Proving the ROI of an API project

Identify the key KPIs to avoid unnecessary delays and complications

IT leaders increasingly find themselves with the difficult problem of estimating the return-on-investment (ROI) of a new API project.

APIs have evolved from being seen as cool projects for marketing or sales to becoming globally mainstream and seen as ‘mission-critical'. The CFO and other non-technical senior managers now know what API management is and why it is important.

But now that these executives know the potential power of APIs, they want documented proof of the value of API investment, in particular ROI. How long will it take to recoup the investment or create other demonstrable value? With multiple projects fighting for attention, priorities have to be set.

This puts a lot of pressure on IT to come up with the evidence. But while it is, of course, important to ask questions around the benefits of API management, there is a risk that building the business case around a generalised concept of ROI will cause lengthy delays. The process could even lead to the original strategy being changed, and if the business case is not clearly shown, projects may not get the green-light to proceed.

Identify the KPIs

This is why it is so important to identify the key performance indicators (KPIs) that are going to truly make a difference. I like to break those down into six focus areas: revenue optimisation; time-to-market; IT efficiency; security and compliance; operational efficiency; and hybrid and cloud deployment.

Within each of those six focus areas, specific KPIs can be identified to cover the lifecycle of API management. Examples include: the cost and risk of a data breach; efficiency targets associated with publishing and documenting APIs; and increased revenue due to reduced time-to-market. Breaking down API management ROI into these fairly specific KPIs helps to identify the real financial and business impact, which in turn helps set priorities.

Best practice

Taking a closer look at a KPI helps show how ROI calculations are put into practice.

ROI can be positively impacted by automating processes involved in publishing and documenting APIs, for example. Costs are reduced in the form of better quality with fewer errors and a faster time-to-market. With that comes the ability to publish more APIs, as well as lengthen their revenue-producing lifespan, adding to the top-line. Plus, faster time-to-market not only increases the ROI for that particular API but also frees up bandwidth to build new initiatives, increasing the ROI for the enterprise as a whole.

A best practice — particularly in the early planning stages — is to always ask if there is actually a market for the API strategy. Developers can fall into the trap of creating applications that are interesting to them, but for which customers will not pay. An API product manager should ensure that customer needs are driving the initiative, otherwise there is a risk of investing a considerable amount into building APIs that nobody uses, thereby leading to no ROI on the project.

This is where non-technical and technical teams can work together on API ROI, with non-technical teams translating the customers' pain points to the technical team who can then build APIs to satisfy those needs.

It's not always about volume

On the other hand, a common misunderstanding is that the highest ROI is driven by building an API that serves a large community. Many companies go wrong in thinking that the more APIs they produce and the more end-users they have, the higher the ROI will go. Yes, a significant return on an API can be achieved when it is widely consumed by multiple end-users. However, businesses can do just as well, if not better, by getting good use out of their API strategy from a single lucrative consumer. The key is building APIs that are useful to the community at which they are targeted.

To that point, companies can also go wrong by focusing too much on increasing the top line - building more APIs as quickly as they can, engaging more users - but not putting enough emphasis on the cost-reduction side of the equation. Identifying IT inefficiencies, eliminating redundancies, and mitigating risks can all have a significant impact on the ROI of an API initiative and should be viewed as being as critical as revenue generation.

As the dependency on APIs increases, so will they be put under the spotlight and their ROI questioned at senior non-technical management levels. To avoid roadblocks, delays, or rejected API projects, it is important to put in place a framework that provides clarity around API ROI and how they demonstrably support business objectives.

Samir Ullal is senior manager, product management and sales engineering for Akana at Perforce Software.