What has come to be called the “API economy” is comprised in large measure of services that host customers’ APIs using Amazon EC2 as their cloud platforms, and attaching management services as their value-add.

Suddenly these players find themselves in possible dire straits, as the company that provides the API economy with cloud infrastructure has now decided to get into the API hosting business for itself.

On Thursday, Amazon announced its introduction of an API Gateway service that enables a similar pay-as-you-go model for the handling of customers’ API libraries, as the established leaders of the API economy.  Now the wholesaler in the compute-on-demand supply chain has become the retailer.

And perhaps you’ve read, Amazon does a pretty fair business in retail.

Middlemen Beware

“If you’re actually providing this service to an external audience,” said Amazon AWS CTO Werner Vogels during a keynote speech at the AWS Summit in New York Thursday, “you might even want to charge for them.”

It’s a prophetic statement, given the circumstances. In its native context, Vogels was referring to customers’ need to construct a manageable business model around how customers utilize their APIs.

“You need to measure and log all the information that’s happening around your APIs. If it’s [used] internally, you just want to know about the usage.”

Amazon’s API Gateway service is a managed API host. What makes publishing APIs to the cloud different from hosting a Web server there is that, for the Gateway, the provisioning process only needs you to provide the raw source code of the API functions (in this case, JavaScript) rather than the entire virtual machine with the host stack attached.

The Gateway already provides the host stack, as well as the management service with analytics that includes how frequently your API functions are being accessed by customers, and how much data is being exchanged in the process. This data can help a DevOps professional determine whether API functions are being used efficiently, and the analytics can help spot instances where they’re not.

API as the Modern EDI

Publishing information with APIs is a very different concept from publishing text on a Web site. While both use the Web (HTTP protocol), typically an API response is a package of data, more often these days encoded using a derivative of JavaScript called JSON. Sometimes these packages are embeddable within others’ Web pages or Web apps, but most of the time they’re simply the data that organizations use to conduct business with each other.

Electronic data interchange is actually an older business than the Web. APIs have become the modern way for organizations to exchange data.

So you can see why vendors would have an interest in being the gatekeepers and checkpoints for this business.

“Many of our customers have told us that they would like to make investments in web services,” wrote Amazon AWS Chief Evangelist Jeff Barr Thursday, “but have little interest in building or maintaining the infrastructure for them due to the cost and complexity involved.”

The ability for a service provider to respond to these customer needs, said Vogels, “is really, really hard. All of these pieces make it very hard to put APIs in applications and components that you want to use.”

That might come as news to the many existing API service providers that already do exactly that — vendors such as Apigee, Mashape, Mashery (now owned by Intel), 3scale, Apiphany (now part of Microsoft Azure), Akana (formerly SOA Software), and Layer 7 Technologies (now part of CA). Most of these providers (excluding Microsoft, obviously) already built their API platforms and surrounding ecosystems on Amazon’s cloud.

Specifically, they host their API services on virtual servers that are, in turn, hosted by Amazon. Now Amazon is opting to cut out the middleman.

Late to the Game?

Amazon’s move was the topic of furious discussion Thursday on Hacker News, the leading online forum for software developers. Said one commenter, “Smart move for AWS, but they are not innovating nothing here, just following.  Late.”

The commenter went on to mention how open source projects such as Kong have become alternatives to commercial API gateways. These alternatives give organizations inexpensive — or even non-expensive — options for API hosting on-premises.

Mashape is the steward of the Kong open source project, having been funded in 2011 by none other than Amazon CEO Jeff Bezos. It produces a Mashape Marketplace around Kong that enables publishers to be discoverable, and that’s Mashape’s business model.

Won’t Amazon’s move jeopardize Mashape’s position as an API services provider?

“Mashape Marketplace is very different from just an API gateway,” said Mashape CEO Augusto Marietti, in a note to CMSWire. While Kong is also an API gateway, he said, it’s on-premise while Amazon’s gateway is cloud-based.

So the move might affect purely cloud-based providers such as Apigee and Mashery, Marietti said. Nevertheless, he added, “it’s a good sign that big players value API gateways as a tool to have in your stack.  It means a lot to the potential and the future of the market.”

As a side note, Marietti mentioned the case of Amazon CloudSearch, which it launched in 2012. Since that time, a firm called Elastic produced its open source alternative ElasticSearch, whose business model is subscription-based service and support.

Marietti notes that CloudSearch has yet to attain the market traction of ElasticSearch, a fact borne out by public opinion as well as being seconded by that one commenter on Hacker News, who said that for CloudSearch it was already “game over.”

Ironically, Amazon’s API Gateway announcement comes on the same day that Amazon revamped its global partner program, ostensibly with the goal of helping SaaS services make better use of AWS.