Sam Ramji met AT&T chief technology officer John Donovan on a speed date -- or at least the tech world equivalent of a speed date.
In 2009, some big-name venture capitalists arranged for lightning-fast meetings between AT&T's top brass and the brains behind various Silicon Valley startups, including Ramji's new venture: Apigee, a company that builds and operates APIs. That's tech-world speak for the software that lets things like Facebook, Google and Twitter talk to all those applications on your iPhone.
Apigee helps companies connect themselves to as many applications as possible -- and ultimately reinvent the way they do business -- but Ramji wasn't sure he could help AT&T. Or at least, that's what he said. According to Donovan, when Ramji showed up for their speed date, he played hard-to-get. "You guys don't move fast enough to play in our game," he told Donovan.
Just a few years ago, that may have been true. But today, it's not. AT&T ended up joining forces with Apigee, building APIs that let outside software developers build phone and tablet applications that do everything from sending text messages across the AT&T cellular network to charging payments straight to a user's monthly AT&T bill. By December of last year, the telecom giant was handling 4.6 billion API calls a month on its network, and Donovan believes that number will reach 10 billion by the end of 2012. "That's the same range," he says, "as the top web companies."
>"Whether you're a company that serves consumers or other businesses, there is an enormous need to expose both data and business processes in ways that others can make use of it"
There was a time when APIs -- or Application Programming Interfaces -- were just a way of building applications for a desktop operating system like Microsoft Windows. But in the age of the internet, they have the power to plug applications into, well, almost anything. They've already transformed websites like Google and Facebook and Twitter into services that talk to a world of other applications, across PCs as well as mobile phones. But that's small potatoes. They're also breathing new life into old-world operations, including mobile carriers like AT&T and even auto makers like General Motors. In January, GM -- another Apigee partner -- said it would offer APIs for OnStar, the communications service it builds into cars.
"Companies are really changing the way they develop their products and deliver their products," says Ted Shelton, a former software developer and chief strategy officer at Borland Software who is now a managing director at management consultant PwC, where he helps companies build APIs too. "We're seeing [API efforts] in virtually every industry. We've done work in healthcare, in finance, manufacturing, shipping and logistics, automotive. Whether you're a company that serves consumers or other businesses, there is an enormous need to expose both data and business processes in ways that others can make use of it."
The aim of these companies isn't just to get Joe Software Developer building new applications for their services. They want to, yes, make more money, and in the end, an API can help do that -- though the path isn't always obvious. Some companies charge developers to use their APIs, creating an immediate source of revenue. But in other cases, APIs are a way of giving things away for free, in the hope that this will expand the use of a service and eventually generate new revenue in other ways. If AT&T improves applications on its network, for instance, more people will use it -- at least in theory. And that means more money.
"If you're trying to think of all the possible ways you can extend or enhance [a product], it's likely you can invest in only a couple of options," Shelton says, arguing that you should open up your APIs instead -- and let everyone else dream up those improvements. "They're going to try all the experiments you thought of, but also all the ones you haven't thought of."
John Donovan acknowledges that AT&T hasn't quite figured out all the ways its APIs will drive revenue, but after years of keeping its network closed to outside applications, AT&T believes this change can only improve its position. "The more connections into our network," he tells Wired, "the better."
Wall Street Meets Facebook (Again)
This month's API poster child is Bloomberg. On February 1, the financial news and data giant opened up APIs that distribute its market data -- and they're completely free. It's quite a change for Bloomberg, which -- like its chief competitor, Thomson Reuters -- has long charged companies for the use of proprietary machines that serve up this data.
There are many forces at work here. Reuters -- the dominant player in this financial data market -- is under investigation by the EU for not opening up its data. Bloomberg's move is a way of gaining an edge on a rival. But the company also says it's hoping to "spur innovation" in the financial services industry. That may sound like spin, but there's all sorts of precedent here. Apigee's Sam Ramji points to Facebook: Mark Zuckerberg and company won the battle with MySpace at least in part because they opened up APIs that allowed outside developers to build application on their social network.
