Open innovation opportunities and business benefits of web APIs: A case study of Finnish API providers

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School of Business | Master's thesis
MSc program in Information and Service Management
MSc program in Information and Service Management
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APIs aka application programming interfaces have been around as long as there have been software applications, but rapid digitalization of business environment has brought up a new topic of discussion: What is the business value of APIs? This study focuses on innovation and business potential of web APIs. The study reviews existing literature about APIs and introduces concepts including API value chain and different approaches to API strategy. The study also investigates critically the concept of "API Economy" and the relationship between APIs and some current technological trends like mobile computing, Internet of Things and open data. The study employs the theory of open innovation, which was originally conceived by Henry Chesbrough. The study aims to answer following research questions: 1. What kind of results has open innovation process produced for API providers? 2. What are the realized benefits of API for API provider? 3. What are the main challenges of API management and development? The empirical part of the study is qualitative case study, which uses semi-structured interviews as a primary data collection method. The study uses multiple case study approach and focuses on six Finnish API providers. The studied organizations include businesses as well as public organizations. The research findings show that API providers can speed up their product development by leveraging the creativity of third party developers, if they are able to offer them useful and valuable data, which developers can use to solve some practical problems. The results of open innovation (ie inbound open innovation) include applications for new platforms, applications for new use cases, client libraries and shared code, feature ideas and technical improvements. The realized benefits of API include also wider reach of service, business process automation and increased internal agility. The study shows that API providers may use API to foster open innovation, to scale up business, to reach new audiences and to improve internal IT architecture. In addition the study demonstrates that the theory of open innovation can be applied to the context of web APIs and that APIs can be used to open up innovation process of the organizations as the theory suggests.
api, web api, api economy, api provider, innovation, open innovation, platform
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