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Over the years, I have had the pleasure to work on open university course and book project API Economy 101 with Marko Seppänen, Professor, Vice Dean for Education (Faculty of Management and Business) at Tampere University. He and his research colleagues have published numerous papers on API and Platform economy, and now the most recent paper is analyzing the travel-related Amadeus' API business models by Heshmatisafa, S. and Seppänen, M., 2023. Exploring API-driven business models: Lessons learned from Amadeus's digital transformation. Digital Business, 3(1), p.100055.
This blog post is a summary of the main points of the research paper. The API Business Model Canvas is an interpretation of the research report findings to the APIOps Cycles API Business by the blog author.
The Evolution of Amadeus' Business Model
Traditionally a B2B company providing customised products at premium prices, Amadeus embarked on a digital transformation journey, reshaping its business model to leverage the potential of public APIs. This blog post explores the transformation of Amadeus' business model, its API portfolio, and the remarkable business values generated by exposing digital assets through open APIs.
Amadeus' traditional business model was transaction-based, driven by maximising the number of transactions through its infrastructure. The company employed a classic two-sided network effect model. This entices more travel agencies to connect to its ecosystem as more markets are included. However, the digital enhancement and development of public APIs paved the way for a revolutionary restructuring of Amadeus' architecture.
Modern IT architecture enabled Amadeus to standardise its products, scale market dynamics, and construct an open platform through public APIs. This move supported the diversification of the existing business model, giving rise to a portfolio of two distinct API business models: the "Enterprise APIs Business Model" and the "Self-service APIs Business Model."
In this article we'll summarize the research on the business models, but if you are interested to learn more about the APIs, visit the Amadeus Developer portals for self-sevice APIs and Enterprise APIs.
Amadeus' API Business Model Portfolio
1. Enterprise APIs Business Model
- Connects travel sellers and providers, offering customised B2B solutions to significant partners and customers.
- Pricing is transaction-based and determined through commercial negotiations.
- Deep integration of strategic partners, such as TravelClick, expands Amadeus' hospitality sector and access to a global customer base.
2. Self-service APIs Business Model
- Connects travel sellers, travel providers, and young independent complements.
- Provides a hybrid platform with a transactions-based model and a convenient developer environment.
- Monetization strategy includes freemium, transaction fees, and revenue sharing based on the API used.
Learn more about the self-sevice APIs and Enterprise APIs
Business Values of Public APIs at Amadeus
The adoption of public APIs at Amadeus has unlocked several business values:
1. Commercialization:
- Public APIs generate direct revenue streams through booking incentives and freemium models.
- Self-service consumers often migrate to the enterprise side for higher resource access and an extensive API catalogue.
2. Ecosystem:
- Public APIs have facilitated the emergence of ecosystems, fostering collaboration, knowledge flow, and partnerships.
- The API platform continuously expands as more complementing parties and APIs join, attracting travel providers and sellers to the ecosystem.
3. Big Data:
- Amadeus possesses extensive data covering a traveller's journey, enabling personalised services and precise customer segmentation.
- The 360-degree view of the customer journey enhances the value of the products and services.
4. Market and Marketplace:
- Public APIs provide insights into market segments and demand characteristics, aiding the development and commercialisation of products.
- The API ecosystem creates a positive network effect, attracting more players to the travel industry marketplace.
5. Entrepreneurship:
- "Amadeus for Developers" fosters innovation and entrepreneurship, encouraging external start-ups and SMEs to co-create solutions.
- API usage data helps recognise commercial opportunities and potential partnerships.
6. R&D:
- Public APIs stimulate internal and external R&D, accelerating the exploration of new solutions without upfront investment.
- Amadeus continuously explores new ways to package its API products and develop cutting-edge technologies.
Takeaways
Amadeus' digital transformation through API business models has been remarkable. The company's API business model portfolio has opened up new revenue streams, fostered strategic partnerships, and created a thriving ecosystem within the travel industry. The innovative use of public APIs has enhanced Amadeus' core product offerings, accelerated its R&D initiatives, and positioned the company as a leader in the market. By embracing the power of open APIs, Amadeus has truly revolutionised the travel industry, setting an inspiring example for businesses across various sectors.
Enterprise APIs Business Model - Business Model Canvas
The "Enterprise APIs Business Model" at Amadeus is a traditional B2B approach connecting travel sellers and providers through a highly integrated system. Below is a breakdown of the business model using the API Business Model Canvas, part of the APIOps Cycles method:
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