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Application programming interfaces (APIs) have emerged as a key element of tech modernization at many businesses, including most banks and insurers. With their ability to link systems and data, APIs play a crucial role in making IT systems more responsive and adaptable.
Yet despite the promise, most enterprises have failed to capture the value they initially envisioned from APIs. In many cases, a rush to build APIs without a thoughtful strategy has created a mess, with redundancies, poor maintenance practices, and limited transparency canceling out many of the potential benefits. Some companies have spent years ripping and replacing megasystems, adding APIs in an ad hoc way the entire time, without making any real progress.
In our work with many clients on developing API strategies and building out API portfolios, we’ve found common themes behind the difficulties companies encounter. One is that IT assumes sole ownership of API programs, so they aren’t tightly linked to business goals or an overarching modernization vision. Another reason API programs falter is siloed efforts—for example, efforts focused solely on data or cloud migration—which can generate only incremental value. To achieve the full promise of APIs, companies ultimately have to make significant progress along multiple dimensions.
To avoid these pitfalls and get the full benefit from their API initiatives, CIOs must address seven key challenges.
Challenge #1: Where do I start?
We’re not sure where to start with our API program.
Digital-transformation leader at a large bank
The flexibility of API means that it can be used almost anywhere in IT to make something better. That range can be overwhelming, and small experiments can take on a life of their own, leading to wasted energies and limited value.
Deciding which APIs to build requires taking a dual perspective: identifying which can enable important customer-facing applications/solutions and which can build a sound technical foundation. Within that context, IT leaders can prioritize API development based on the business’s strategy, business and modernization impact, and ability to execute. For example, a regional bank began with APIs that digitized a key customer journey. It then went on to build APIs that simplified the architecture and drove efficiencies.
Customer journeys are a good place to start thinking about which APIs to build. A focus on journeys can identify which APIs can stitch together disparate IT systems to deliver a seamless end-to-end customer experience. To maximize the impact, tech leaders should also consider three additional ways APIs can provide value.
Data access and integration
APIs can expose data across various IT systems, both legacy and modern. They can then be used to extract the data and link them to advanced analytics systems.
Most large organizations still have significant captive, on-premise infrastructure and have started to migrate to private clouds. A small number are embarking on public-cloud migration to reach the next horizon of benefits. Managing a hybrid cloud environment requires IT leaders to prioritize APIs that can access infrastructure across both private- and public-cloud assets.
APIs can help with transformations because they can connect core IT systems, and the specific data inside them, to digital platforms. APIs can also serve as connective tissue and a synchronization mechanism across both modern and legacy systems that may operate at different clock speeds.
All of these elements are intimately related. Thus figuring out which APIs to build first requires mapping the most important journeys and then noting the required complementary APIs to unlock the needed data, cloud, and core resources. It also requires identifying APIs that will allow the organization to operate in an
agile online courses, test-and-learn mode.
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Challenge #2: What should my API teams look like?
We decided to implement APIs using agile online courses but had a hard time making it happen.
Transformation leader at a large insurer
The teams that build APIs need to employ a dedicated agile online courses operating model. This requires a shift from seeing API building as a set of one-off projects and instead treating each API as a product that will evolve and improve over time based on customer feedback. The two core elements to get right for the operating model are teams with the right skill sets and an…