Inside Advanced Scale Challenges|Friday, October 19, 2018
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The ‘API Economy’ is Upon Us 

To hear the experts (or those with a financial stake) tell it, application programming interfaces, ubiquitous APIs, are the glue that will tie it all together when everything but your coffee cup is connected to the cloud via chunks of software code.

At a higher level, API building blocks are being used to integrate disparate legacy systems to the cloud. According to one estimate, global companies are spending upwards of $600 billion a year to integrate and scale existing systems.

The API avalanche is apparently for real as more "things" are connected. While code jockeys have long used APIs to create applications and stitch systems together, these building blocks really began to take off earlier in this decade with the explosion of "app stores" run by consumer giants like Apple and Google. Now, API's are the cornerstone of new digital businesses and the growth driver for established companies.

According to McKinsey and Co., Salesforce.com generates nearly 50 percent of its annual $3 billion in revenue through APIs. The management consulting firm also notes that established tech companies like chipmaker Intel and Microsoft are snapping up companies that manage APIs for clients.

Along with acquisitions, companies like Salesforce.com with established "API strategies" have been investing in the blossoming API industrial complex that is tying together applications, systems, data, devices and "things." On Tuesday (May 19), for example, the Salesforce.com investment arm led a whopping $128 million funding round in the API leader Mulesoft, provider of an integration platform for connecting software-as-a-service and enterprise applications in the cloud and on-premise.

San Francisco-based Mulesoft has so far raised $259 million in venture funding, and Forbes magazine values the company at $1.5 billion. According to other reports, an IPO is possible as the "API economy" continues to heat up.

Along with Salesforce Ventures, the latest investment round in Mulesoft included existing investor Cisco Investments and new strategic investor ServiceNow, the platform-as-a-service provider of service management software.

A group of public market institutional investors also joined the Series G funding round along with existing investors like NEA, Lightspeed Venture Partners and Bay Partners.

Mulesoft said it would use the new cash infusion to expand its partnerships with Salesforce, Cisco and ServiceNow while expanding development of its integration platform. Echoing the growing chorus of API proponents, Mulesoft CEO Greg Schott declared in a statement announcing the latest funding round: "APIs are the rocket fuel for connecting what’s never been connected before."

"This investment validates our vision to attack the largest unsolved problem in IT with a platform for API-led connectivity," Schott added.

Founded in 2006, the enterprise software company said its annual run rate of total bookings topped $100 million in fiscal 2014. It reported a 110 percent year-on-year jump in new subscription bookings during the first quarter of 2015. Mulesoft also claims more than 700 enterprise customers for its flagship Anypoint Platform, including AT&T, Master Card, Tesla, Toyota and Wal-Mart.

The integration platform creates custom APIs used to connect applications, data and devices to the cloud along with legacy infrastructure like on-premise databases.

Along with acquisitions and investments in API pioneers like Mulesoft, APIs are said to be shaking up existing business models. As McKinsey and Co. concludes, "companies across industries are already following in the path of digital natives and using APIs to generate significant revenues and in some cases build new business models."

About the author: George Leopold

George Leopold has written about science and technology for more than 30 years, focusing on electronics and aerospace technology. He previously served as executive editor of Electronic Engineering Times. Leopold is the author of "Calculated Risk: The Supersonic Life and Times of Gus Grissom" (Purdue University Press, 2016).

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