, iterative software development lifecycle.

Testing is a make-or-break matter at this stage. Run different types of manual and automated tests to confirm that the product meets the defined specifications:

• Smoke tests. Conduct a fast preliminary check to ensure the core functionality works as intended.
• Unit tests. Verify individual functions or methods. 
• Integration tests. Look into how 1) different components of an API interact and work together and 2) your API interacts with external systems. 
• Load tests. Evaluate the API’s performance under heavy workloads.
• Security tests. Spot vulnerabilities using tools like Selenium to protect your product against threats (SQL injections, cross-site scripting (XSS) attacks, and others).

Deploy

Make sure your deployment environment can handle multiple languages and follows all the data protection rules, storing data in the right legal jurisdictions. 

Set up a user-friendly developer portal so it’s easy to get hold of documentation (which should cover all aspects of API usage, including a sandbox environment for testing integrations), API keys, and support.

As a reminder of how critical comprehensive guides are for your API product, over half of 40,000 developers worldwide named poor documentation the major snag to consuming APIs.

Monitor, manage, and support continuously

Once your API is live, don’t turn a blind eye to continuous monitoring. Implement logging to capture API user activity, errors, and performance metrics. By analyzing user logs, you can reveal typical behavior patterns to identify common interaction scenarios. 

Besides, pay close attention to direct feedback from API users to pin down their needs and pain points. 

These actions will drive ongoing improvements, bug fixing, and the implementation of more calibrated new features. Generally, treat your API as a living product. Regular updates and responsive support will keep it relevant, secure, and useful to your users over time.

Get started with your first-class API product

Many enterprises we work with are eager to build custom APIs that share data with an array of partners, but run into problems they can’t solve on their own. If you’re like them — ready to take that leap but need expert engineering support to bring your vision to life — team up with experts who have the chops and the hands-on experience for end-to-end API product development.