Geoffrey Moore’s wildly successful book, Crossing the Chasm, argued strongly in favor of the concept of the “Whole Product“. Under the whole product scheme, a vendor needs to surround their product with all of the features necessary to make it compelling for the customer to buy. In the software business this often means that you need to partner with other technology vendors to connect your products together. It’s why ERP vendors partnered with database vendors way back in the day. It’s also the reason that small software-as-service vendors partner with the likes of Google, Facebook, Apple and Twitter in today’s world.
In the past, partnering was often a difficult undertaking as it routinely required complex license agreements and proprietary code (CORBA anyone?). Web 2.0 saw the dawn of the “application programming interface” or API — era. The big boys now routinely provide APIs for the smaller vendors to use — and the smaller vendors in turn provide similar APIs in order to get their software plumbed back into the big boys. (Although it is still much more common for the smaller vendor to use the larger vendor’s API. Integration goes up more often than it goes down). The advent of RESTful web service APIs, and cloud-based data centers, have made this wonderful world of integration much, much easier — adding to the proliferation of APIs.
If you’re a gorilla (Google, Facebook, Apple) — then you provide APIs so as to box out the other Gorillas and control your market. Apple bought a company called Topsy just last week. And just what is Topsy? It’s an analytical platform that makes use of Twitter’s API. When you are a small player, you plug into those APIs in order to provide the “whole product” to your customers (just like Topsy is doing). In some cases you also provide an API so that people using software from the Gorillas can integrate down into your product and in order for them to build their own “whole product”. Witness Salesforce.com’s recently announced strategy to provide APIs for ALL of Salesforce.com. It’s a great way to get customers and smaller vendors to become more dependent on SFDC.
Beware the future, small vendor.
For a small vendor the outlook is often grim — if you follow Moore’s arguments to their ultimate conclusion. In order to build the “whole product” you partner up and provide connections and interfaces to other products in the quest provide a complete, compelling solution to the customer. In the end, the dominate vendors then “engineer you out” of the whole product. This is a euphemism for “getting rid of you”. In the meantime, every vendor that you work with is shortly going to be offering you their product via an API — Gigaom has a nice piece on the upcoming API “wars”.
So, what’s a middle market company to do? If you are offering a SAAS-based platform, you really have no alternative BUT to offer a fairly robust API to your platform. RESTful web service endpoints are likely the way to go — as the effort to build and support native programming language interfaces for a variety of languages can be a herculean effort. And, in order to co-exist with the Gorillas, you will likely need to provide connections from your platform to their platform via their APIs. But watch your back, as your new Gorilla “friends” are likely to turn on you at some point — by offering their own versions of your product. It becomes much easier for the Gorilla to move you out, once a customer is used to “using” your platform primarily via your API — and it gives the customer “one bill and one throat to choke”. It’s also worth noting that the Gorillas have no problem changing their API at will, or even eliminating it altogether. Microsoft/Skype recently disenfranchised a whole host of smaller desktop vendors by eliminating their Desktop API product. This puts you at the mercy of the Gorillas — and they know it. The end customer, however, doesn’t care — they just want a “complete solution”. And they are increasingly likely to choose the combination of vendors that provide it.
As a middle-market company that is purchasing software for your business — or hopping onto one of the many software-as-a-service platforms out there — look for products that have substantial APIs. Any vendor worth their salt is going to have to provide APIs for their produt in order to play in the “complete solution”.