How the Cloud Affects Product Strategy

How APIs change the business of software

It goes without saying that the cloud has transformed how software products are built and delivered.

At one level, this transformation has been powered by unlimited network and hardware performance and capacity. But just has significant has been the codification of several design patterns and best practices for connecting diverse software systems. APIs (application programming interfaces) have evolved from idiosyncratic afterthoughts to core elements of any tech/business strategy.

APIs have become a core aspect of every SaaS product’s go-to-market strategy.

It’s not just massively scaled cloud infrastructure platforms from giants like Amazon, Microsoft, and Google. The impact of cloud APIs reaches far beyond this group. Every software product today, whatever its scale, is fundamentally driven by APIs, both as a consumer and a provider.

Moreover, that change extends far beyond the teams building and integrating technology. The cloud’s impact on software development has changed the way both technical and business buyers see the costs and benefits of technology decisions. APIs have become a core part of every SaaS application’s go-to-market strategy.

Questions to ask about an API-centered product strategy

Planning for an API-centric strategy has become part of every product and engineering leader’s responsibility. When considering go-to-market strategies, here are key questions a team should consider:

1. How do you define the value of your API?

It’s tempting to believe all APIs are worthwhile, but product teams are more effective when an API’s value is explicitly defined. Some calculations reflect intrinsic architectural or performance benefits. But others are directly tied to capturing competitive or customer value. Bottom-up tools like like user stories and “jobs to be done” are one approach; so are higher-order business strategy analyses.

2. How is the API’s value captured?

It’s unusual for an API be monetized separately from an overall service offering—few APIs are figuratively coin operated. However, volume-based business models are not far removed from that idea. Revenue sharing is another model, where a partner is compensated by the amount of business they generate by using a specific API. And freemium business models where the API is free, but ancillary services are sold, remain common.

3. What is the API’s governance model?

With the proliferation of APIs, managing and regulating their use is emerging as a major challenge. Teams should be ready from the start for this complex problem. How are conflicting requests prioritized? How will limits be enforced?

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