Software Integration 101: What is an API?

Understanding API usage from a business perspective

Software integrations play a key role in automating business processes. Without them, organizations would have to manually key data into their systems—slowing operations, decreasing productivity, and creating risk for human error.

Now that most business apps have moved to the cloud, integration solutions are more accessible to businesses small to enterprise. Many software as a service (SaaS) applications have Open APIs, which are publicly accessible rules and protocols for developers to use when interfacing software.

Now, from a business perspective, why should you know–or care–about APIs? 

Due to the nature and cost of API usage, building integrations between your tech stack is not a straightforward, one-and-done project. We'll explain why that is throughout this blog.

What is an API?

Application Programming Interface (API) is best described in two ways: one for developers and another for end users.

For developers, APIs are like the rulebook of a board game. It has clear, predefined instructions on how the game should be played. This includes the number of players you'll need, what actions are/aren’t allowed, the items required to play, and how to win.

For end users, think of an API as a waiter in a restaurant. When you want to order food, you don't go directly into the kitchen to cook your meal. Instead, you communicate your order to the waiter who then brings details to the kitchen. The chef (the source application) prepares the meal and the waiter (API) returns with your dish (API Response).

An API is the middleman for software, designed to grant access to features developers need to integrate other applications. Not every app publisher or business software has the same API, so let's dive into some of the different types.

Types of APIs

No one API is the same since applications are often developed using different tools and strategies. Some APIs are well-documented and publicly accessible, while others have barriers and insufficient information. To find out what kind of API the software you want to integrate has, a quick search on their website for developer documentation is the best place to start.

Open API

An open API is publicly available for any developer to use. When a platform has an open API, it generally means the software welcomes third-party connections. This doesn't mean developers will have unlimited access to every nook and cranny of the application. Like any API, there are authentication requirements and guidelines in place to regulate API usage.

Open APIs often come with comprehensive guides on how to map available endpoints, make requests, and leverage functionality to seamlessly integrate other platforms. As mentioned previously, most SaaS enterprise applications have publicly accessible APIs and often come well-documented.

In our experience, here are a few examples of excellent open API documentation:

• OpenAI provides an intensive guide to accessing its API, featuring dynamic examples and best practices.
• Stripe API documentation is considered gold standard, including comprehensive guides, interactive examples, and a live code editor.
• Tailwind CSS is a developer favorite for API documentation, dynamic features, and educational courses. Plus, Tailwind even sells a template for clean API documentation.

Internal API

Private or Internal APIs are used within an organization's internal software systems. They are not accessible to external developers or customers. Instead, internal APIs are built and maintained in-house to control interactions within a company's tech infrastructure.

Key aspects of Internal APIs include:

• Restricted access for certain internal departments and teams (Pro)
• Improved security and control over data exchange (Pro)
• Additional development time and costs required to maintain (Con)
• Potential challenges in scaling or refactoring systems (Con)

Partner API

Partner APIs are designed by a company for its external business partners. Like open APIs, they are used to facilitate collaboration and integration with other applications, but they are restricted to authorized partners and require specific credentials for usage.

What are API Architectures?

There are multiple ways software companies build their API. Each one offers different benefits and is made for distinct use cases. Here are the common types of API architectures:

1. REST (Representational State Transfer)

REST is a style used for maintaining a network of applications. It's best known for its consistent structure. The rules are straightforward and each request is handled the same way. REST relies on “stateless” communication, meaning each interaction within the API is independent of others and it doesn't require servers to recall past interactions.

Stateless communication in REST systems makes them much more scalable. From a business perspective, software with REST protocols can be appealing due to its simple and resource-based design. They often use standard HTTP methods, meaning common error codes like “404 Not Found” or “500 Internal Server Error” can be easily understood and addressed.

2. SOAP (Simple Object Access Protocol)

SOAP follows a formalized process where communications must be packaged and sent in a specific format. This type of API architecture comes with built-in rules and security to guarantee data is delivered securely. SOAP can operate over various protocols, including HTTP and SMTP.

SOAP is best known for handling complex operations, such as transaction processing, where steps must occur in a certain order for it to be valid. That being said, if security, reliability, and transactional integrity are a priority, SOAP architecture is something to look for in a finance software's API.

3. GraphQL

GraphQL is a flexible way for apps and services to request the data they need and nothing more. Just like picking certain items you need from the grocery store, GraphQL allows other platforms to specify what pieces of information they need without needing to make multiple separate requests. With GraphQL, developers can make quick and easy modifications to data syncs with the software integrations they've set up.

API Usage and Cost

For multiple applications to share data with each other, it requires an API call or request. If you're using a software that monetizes its API usage, this means you’ll have to pay for each time the API is used. However, every platform uses different pricing models for API usage, including monthly call limits through a subscription.

API monetization has been around for decades, but an increasing number of businesses are taking advantage of this revenue stream in 2024. Take Twitter for example. In 2023, the social media platform began charging third-party developers for access to data used for trend analytics and targeted ad campaigns. When any platform monetizes its API usage, it creates an additional expense users should be aware of.

API Monetization Examples (S is for SaaS):

• Salesforce (subscription-based pricing): provides APIs that enable businesses to extend and customize their CRM functionalities with other systems in their tech stack.
• Stripe (transactional pricing): charges for API usage based on transaction volume
• Sage Intacct (subscription-based pricing): customers must purchase a Web Services license to access the API
• Slack (freemium): the communication app offers a set of APIs for free use; premium features are available with added costs
• (Bonus since this isn't an S-letter software) Twilio (usage-based pricing): this pay-as-you-go API allows developers to embed voice, messaging, and video functionality into their applications

One way IT teams and business leaders can monitor their organization's API usage is through jobs (or sync jobs). A job is a record of every step in a workflow that happens at a specific time.

For example, your ecommerce store uses Stripe to process payments. When a customer makes a purchase, one sync job triggers to record the payment in your accounting system. Another sync job could occur if the workflow includes a writeback to the source system (Stripe). Developers can schedule jobs to run at specific times and make updates to decrease the amount of times workflows hit a platform's API, potentially lowering usage costs.

API Security and Compliance

Data security and compliance are going to be a priority (especially for your IT team) when adopting software integrations. To understand how the system you want to integrate handles data, a developer will need to evaluate the platform’s API documentation. 

Security information to look for include:

• Data encryption: Does the API support strong encryption protocols (such as TLS) for data transfer?
• Authentication measures: Verify that the API uses authentication measures (like OAuth, API keys, or JWTs) to ensure only authorized users have access to data.
• Security audits & certifications: Does the API provider undergo regular security checks and hold relevant certifications (i.e. SOC 2, ISO 27001)?
• Access logs and monitoring: Ensure you'll have access to detailed job logs for auditing, tracking usage patterns, and other activities relevant to your integration.
• Data residency: If applicable, find out where data is stored and processed.

An important feature every API should support is the ability to set up error-handling mechanisms. It's not a rare occurrence for teams to run into errors when leveraging their software integrations. Developers should receive notifications when API calls fail, as well as a log to identify specific error codes and when they occurred.

In Conclusion: Decisions around API usage should align with your integration needs

When limiting API usage, taking shortcuts to cut costs can be tempting. Whichever strategies you take, it's best to make decisions based on best practices for your software integrations. If you don't have an in-house integration expert, ask people in your network who use the same software and find out what steps they're taking to use APIs more efficiently.

Even if you have a provider maintaining software integrations for you, knowing what APIs are and the costs behind them is valuable for your people and overall business performance.

Have a question we didn't answer here? The integration experts at Venn Technology are eager to share what we’ve learned from integrating and automating business software for SMBs and nonprofits.