API Cost Calculator: How Much Does it Cost to Build an API?

by Kevin McGahey • May 28, 2024

You need to save money, deploy projects faster, and spend more time on developing application experiences that enthrall users. It is practically a certainty that APIs will play a critical role in your software development process, but how much does it cost to build an API? Learn more about DreamFactory's API cost calculator in this blog article!

Here's the key things to know about our API Cost Calclator:

Building an API is more than just connecting users to a data source. It requires careful planning and execution to ensure security, documentation, and scalability.
The cost of building an API can vary depending on the complexity of the project, but it typically ranges from $10,000 to $50,000.
There are a number of factors that can affect the cost of API development, including the number of endpoints, the data volume, and the security requirements.
APIs can offer a number of benefits for businesses, including increased efficiency, reduced costs, and improved customer experience.
By understanding the costs and benefits of API development, businesses can make informed decisions about whether or not to invest in this technology.

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How Much Does an API Cost to Build?

On average, it costs $20,000 to build a relatively simple API. This figure assumes that you're building a secure, documented, fully-featured API with the services of an experienced API developer based in the United States.

It's important to understand that there is more to an API than just coding an interface to some data source. Whether you are planning on hiring a contractor or assigning a new project to your team, an API calculator can help you understand the time and cost required to develop a mission-critical part of your next project.

How Do I Calculate My API Development Costs?

Over years of working with countless developers around the globe, we've learned a great deal about what is required to build, test, and deploy a successful API. During the course of these conversations it has become almost universally evident that organizations enter these projects with very little understanding of the costs involved. To help companies understand the costs, we created an API cost calculator. Please click on the image below to open the calculator in a new tab, and follow along with the remainder of this section to understand how it works.

What Are the Different Types of Costs Associated with API Integrations?

API integration costs include development, operational, support, maintenance, opportunity, data, and security costs. Consider expenses like development time, bandwidth, CPU utilization, storage, error monitoring, troubleshooting, customer inquiries, recurring fees, missed opportunities, data purchasing, and securing sensitive information.

When planning for API integration, it's crucial to carefully evaluate these costs and ensure that they align with your business goals and budget constraints. Proper management of resources and strategic decision-making can help mitigate risks and maximize the benefits of API integrations. By analyzing the potential costs and benefits, you can make informed decisions about which APIs to integrate with and allocate your resources effectively to maintain a balance between API functionality and overall expenditure.

Primary Costs for Building an API

Cost #1: Developer Cost

Without question your largest expense will be developer cost. So how much does an experienced backend developer cost? Head over to Glassdoor to learn more about average developer salaries in your area. Keep in mind compensation could increase by 25% to 50% when working with contractors.

Cost #2: Development Time

The time required to develop the API is going to be a function of it's capabilities. The calculator breaks these capabilities into several subcategories, allowing you to tweak the time required to complete each. Let's begin by explaining the fundamentals:

Research: This estimates the amount of time required to research the API project. Is there any special domain-specific knowledge? What data source(s) will be exposed by the API? Will it interact with other third-party services? You'll want to compile as much information as possible during this phase.
Database Design: If this is a greenfield project, then it's possible the data source doesn't yet exist. If the API is intended to expose a database, and that database doesn't yet exist, then you'll need to factor in time to build the database structure and seed it with initial data.
Prototype: Next the team should aim for building a simple prototype in order to put the API into testing as early as possible. Once in testing, you'll ideally receive a great deal of feedback regarding the behavior and functionality.
MVP Completion: With prototype feedback addressed, the team can next strive towards building an alpha version of the API containing most of the desired first release functionality.

It's however this last fundamental step that trips up a great many teams. Even an API's alpha version should never be considered complete without taking factors beyond functionality into account. Notably, a modern API should include:

API key and role-based access controls: Leaving your APIs open to the public is a recipe for disaster. At a minimum you will want to secure access using API keys and additionally lock down accessibility using role-based access controls. APIs should be built from a foundation of security.
Interactive documentation: Interactive, self-documenting solutions such as Swagger ensure that your documentation is always synchronized with the API inputs, outputs, and endpoint descriptions. Further, interactive API documentation allows your developers and users to familiarize themselves with the API before writing any code.
Limiting restrictions: The ability to implement API volume limiting restrictions are important for several reasons. Firstly, they help prevent data access cost overages, due to overzealous clients. Second, they minimize the possibility a malicious actor can use the API to export unreasonably large amounts of data from your organization.
Logging capability: Whether to satisfy internal compliance policies or governmental regulations such as FINRA, GDPR, or POPI, you'll need to log API traffic to ensure data access can be later audited.
Real time API monitoring and alerts: Real-time dashboards are incredibly useful for keeping tabs on your APIs' operational capacity, allowing you to monitor HTTP response status codes, API popularity, user-specific behaviors, and much more.

