The Future of Software is Wide Open
In a nondescript California garage recently, a guy told a gadget to get his electric car, named KITT, out onto the driveway and ready for him to drive.
Not only was this the perfect mashup of cutting-edge technologies and 1980s nostalgia, it spoke to just how far the computing paradigm has shifted in favor of cloud-based, open-computing platforms.
The guy was Jason Goecke, a developer who joined Cisco Systems (CSCO) in 2015, when the networking giant bought Tropo, a company he cofounded.
The gadget was an off-the-shelf Amazon Echo. The electric car was a Tesla (TSLA) Model S, nicknamed KITT after the computerized car in the TV hit Knight Rider. At the intersection of the man, the car and the gadget is the belief that "application program interfaces," or APIs, are the future of all computing.
Tropo managed to build a community of 200,000 developers around its simple and completely open APIs. That must have been very appealing to Cisco. And let’s not forget Echo began life as a simple Bluetooth speaker. It was the object of derision before Amazon (AMZN) embraced open APIs, allowing developers to turn it into a pizza (and now Tesla) ordering phenomena. The point is that all of these wrinkles are coming from developers fiddling with APIs.
The role played by cloud computing in the API revolution is key. I’ve often written that investors cannot afford to miss this big trend. Companies that ignore the cloud and its vital role in the future of computing are doing so at their own peril because future customers are not going to pay a premium for "fat" devices with faster processors or more storage when all of that stuff can be handled in the cloud for a fraction of the cost.
Even Microsoft (MSFT) and Intel (INTC) — the power couple that pushed fat-client computing to the edges with the personal computer explosion — have finally hopped aboard. Microsoft abandoned its Windows Everywhere strategy and embraced open Linux. Intel is now officially all-in on the Internet of Things with a focus on expensive, custom chipsets for cloud-computing servers and inexpensive chipsets for sensors. It’s a new world where thin is in and fat ain’t where it’s at.
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For a long time, open systems were taboo because they meant breaking down barriers that exposed profit centers and intellectual property. For example Oracle (ORCL) famously sued Alphabet (GOOG) for using open Java APIs in the development of Android, its own open-source computing platform. Still, all of the really interesting innovation is happening where open APIs are more prevalent.
Salesforce (CRM), a fast-growing customer-relationship software firm, earned 50% of revenues from open APIs in 2015 and even has an App Exchange for partners who build applications on top of its platform. Expedia (EXPE) generates as much as 90% of its revenues through APIs that allow developers to tap into its vast hotel, airline and car-rental booking network.
And IBM (IBM), long considered to part of the legacy-tech ecosystem, decided to open up APIs for Watson, its big-data, cognitive-computing platform. In the past, this would have been unthinkable. But now Big Blue is working with energetic startups from retail to healthcare to build new businesses and revenue streams. By all accounts, it’s working. Open strategies attract innovators.
That is kind of the point of Jason Goecke’s nifty Tesla trick. Sure, the KITT of the 1980s’ TV show Knight Rider could do all of these things and more. But that was science fiction and until quite recently, corporations refused to share new technologies.
The good news is that’s changing. And innovators working on the next really big idea in a nondescript garage somewhere will be much better equipped to tackle challenges with cloud computing and open APIs. And that opens even more doors for investors.