What 'Economic Headwinds' Mean for Your APIs

Net API Notes for 2024/01/30, Issue 231

The inaugural #APIFutures collaborative writing event I participated in earlier this month was a huge success! With more than thirty participants, I loved seeing the breadth and creativity applied to the question, "What is the most significant challenge or opportunity in the API space?" If you haven't yet checked out the insights for yourself, browse over to the #APIFutures landing page for links to all the assembled goodness

For 2024, there is an additional boogeyman that needs to be called out. A specter haunting many API programs worth naming is the "macro-economic climate". Stated another way, it's weird out there. That creates uncertainty, and that uncertainty impacts the APIs and API programs that we're responsible for.

In this edition of Net API Notes, I want to put a finer point on what's happening. From the end of the near-zero interest rate phenomenon to soft landings to "greedflation", the API-driven outcomes sought after by organizations may look different this year. 

A photo-realistic image of a liminal office space, styled in the manner of the backrooms.

2024 Shaping Up to Be A Liminal Space Like Few Others

Many traditional metrics for measuring economic health imply things are just dandy: inflation has slowed, unemployment is steady and pay is up, the S&P is setting records, Q4 economic growth exceeded expectations, and companies continue posting strong earnings. Those strong earnings, though? New research shows they were primarily responsible for the inflation experienced during the second and third quarters of 2023. This year has brought a slew of high profile, tech-sector layoffs, "shrinkflation" examples abound in my pantry, and every streaming service seems to be charging more to maintain the previous level of service. And don't get me started about the difficulty startups have had while attempting to raise new funding in a post-zero-interest rate phenomenon (ZIRP) world

It's a weird time. By many accounts, we should feel prosperous. However, ask folks about their confidence, and you're likely to hear anything but. There's a palpable anxiety about the state of (gestures arms around wildly) everything. That anxiety will continue to be manufactured for political gain through the election period happening simultaneously across 50 countries

The leadership at your company - the ones that oversee the funding - are not immune to these confusing signals. While the worst of the "economic headwinds" may be behind us and we're headed for a "soft landing" (whatever that means), we're still a long way off from cushy, all-expense paid corporate offsites and unicorn minting private investment. The modus operandi for 2024 will be cautious optimism

Translating Cautious Optimism to 2024 API Priorities

The 2024 challenge for all involved in API creation - from the platform managers to the individual developers - will be dealing with increased emphasis on demonstrating cost efficiency and optimization of existing resources. That means a heightened focus on real, provable return on investment (ROI). 

"When times are good, companies develop a series of habits. When times are tough, they can no longer get by with bad habits, and the good habits that worked in the boom times are no longer a good fit in lean times."

Multiple global shocks have companies in a very conservative posture. Businesses are thinking tactically. That means less innovation, exploration, and experimentation. The name of the game is still reduction, improved efficiencies, and rigorous performance measurement for the foreseeable future. API Product Managers will be challenged to improve customer satisfaction without additional budget. And if that wasn't challenging enough, teams will have to do all of that in a period of heightened risk aversion, having to demonstrate responsible security practices under increased scrutiny and company oversight. 

This means:

  • Prioritizing High Impact APIs, as opposed to "letting a hundred flowers bloom" -  API investment (in terms of both time, money, and energy) must be more focused on those APIs that offer the highest potential for revenue generation, cost savings, or significant efficiency improvements. "High Impact" may mean prioritizing the retention of existing clients rather than acquiring new ones. 
  • Optimizing Existing APIs - Existing APIs will be pressured to optimize their current performance and scalability, reducing operational costs and enhancing user satisfaction without increasing spending. 
  • Demonstrate Revenue - APIs that can be directly monetized through subscription models, usage-based billing, or as part of premium offerings receive more attention. External-facing APIs that have been part of "lead gen" efforts will be asked to quantify their effort. Internal APIs operated as overhead for providing a beneficial, company-wide service will face additional scrutiny.  
  • Start with Value - New initiatives must have a rock-solid business case, with clear metrics for success and a defined timeline for ROI realization - "launch it and they will come" speculation will be difficult, if not impossible, to make operational.
  • Provide Enhanced Reporting - In this climate, there's a greater demand on metrics:  tracking API usage, performance, and contribution to business goals. This data informs decisions on where to invest, what to optimize, and what to sunset. These metrics will go beyond user adoption to also attempt to measure cost-effectiveness. APIs that are costly to maintain but offer limited business value will become candidates for deprecation (or at least reduced investment).