Why Understanding API Costs is Critical to Success

Our extensive research indicates a feature-complete, fully documented, and secured API built by an experienced United States-based developer will cost approximately $20,000 and require 30 working days. This already considerable expense presumes your organization has key infrastructure in place such as a readily available logging and monitoring solution. Further, the cost, schedule, and complexity can quickly balloon when ongoing maintenance is taken into account, and should your future projects require multiple APIs. That said, you may reasonably wonder why API development can be so costly and time-consuming. At a minimum your development team will need to:

Gather a great deal of domain-specific knowledge in order to understand how the data should be exposed and managed.
Fully document the API and ensure the documentation is consistently synchronized with the API's latest features.
Build strong security safeguards into the API infrastructure to ensure valuable data isn't inadvertently exposed to curious or malicious third parties.
Integrate a robust limiting solution to ensure errant or malicious clients can't quietly run up hosting or access costs.
Incorporate a real-time monitoring system to confirm the API is always operational.

Why CTOs Must Embrace an API-first Strategy

In light of these costs, CTOs and budget-minded business owners might be wondering whether an alternative solution exists. Consider alternatives at your peril. APIs offer a great number of internal and external business advantages, just a few of which follow:

The API economy is exploding: Gone are the days of siloed institutional data. Customers and partners want to reliably interface with this data and are often willing to pay to do so.
APIs reduce code and simplify data access: Chances are your organizational data will need to be accessible through multiple applications and services. APIs offer a single, unified solution for building these connections, dramatically reducing the amount of redundant code required as a result.
APIs can dramatically reduce data theft: Well-defined interfaces, strict access controls, and real-time monitoring solutions, can dramatically reduce theft and other malicious activity.

As you can see from the above, it is prudent to factor the costs of API development into your project budget. How can one effectively do so when so many factors are involved?

Building an API is much more than merely building a bridge between your users and a data source. Hopefully our calculator will serve as a valuable tool for understanding the costs involved before venturing too far into implementation.

Benefits of Calculating the Costs of Your APIs

By understanding the expenses involved in API development, businesses can make informed decisions that optimize their investments in the digital landscape. The benefits of accurately estimating API costs include better budget allocation, risk mitigation, and a clearer understanding of the potential return on investment. In turn, this enables organizations to strategically plan their API development process, maximize operational efficiency, and ultimately enhance their competitive edge in today's fast-paced, technology-driven market.

Understanding the Value of Your API Program

Companies that effectively implement APIs can enhance efficiency, reduce expenses, and bolster their profitability. By leveraging the right APIs, businesses can monetize collected data, forge lucrative partnerships, and foster innovation and growth.

APIs have numerous contemporary applications across different sectors. For instance, retailers use APIs for real-time inventory tracking, building multi-brand shopping platforms, enhancing customer experiences, and increasing automation. While APIs offer immense benefits, their strategic deployment is crucial for realizing their full potential.

APIs have emerged as a significant revenue source, with Salesforce reporting in 2020 that APIs generated 31% of business revenue. Successful companies focus on designing and implementing APIs with a clear purpose. Some of the revenue-boosting benefits include heightened productivity, amplified innovation, and improved cross-team agility for self-serve IT.

Examining customer journeys is an effective way to pinpoint API opportunities. Identifying customers' primary pain points and proposing API-based solutions is key. After recognizing these opportunities, prioritize those with the most significant impact. This data-driven method ensures the development of a valuable API program for your business.

Build APIs Faster

In many cases, to unlock the full value of an opportunity, several APIs are required. So, you’ll need to focus your attention on the complexity to execute. What is the technical difficulty in building APIs and how ready is your company from a legal, business, and policy standpoint? For many, it’s most beneficial to partner with a leading provider of instant SQL server APIs, like DreamFactory.

Bottom line — You need to be aware of what value APIs will bring to your company and then calculate the cost of APIs to keep your expectations grounded. The goal is to stay within your budget while implementing the APIs needed to move toward digital transformation.

You can have your first API generated within 30 minutes of your first call with DreamFactory and then add on as you scale. Discover more about DreamFactory’s API products.

Bypassing API Delivery Time Estimations with API Generation

API Generation is a powerful alternative to the traditional API development process by offering automatic API generation capabilities. This significantly reduces both the time and cost associated with developing APIs. DreamFactory is a platform that allows developers to save time on both the manual development but also the documentation of an API.

First, DreamFactory automatically generates REST APIs for numerous data sources, eliminating the need for developers to manually write API endpoints and thereby reducing development time.

The DreamFactory platform includes features such as API key management, role-based access controls (RBAC), and OAuth support. These features ensure secure and manageable access to APIs without the need for additional development. it also auto-generates documentation, taking out another step in the tedious API development process.

You can have your first API generated within 30 minutes of your first call with DreamFactory and then add on as you scale. Discover More About DreamFactory’s API Products.

Questions? Contact the API Experts.

Our team regularly works with an extraordinary breadth of organizations, ranging from seed-funded startups to Fortune 50 companies. Many of these customers adopt our namesake DreamFactory platform, a powerful tool used to generate a full-featured, fully documented, and secure REST APIs. The DreamFactory platform can save you thousands of dollars and countless hours of tedious development.