API ROI measurement

Although APIs are not typically considered as products, it is important to recognize their potential value and profitability. When you come to this realization, it becomes necessary to update your strategy, ensure that your API infrastructure is solid, and establish criteria for success. This includes implementing API market strategies, considering Return On Investment (ROI), providing high-quality API documentation, and developing a comprehensive landscape for your APIs.

After you have defined your API monetization strategy and can move forward, the next step is to understand how long it will take to see returns on your investment. ROI is a widely used tool, and one of the reasons for its popularity is its simplicity. Once you have defined and agreed upon your ROI measurement strategy with accounting, management, and IT (the rules must be the same for all APIs in the enterprise, to have objective measurements and evolve your APIs), you should evaluate major points that can decrease your ROI, and target them as soon as possible.

The first and most important thing is to ensure that you have excellent monitoring and data collection in place (in addition to having the API itself). You need to make sure that clients have access to the API, that it is up and available, that it delivers the expected information, and that every possible aspect of it is measured. This will be especially useful when you move on to the optimization phase. You wouldn’t want to find yourself in a situation where your ROI is negative because you didn’t notice that someone blocked all external connections two weeks ago.

For the analytics part, you need to focus on characteristics that can significantly decrease your API’s productivity. For example, uptime, correlating error messages with deployments, measuring average data usage against the effectiveness of auto-scaling, or how quickly you’re reaching set limitations. You can create indirect measurements such as release frequency versus customer support calls, functionality updates versus user count increase, or profit changes.

Initially, you’ll see great improvements with any update as the “critical” issues will jump out immediately. Later on, you’ll need to rely more on statistics as outstanding issues become less noticeable, but the “small ones” accumulate over time.

API lifecycle management

API strategy is like road infrastructure. If your infrastructure is poor, there will be many accidents, cars will break down frequently, and people will try to find workarounds to make their lives easier. On the other hand, with good infrastructure, you get growth. When it comes to any API as a product, you need a perfect infrastructure to support your needs, from delivering what the API promised to managing and monetizing it effectively.

Here are some things that can impact your ROI:

• Poor or insufficient documentation
• Inadequate technical support
• Frequent changes that impact end-users (e.g., changes to API calls or the data returned)
• Switching to a different API without the ability to manage the old one (We’ve all heard it before: “We want to switch off our old API, but we don’t know who’s using it. I guess we’ll just turn it off and wait for someone to complain.”)
• Poor user management and access control

Security

As discussed in the article “API Security – Common Threats,” there are many ways to compromise your APIs. A significant threat to your ROI would be a hacker attack. Some potential consequences of such an attack include:

• Stolen goods or services: Without proper API protection, an attacker can order physical goods or services without paying for them, causing financial loss for your enterprise.
• Damage to reputation: If your users don’t feel confident that their data is secure with you, they may turn to your competitors instead, resulting in loss of revenue and market share.
• Uncontrolled exposure: If an attacker gains unauthorized access to your APIs, they can expose sensitive data and/or manipulate system functions in ways that can harm your enterprise.

IT Productivity

Every stage in the development lifecycle is critical for you as a provider, as even the smallest things can have the biggest impact. Poor productivity can harm your business.

• Customer feedback: Always keep communication with your clients. If you are not talking with them, your competitors will be. Gathering valuable feedback can help you deliver more features and improve the current setup. Sometimes, a 10-minute chat can save you one year of development on a feature that nobody is going to use.
• Analysis: Fixing errors at this stage is often cheaper than fixing them in production. Ensure that your departments communicate with each other, and business communicates with engineering.
• Development and planning: Prioritize features, bug fixes, and other issues based on their impact and business value. If not, your clients may start looking for feature-rich alternatives.
• Testing: Allowing clients to test your code because you failed to do so is a surefire way to decrease ROI.
• Deployment: Long outages due to deployment windows and poor infrastructure, as well as poor deployments that cause new issues in production, will not retain users for long and negatively impact your ROI.
• Maintenance: Frequent issues, long fix times, and poor customer support do not help either.

Measuring the ROI of APIs is crucial for businesses that rely on them to generate revenue. To maximize ROI, a solid API strategy, rock-solid infrastructure, and excellent customer support are necessary. However, even with the best strategy and infrastructure in place, it is important to monitor and analyze the API’s performance regularly. By doing so, businesses can identify any issues and address them promptly, leading to improved customer satisfaction and increased revenue. Overall, effective API ROI measurement requires a continuous cycle of planning, development, testing, deployment, and maintenance, with a focus on meeting the needs of both the business and its customers.