Perhaps Bloomberg can do the same, expanding the use of its services by encouraging others to build applications that plug into it. Once you have the users, you can sell other stuff -- like complimentary services or software. Facebook's IPO filing reveals that 12 percent of its revenue comes from Zynga, a company that uses Facebook APIs to build games atop the social network. Some of this dough comes from Zynga ads posted to the site, and the rest comes from Zynga games using Facebook's payments system.
And Bloomberg is not alone. In October, NYSE Technologies -- the IT division of NYSE Euronext, the company that operates the New York Stock Exchange and various other exchanges across the globe -- open sourced the APIs it uses to distribute market data, hoping to expand the market for its services. The idea is not only to share data for free, but to share the design of the APIs themselves, so that other outfits can built similar interfaces.
"We want to create a community around open and common standards so that we can drive the cost and friction out of global trading,” NYSE Technologies CEO Stanley Young told Wired at the time. "At the moment, it’s a very fragmented, very complex, very costly place to do business — especially if you’re a fund manager sitting somewhere in the Midwest and you want to execute trades on 100 exchanges across the world." As more outfits use its APIs, NYSE plans to sell them stuff like virtual infrastructure, where they can run the tools that use its data.
According to Ted Shelton, of PwC, this free data idea is finding fertile ground on Wall Street, a place that has always been quick to adopt new technology -- and new ways of thinking about technology. "You're going to see more and more cases where companies that are providers of data -- or of business processes like risk management models or trading systems -- open up APIs so that other people, even outside the financial industry, can begin to innovate."
The New Open Source
It's no coincidence that Apigee's Sam Ramji is the former head of open source at Microsoft -- a company that spent thirty years building a business that sold Word and Windows and other shrink-wrapped boxes of software, but has now realized there's value in building software you give away for free. Ramji sees free data APIs as The New Open Source. "Companies like Microsoft were terrified of open source, but they came around," he says. "For so many years, people saw data as a proprietary advantage, but now we have this wave of companies that want to give it away for free."
If you give away the data for free, Ramji says, you can still find a way of making money from the metadata. "Does it matter what the set of all YouTube videos are being linked on Twitter? Or does it matter what the top 20 YouTube videos are? Is the most important financial trading information the current trades -- data -- or is it the stocks that are currently being looked up by the most people -- metadata? Much like open source, open data is a business model built on moving the acme of value to a different point in the chain -- enabling these players to disrupt competitors and profit from asymmetric advantages."
Bloomberg and NYSE are moving in this general direction, but Ramji says their "open APIs" could be more open. Apigee seeks to build APIs based on the web's underlying HTTP protocol and an API convention called REST (representational state transfer) -- which basically means they can be used on most any software platform, with almost any language. Whereas Bloomberg and NYSE use protocols that only work with certain tools, Ramji's goal is a world where any API works anywhere.
>"This is true openness in APIs: using standard, open, free technologies to offer your data and services. The huge benefit of this is that without any additional effort, any device you’ve imagined — or not — has the capability of accessing your API"
"HTTP is ubiquitous. Every language on every device has libraries that know how to act as an HTTP client," Ramji says. "This is true openness in APIs: using standard, open, free technologies to offer your data and services. The huge benefit of this is that without any additional effort, any device you've imagined -- or not -- has the capability of accessing your API."
This too may sound like spin. But it's indeed the way the world is moving. Apigee is helping Morningstar, a Bloomberg competitor, build a "RESTful" API, and this is just one of 250 "enterprise" businesses working with Ramji and company.
As Apigee CEO Chet Kapoor points out, these businesses have so many different goals. APIs aren't just a means of sharing data. They're a way of getting your services onto the new breed of mobile devices, including iPhones, iPads, and Android devices. And they're a way of streamlining your partnerships with other companies. "You don't have give partners software in order to interact with you," Kapoor says. "You just give them an API."
Whether you're a tech company or not -- whether you believe in open data or not -- you can benefit from an API. Agigee's list of customers includes not only AT&T and GM and Morningstar, but MTV and Staples and Sears. "Now that's an old line company," Ramji says.
Ramji may have played hard-to-get with John Donovan. But the truth is that Apigee sees everyone as a potential customer. "If you have to ask who our customers might be," Chet Kapoor says, "you don't understand what's going on here."
