Why Calculate the Cost of APIs and How To Get Started

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calculator showing why you should calculate the cost of apis.

The use of application programming interfaces (APIs) is exploding across nearly every industry, and for a good reason. What was once primarily found only in technical domains is now becoming a key indicator of business growth. Whether your goal is to connect internal systems, personalize offers, or create innovative products, APIs are leading the way.

The benefits are clear — but at what cost?

Calculate The Cost Of Developing APIs From Scratch

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API development is a relatively complex procedure, which makes it a significant investment. There are expenses concerning the implementation of APIs, including upfront and ongoing costs. 

To remain competitive, you need to be aware of these costs. When you calculate the cost of APIs, this will allow you to budget accordingly, ensuring you're getting the highest return on your investment. Will you make more money following the implementation of a specific API? If so, how long will it take? These are the types of questions you need to ask. 

Here's why you should calculate the cost of APIs and what you can expect from the process. 

Understand the Value of Your API Program

Companies that understand how to effectively implement APIs are able to boost efficiency, cut costs, and improve their bottom line. For example, with the right APIs, you can monetize the data you collect, develop profitable partnerships, and open new doors for innovation and growth. 

There are many modern use cases seen across various industries today. For example, retailers are implementing APIs to track inventory in real time, create multi-brand shopping platforms, provide a better customer experience, and take advantage of greater automation. The benefits are vast, making APIs incredibly valuable, but only when applied strategically. 

Data shows that APIs are the new revenue stream. In 2020, Salesforce reported that 31% of business revenue is generated by APIs. These are the businesses that are designing and implementing APIs with intent. Just some of the benefits that support higher revenue include increased productivity, greater innovation, and more optimal cross-team agility for self-serve IT. 

For example, analyzing customer journeys is a great way to identify API opportunities. What are some of your customers' greatest pain points and how can APIs offer a solution? Once you identify those opportunities, prioritize those that will have the greatest impact. This data-driven approach provides clarity so that you can build an API program that is valuable to your business.

When you understand the value of your API program, this provides a clearer picture as you calculate the cost of APIs.

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.

Calculate the Cost of APIs

Before you begin to calculate the cost of APIs, you may be wondering, what does the average API cost?

There is no black-and-white answer here concerning a total cost as there are several variables to consider. However, on average, expect to pay around $20,000 to build a relatively simple API. This figure will buy you a fully featured, secure API, leveraging the services of an experienced API developer in the United States. 

Building an API is one thing. The cost of running an API based on its lifecycle is another. Of course, the initial and ongoing costs are not inclusive of one another, and both need to be considered before you begin.

The cost of building an API will largely depend on the size and scale of your project. You may also need to tweak things along the way. There is a lot to consider, so work closely with your developer team to understand the process, including what API calls they’ll implement and what that means for API pricing and overall management. Become familiar with some basic terms so that you can communicate more clearly (e.g., REST API, mySQL, PostgreSQL, IoT, etc.).

When you calculate the cost of APIs, it's important to understand your initial expenses, plus the monthly cost of running that API. For example, the cost of maintenance. 

Here are some of the most crucial considerations to be aware of when you calculate the cost of APIs:

  • Developer cost – This will be your largest expense, as an experienced backend developer will charge around $50 per hour, depending on their level of experience and location. You can search for your state and city on Salary.com to get a better idea of what developers are charging in your area.
  • Development time – There is plenty to consider concerning development time. This timeline primarily depends on the functions or capabilities you seek. Also, do you have a data source in place? If not, you will need to build the database structure and seed it with primary data to utilize a related API. You'll also need to consider the importance of strong security safeguards, which are another time-consuming aspect. 

Learn more about how DreamFactory can save your team weeks if not months of development time on API projects.

The Cost of Not Implementing APIs

When you first calculate the cost of APIs, you may be surprised by how much you'll have to pay. However, not implementing an API-driven strategy can cost you a lot more in the long run. When you ignore the value of APIs and the importance of digital transformation, you leave potential revenue on the table and allow your competitors to gain an upper edge.

The value of APIs at stake is significant. A McKinsey analysis estimated that as much as $1 trillion in total economic profit globally may be up for grabs based on the redistribution of revenue across varying sectors within ecosystems. APIs are the links between organizations and technologies within these ecosystems. 

That said, the number of organizations with mature APIs in place remains small. Startups and businesses of all sizes, across all industries, can benefit from APIs. This strategy is no longer just for companies like Amazon and Microsoft.

Besides some early movers, the majority of businesses do not have a formal API strategy, do not understand the value of having one, and are unsure of how to implement an API program. Since the API market is gaining momentum, those who move quickly to develop a strategy and monetization model, ensure the right governance, and drive adoption can experience immense revenue growth. 

Calculate The Cost Of Developing APIs From Scratch

Calculate yours!

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DreamFactory Can Help

Have you begun to calculate the cost of APIs but are unsure what to do next?

DreamFactory can automatically generate APIs for all common databases and other data sources. Have your API programs up and running in a fraction of the time for less. Dive deeper into how we have helped customers build API-driven applications in record time. 

Ready to get started? Start a free 14-day trial today!

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