In an earlier edition of the newsletter, I introduced a new framework to explain the difference between different ecosystem positions.
The least understood of these is the Integrator business model. Through this issue, we dive deeper into how Integrators work.
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APIs drive distribution and embedding of products, services, and capabilities across ecosystems.
As the number of APIs increase and API provisioning gets increasingly fragmented, Integrators act as API switchboards enabling one-stop standardized connectivity and interoperability across an increasingly fragmented API landscape.
On the supply/production side, an integrator aggregates product provisioning APIs across the production ecosystem, and on the demand/consumption side, it integrates across distribution environments (websites, apps, and other digital services) in the consumption ecosystem.
Integrators emerge in any API-based distribution landscape and create value by organizing access across the ecosystem.
Financial services, logistics, automotive, and travel are prominent examples involving mediation of APIs through integrator switchboards.
In logistics, for instance, EasyPost acts as an integrator connecting parcel shipping and logistics processes in the production ecosystem with eCommerce retailers, fulfilment centers, marketplaces, and enterprises in the consumption ecosystem.
It integrates a fragmented commerce and logistics landscape and provides a unified API exchange. It integrates with more than 60 shipping carriers on the supply side and allows online retailers on the demand side to access all these shipping options through a unified interface, allowing them to compare prices and delivery times.
EasyPost started out in 2012 by integrating USPS as its first logistics partner. Like most integrators, it built out demand using USPS and subsequently added more shipping companies like FedEx, UPS and other regional companies.
EasyPost has also built out central capabilities like marketplace price comparison, custom tracking engine, and an address verification engine on back of the data obtained from shippers and communication with the service provider APIs.
On the distribution side, EasyPost partners with ecommerce infrastructures like SellerActive and Linnworks, as well as inventory management systems like InFlow. All distribution partners provide EasyPost’s shipping APIs to their customers to enable shipping solutions.
Business development and developer engagement is key to playing the integrator game.
Most successful integrators scale through developer adoption, by providing an easy to use SDK and structuring a well executed developer program.
Partnerships are key to integrator adoption across the ecosystem. This involves ensuring ease of embedding but also investing in business development to land and expand adoption with accounts.
A typical integrator business development approach involves four roles.
Not all integrator switchboards gain a competitive advantage over the ecosystem. If either the supply side or the demand side is dominated by a few large players, power shifts away from the integrator even though the integrator may perform the same functions technically.
Otonomo, a vehicle data hub, powers an integrator business model, distributing data from across automotive OEMs to application developers. The automotive industry’s consolidated industry structure skews power away from Otonomo and in favour of the OEMs which act as production partners. As a result, even though Otonomo runs an integrator business model, it gets automotive OEMs on board as a data broker, managing their data and driving adoption of this data across the distribution ecosystem, which constitutes app developers who build connected car applications.
The more fragmented the production and distribution partner landscape, the more power skews in the integrator’s favor.
In the financial services ecosystem, the API provisioning landscape is much more fragmented. Hence, power moves away from API producers to API integrators.
Galileo FT, a financial services API integrator, scaled out its ecosystem through business development.
Galileo helps distribution partners access financial services. Its APIs offer capabilities like account set-up, funding, direct deposit, ACH transfer, early paycheck direct deposit, bill pay, transaction notifications, check balance, and point of sale authorization. Its API consumers / demand-side partners include Chime, Robinhood, Monzo, Revolut, Transferwise, and Varo.
On the production side, card issuers like Mastercard power Galileo with capabilities to enable new card launches. Its partnership with Plaid enables ACH transfers. Overall, it offers connection to more than 55 endpoints in the financial services ecosystem – to networks, issuing banks, KYC providers, and mobile wallets. Galileo empowers developers to write mashups and recipes by combining the functionalities across multiple APIs on its exchange.
The more value integrators like Galileo add beyond API integration, the greater the skew of power in their favor.
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