The Impact of Open APIs on Economy and Society

Catherine Mulligan is a Horizon Transitional Research Fellow in Innovation Studies at University of Nottingham. The following is an extract from her upcoming book “The Communications Industries in the Era of Convergence”, published by Routledge. The text is taken from our publication “Build on others’ work” about how you can create media and build services on data and content that already exist.

APIs are far from a new concept. While their role within technology is well-known, their impact on the economy and society is less understood: APIs actually helped fuel globalisation since the 1960s.

The current era of Open APIs is different, however: these interfaces highlight wider changes in both our economy and society. This is only the beginning and the impact of Open APIs will be felt in every part of the globe.

APIs and Globalisation

APIs originated in 1960s to reduce development and testing costs by allowing for modular development of code. APIs on e.g. IBM’s 360 made code re-usable internally to companies.

By the 1980s APIs were exposed to external developers, allowing them to create and sell applications on top of platforms. Companies could use APIs to develop software across the globe simultaneously; many even outsourced development. APIs were one of the drivers of globalisation during the 1980s helping companies to achieve new levels in the pursuit of economies of scale. Without APIs, the economy may have a different shape.

From 2005 onwards the speed of technical change means companies must work closely together, focusing simultaneously on ‘core business’ and close interaction across industries to ensure compelling 3rd party product offerings on their platforms.

Meanwhile, mobile devices allow for the capture of data about end-users in a manner that has never previously been conceivable, while new streams of data from NFC, RFID and sensor are released every day. Market uncertainty is the result – it becomes too expensive to establish the business relationships and legal contracts with every company needed to develop compelling applications. Many sub-platforms need to be linked together to create a complex ‘network of platforms’, connected via Open APIs that function both as a technical and contractual boundary to reduce transaction costs and increase innovative capacity by creating dynamic ‘contracts’ between parties.


Open APIs and Market Creation

Open APIs and Society

Open APIs brings both technical and social opportunities and challenges:

  • Open APIs create more equitable access to information, allowing access to data previously locked in libraries.
  • Cloud-computing APIs create more equitable access to processing capacity. Access to information and the ability to process it is rapidly becoming a global human capability, not just a corporate one.
  • At the same time, however Open APIs create imbalance between regions as a large portion of the world’s population contribute their data to increase the revenues of US-based companies, e.g. Google. Open APIs are the basis of new organisational structures for companies as they did in the 1980s.

Open APIs are far more than a technical interface – they are setting the stage for the next era of globalisation. The eventual impact will be far greater than just Web 2.0 and is a development to be watched.

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