Why API-based architectures excel in times of economic uncertainty
The use of APIs will increase, not despite the economic uncertainties — but increasingly because of them.
In January 2023, some of the world’s economic, academic, and political leaders gathered in the small alpine village of Davos, Switzerland, to shape global, regional, and industry agendas. In 2023, this is not an easy task for the World Economic Forum, as there is no shortage of challenges for the global economy: high inflation, increasing interest rates, supply chain shortages, geo-political tensions, energy crisis, a possible recession, the remainders of a pandemic, and the climate crisis. In its Global Risks Report 2023, the World Economic Forum even used the term “polycrisis” to describe these uncertain times.
As organizations continue to face disruption and uncertainty about the polycrisis, both IT and business leaders are bracing for more economic upheaval, where the challenge is increasingly about how to keep pace with the ever-changing world and new crises.
A good environment for technology and APIs?
You might be tempted to think that this is not a good environment for technology and APIs. But I believe the opposite is actually the case. Why?
In times of uncertainty, the importance for organizations to be resilient and adaptable to new circumstances grows significantly. When there is uncertainty, companies need to be adaptable and respond to sudden changes. Companies need to reshape their processes, pivot business models, and change their IT systems. But seldomly are those underlying IT systems built for change, and their rigidity limits the resilience and adaptability of the overall enterprise.
An IT architecture to deal with uncertainty
Such new circumstances are typically introduced during crises. For example, during the pandemic, companies had to switch to e-commerce, contactless store pickup, digital banking, or digital government services to meet customer needs and demands. The companies that were able to adapt quickly came out as the winners. Their IT systems were ready for the change because their IT architecture is built on the principles of modularity and composability.
As Paul Clements, co-author of the classic software engineering book Software Architecture in Practice, puts it: “The best software architecture ‘knows’ what changes often and makes that easy.” In this case, APIs can make such changes easy.
Advantage of an API-based IT architecture
If important data and functionality is packaged into reusable digital building blocks (a.k.a. APIs), the building blocks can easily be rearranged into the new processes that are required by changing circumstances. Change does not require starting from scratch, which would require a long adoption timeline. Instead, changes can be implemented simply and quickly by rearranging and reconnecting ready-made APIs — the digital building blocks. API-based architecture is a necessity for companies and their IT systems to stay flexible enough to pivot, be agile in the face of disruption, and outpace the macro challenges.
It is important to understand that the use of APIs will increase, not despite the economic uncertainties — but because of them.
In times of uncertainty, companies optimize for flexibility, adaptability, and resilience — all the way down to the IT systems of the organization. You have a strategic advantage if you can adapt quickly to new circumstances. Not only will you need to adapt the business strategy, but also the IT processes that enable the business. API-based architectures provide this flexibility to the IT systems and allow companies to make the necessary changes.
Investors take notice
Investors have already understood the value of APIs as a competitive differentiator. Boston University shared in its report “The impact of APIs in firm performance” that API adoption predicts a significant increase in a firm’s market value. Investors judge API adoption as a signal for positive future performance, as it makes companies more resilient.
The company that is best prepared for change with an adaptable API-based architecture has the highest chance of pivoting successfully, and quickly, when external circumstances and the global economy require the change.
The challenges that lie ahead will likely require businesses to pivot in new and unforeseen directions. Processes will need to be adapted. IT systems will need to be changed. And this will be easier with an API-based architecture. Companies that invest in an API-based architecture will be able to change quickly and will have an advantage over their competition.