During economic uncertainty, companies become fixated on optimizing expenses and highlighting direct and obvious alignment with strategic business objectives. API governance, whether practiced through a Center of Excellence or distributed through a community of practice, has also been an increased line of inquiry - those writing checks want a formal mechanism for managing costs and controls. To oversimplify it, what keeps your leadership up at night today isn't the same thing as it was yesterday; efficiency, ROI, and tactics are the moment rather than growth, influence, and long-term strategy (for the moment)

Why Is This Happening? 

During periods of heightened stress, organizations, much like individuals, skew towards risk aversion. When uncertainty clouds the horizon, the allure of control, even if imaginary, becomes attractive. Metrics and data, for instance, offer this semblance of control. Have you heard increased calls for "single panes of glass"? Is there a team building the one dashboard that promises to answer all the questions? That is one manifested response to the uncertainty of "economic headwinds". 

"First let chaos reign, then reign in chaos." - Former Intel CEO, Andy Grove

In this climate, IT departments will attempt to optimize resources and minimize risks. They'll intensify their focus on metrics, controls, processes, and oversight. This can be a worthwhile exercise, an opportunity to trim the fat and tighten up suboptimal routines. But, if calcified over time, this diminished tolerance for experimentation (and thus risk) can kickstart a negative feedback cycle. 

Risk aversion and the effort to reassert certainty are understandable. The challenge for organizations is to balance this pull for clarity with the activities that will lead to new opportunities. 

Unfortunately, there will not be a text alert or circulated memo of when to make the switch. Business is never that simple. 

Are you scrounging around for meaningful metrics to justify your API effort? Are you facing new internal oversight? Let me know what you're seeing - I'd love to hear more about your challenges.

And if you want more nuance on these points, check out Claire Barrett's contribution to the #APIFutures project, "Why API Success In 2024 Will Be More About Psychology Than Technology". It is excellent.

(For, perhaps, a more cogent perspective on the driving forces, see the Update from John Cutler below.)


Wrapping Up

You might have noticed this email looks different than previous editions of Net API Notes. As I mentioned in December, I felt it was important to take the newsletter off of Substack. Fast forward a month (and many, many curse words later), and I'm now on a Ghost Pro account. In the process, I also simplified how readers can support this work.   

Paying subscribers can enjoy the latest issue of ¡APIcryphal!, my case study series re-examining the lessons of API past and applying them to our present. It was a delight to revisit Caterina Fake's coining of "BizDev 2.0" in 2006 to see how relevant it is to today's platform discussions. I'll be examining another seminal moment coming up in early February. 

Subscribers also help ensure that these regular editions of notes remain advertising and sponsor-free. If you want to support Net API Notes in the future, check out the subscription page to get started

Thank you for reading, please excuse the moving boxes, and I'll see you in the next edition. 

Till next time,

Matthew (@matthew in the fediverse and matthewreinbold.com on the web)

Update 2024-05-15

In his recent newsletter, product specialist John Cutler gives another perspective as to why we see now see this happening across the technology landscape:

"-during rapid scale, there is a bias to want to believe everything is a local problem—anything collective or cross-cutting is a threat to speed and independence."

Given most would characterize the present moment as not optimistic, we see an aggressive shift towards those collective or cross-cutting activities. John calls out the pendulum like effect, something that I've attempted to illustrate before with polarity mapping.

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