Google has bought one of the leaders in the API market — Apigee — for $US625 million. The silo-busting software company is a leader in its field and sells heavily around the digital transformation story.
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Apigee makes application programming interfaces — which to the layman sounds like $US625 million worth of yawns. In fact it is a critical piece of digital infrastructure. It provides the solution to one of the biggest problems incumbents face: getting their information silos to talk to each other.
The sale price also seems remarkably conservative by the standards of the technology sector. Alphabet (Google’s owner) paid $US17.40 a share, which is only a six per cent premium to the market (although the owners take it all in cash).
Apigee has been active locally, although its price points have made penetration into this market difficult. And selling a technical message to non-technologists — as the company tried to do — is never an easy ask.
For Google the move is an investment, and serious signal of intent, around its cloud business plans. It sets the stage for a potentially spectacular battle in the public and enterprise cloud markets with Amazon and Azure (and maybe IBM if it can get its act together anytime soon).
In a blog post explaining the deal, Diane Greene, Senior Vice President at Google described the rationale.
“The addition of Apigee’s API solutions to Google cloud will accelerate our customers’ moves to supporting their businesses with high quality digital interactions. Apigee will make it much easier for the requisite APIs to be implemented and published with excellence.”
Greene said that offering a good API involves much more than developing and publishing a performant specification of the interface. Instead, she argued, “A good API needs to support security, give developers the freedom to work in the development environment of their choice and allow the company to continue to innovate its service while supporting a stable interface to the apps and services using the API. Finally, a good API includes testing support and usage analytics to guide the company’s developers.”
Her comments suggest that to a large extent Google’s move is more about acquiring the technology and expertise, than any regard for the ongoing business.
For his part, Apigee CEO Chat Kapoor piled onto the cloud story (which is not necessarily one the company pushed with any vigour previously).
According to Kapoor, “Many companies understand the importance of using digital technologies to transform business models and processes, but often they pursue digital and cloud independently. Not only are they trying to deliver digital experiences that are fast and convenient for their customers and partners, but their IT organisations are also shifting infrastructure to the cloud to increase agility and lower costs. Smart companies realise that these are two sides of the same coin; that digital strategy must converge with cloud strategy.”
The move also sets up an interesting little culture war. Apigee’s biggest competitors typically are not just companies like Mulesoft or SOA, which also play in the API space. They are also internal IT departments with a Do-It-Yourself culture. Often these are the same IT professionals who resist outsourcing to public cloud infrastructure. Sometimes that’s due to limitations of cloud such as latency, or legal issues such as data sovereignty.
And sometimes it is simply a matter of career self-preservation.