Not too long ago, APIs, or application programming interfaces, were something only a programmer could love – or was even aware of. APIs were the code bits that enabled one application in the machine to send data to another application – such as a CRM system sending data to an accounting system.
Now, APIs have emerged to a starring role in today’s digital enterprises. And it isn’t just programmers who are enamored with their potential. Now, it’s business managers – and even their top-level executives – who want in on the API action.
That’s because APIs are no longer something that happens inside machines – nowadays, the impact of APIs on insurance companies’ operations and go-to-market capabilities may be significant. Using APIs to tap into existing functions offered by third parties – such as Google Maps or Salesforce analytics – provides new forms of functionality, as well as a way to cut the costs of maintaining or writing software.
I recently helped put together a report for MuleSoft on the business potential offered by the growing API economy. We called the API-enabled organization a “composable enterprise” – a connected organizations with business processes supported by on-demand services that are acquired and leveraged from the cloud and APIs, furnished by outside providers or through internal data centers. These services are connected through APIs.
Not only is the API economy delivering business advantages, but also elevating the careers of IT professionals – from systems maintenance roles to digital “provocateurs.” As we observe in the MuleSoft report, in the API-centric enterprise, IT is an enabler of digital growth. “All too often in organizations, IT has been the department of ‘no,’ or the place where project requests go to languish. In a composable enterprise, IT serves as a full partner to the business, but at the same time, may even be invisible. Services rendered through the cloud, APIs and mobile are part of a structure that enables decision makers to quickly access the applications and information they need. “It’s not just about connecting applications together, it’s also about exposing information through things like APIs that enable people to be able to grab information easily, in a self-service way, without having to go through central IT for everything,” noted Ross Mason, founder and vice president of product strategy at MuleSoft.
At its DeveloperWorks site, IBM offers some examples of public APIs specifically available to the insurance industry, including the following:
Agencyport Turnstyle – provides for extraction of data from ACORD-compliant forms used in the insurance industry for serialization as XML.
- Progressive SuperCREWS – provides information comparing the rates of other major insurance companies to its own.
- Insured Rating – enables users to develop a rate plan reflecting risk levels posed by prospective customers.
- NAIC Registry – allows automated filing of standard reporting documentation required of insurance providers for compliance with state regulations. The provider is a cooperative agency maintained by state governments to encourage consistent regulatory and business practices for insurance companies.
Along with the potential transformation benefits APIs deliver as they are consumed from other parties, there is inherent value that can be measured as well in the APIs that are built and offered by insurance companies. CIO’s Thor Olavsrud recently came up with a snazzy formula for quantifying this value, which goes as follows:
API worth = Number of users/10,000 x (Number of dev hours x dev hourly cost), with the entire result divided by the number of competitors +1.
So, as Olavsrud illustrates, an API with 100,000 users, which took 500 hours to build by two developers earning $50 an hour, and meeting five competitors in the same space, would have a value of about $83,000.
$83,333 API value = ((100,000/10,000) x (1000 x 50))/5 +1
The purpose of calculating such a value is to get a sense, up front, of what kind of investment needs to be made in the API development project. Given the incredible business power behind today’s APIs, consuming or building APIs is a good investment.
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