What is an API and How Does it Apply to Business Management?

API stands for application program interface and is used to describe a means for systems to interact with one another. API is a term frequently used when discussing integration between software applications. Even if you’ve never heard the term before, you’ve certainly been affected by API technology in some capacity – such as when ordering product online from Amazon or accessing information on certain websites. But what exactly is an API and how does it apply to business management? To explain the answer, let’s start from the beginning.

Specific protocols, routines and tools that make up APIs help programmers build software applications and dictate how multiple applications will talk to one another. APIs provide limited information about a system’s internal infrastructure so that outside developers can use the information to build new applications that work with the original system. By limiting outside programmers access to specific information, businesses can integrate with other solutions without providing access to their entire data set/code infrastructure. APIs are typically divided into two categories, public and private. Public facing APIs expose data to the outside world and are readily available to all programmers, whereas private APIs expose data only to applications where specific access has been granted and where there is a relationship between the companies. APIs save businesses resources and time and eliminate the chance of legal ramification when information is not properly shared.  APIs reduce the need to build applications from scratch where the specific functionality or information already exists in some capacity.

The way in which APIs work may sound similar to how EDI works, but the two are quite different.  EDI allows businesses to transact electronic data between members of the supply chain, whereas APIs allow systems to retrieve, change and submit data within applications. APIs provide access to system data and system logic.

With EDI, information is electronically exchanged between systems in a universally understood language. In this situation, information is simply being shared between applications. For example, Walmart can send a purchase order through EDI for an order of product from one of its suppliers.  Both Walmart and the supplier have different formats for reading, writing and storing information based on the specific back-end ERP software they use to manage their inventory and accounting.  With EDI, information sent from Walmart is generated according to EDI standards, and then the supplier can retrieve the information and translate it back into a format that works with their specific ERP system.  This type of workflow will typically will involve the help of middleware to automatically read and translate the information sent via EDI in a format that is readable by both Walmart and the supplier’s specific software. This eliminates the work involved for both companies to send information in different formats depending on the partners in the supply chain.

With APIs, information can be retrieved, stored, changed and submitted depending on the specific communication set-up. In the example above, once the supplier receives the purchase order through EDI and it has been translated accordingly, an API can then populate that information into the supplier’s software system, automatically creating a sales order and also allocating the inventory where possible. Without the help of an API, these steps would be a manual process. In this example, EDI allows the transfer of information whereas APIs take action with the information received.

An API specifies how software components interact and allows two separate systems to communicate and share information with one another. This helps facilitates seamless integration with 3rd party applications and means that once a specific integration has been built, it can be reused over and over again following the same format.

A quick Google search for API provides public API information from a variety of popular platforms such as Google Maps, Twitter, and Instagram.  The idea being that when a system provides developers with API information, those developers can then go and build applications off that technology.  A good example would be how Yelp will show you the location of restaurants using Google Maps.  Yelp developers used Google Maps’ API to integrate maps into their website so that the technology did not have to be developed from scratch. In this situation, Yelp is accessing data exposed by the API.

As discussed above, it is obvious how APIs can be beneficial in a business setting to help facilitate integration across a variety of applications and to share information. Another common business example is eCommerce integration.  Let’s pretend the distribution company mentioned above also sells product online through Amazon. In this situation, APIs are used to dictate how much information and how often that information is shared between the distributor’s back-end ERP solution and Amazon. The ERP solution provides access to its private APIs so that Amazon can call information from within the ERP and then share information back.  In this situation APIs help share information both ways and also manipulate the information being shared.  Information is passed and manipulated from the ERP system to Amazon in terms of inventory availability, pricing details and product descriptions, and then from Amazon to the ERP in terms of order information, shipping details and payment information. When information is shared in this way, and API logic is accessed, information from both the ERP and Amazon gets automatically updated and populated within each system, eliminating the need for manual data entry. An API can be set up so that changing the description of a product in the ERP system automatically triggers an event to change the description of that same product on Amazon. When dealing with eCommerce integration between an ERP system and online store, there is frequently involvement from a 3rd party integration company to set this up.  This allows both the ERP vendor and eCommerce company to focus on their core competencies, and leaves the integration to a company like VL Omni that specializes in integration across platforms and applications.