Digital Ecosystem

A digital ecosystem is a community of developers, providers, and other stakeholders—as well as the software and services that they offer—that enhance the value of a digital platform. Ecosystems are powered by APIs and should provide seamless interoperability between the platform, software, and end-user device.

By enabling third-party development, digital ecosystems can help companies accelerate innovation and develop new features and offerings much faster than companies that do not cultivate ecosystems.

A digital ecosystem can take many forms, from a marketplace featuring third-party software intended to support and complement a company’s offerings to developer ecosystems that incorporate onboarding, provisioning, and management capabilities. The flexibility of digital ecosystems makes them especially valuable—an organization can address specific needs through the structure and purpose it selects for its ecosystem.

Ecosystems are increasing in popularity and are now seen as a critical platform component. According to IDC, by 2023, 60 percent of the Global 2000 will host digital ecosystems that include thousands of developers. Of this group, half will drive 20 percent or more of their digital revenue through a digital ecosystem or platform.


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The Power of Software Ecosystems

How do digital ecosystems deliver value?

A carefully constructed and effective digital ecosystem can benefit all stakeholders—the business itself, developers, and consumers.

Every company has limits related to the number of programs and applications it develops internally. There is only so much time, and so many staff members, available to address these duties. Organizations must also consider the need to ensure quality and stability in their core offerings. Spreading resources too thin can lead to negative outcomes related to those foundational solutions in terms of performance, reliability, and overall customer satisfaction.

By implementing or expanding a digital ecosystem, companies can build partnerships with third-party developers that have the knowledge and abilities needed to play a role in the innovation process. These developers bring useful, complementary technology that supports core offerings to the table.

The business that owns the ecosystem can then offer a broader range of relevant apps to their customers. This strategy can increase the potential for additional sales and address client needs without requiring the enterprise to dedicate significant resources to internal development.

Third-party developers can benefit from the association with that company and their placement within its digital commerce platform. This raises the developer’s profile with a relevant audience of customers and offers that third party more opportunities for sales as well.

Finally, customers can access more options to support their operations and supplement the functions of the core offerings supplied directly by the organization.

How can your organization build an effective digital ecosystem?

A digital ecosystem is a rare example of a mutual win in business, where every group and individual involved stands to benefit from its establishment and use.

However, businesses must develop an ecosystem strategy to support success. Carefully incorporating your company’s structure, approach related to digital innovation and technology, current offerings, and desired outcomes is crucial for finding a successful path forward. Consider these three broad categories that represent common structures for developer ecosystems, keeping in mind that continuing advances in technology increasingly allow companies to blur the lines between them and develop a model that best addresses their needs:

  • Add-on: This type of ecosystem includes existing products—any core service your company offers—that can be enhanced or have their capabilities expanded through new apps and add-ons contributed by third-party developers. Innovation is, in a sense, outsourced to those partners, reducing risk for your organization. A key distinguishing feature of an add-on ecosystem is the supportive nature of the applications introduced by outside developers—many or all will support the functionality of your existing product, as opposed to being a stand-alone offering.
  • Commodity: In this model, your organization’s products are components that can be incorporated into applications built by third-party developers. These functional elements can be incorporated into software by those developers to support specific goals, like error reporting or caching.
  • Sell-with: The sell-with concept is similar to the add-on model, but most or all products included are complete programs on their own. The ability to easily integrate additional products with the core offering, such as combining a CRM solution with an email marketing app, is crucial. A company can create packages of software that address a variety of business needs, providing an attractive option for customers.

Driving value creation through effective integration

No matter which type of digital ecosystem best aligns with your business model, it requires efficient and reliable integration to overcome the limitations of existing technology and workflows.

Many organizations are accustomed to engaging primarily or exclusively in direct, first-party sales. That means companies often lack the necessary infrastructure to enable transactions involving third parties—the developers who build the digital technology that complements or pairs with core offerings. These barriers can negate the benefits of a digital ecosystem.

In practice, the simplest and most effective path forward for businesses developing a digital ecosystem is the inclusion of an integration layer that connects systems focused on first- and third-party digital commerce through APIs.

Encouraging developer participation

As digital ecosystems become more common, third-party developers can pick and choose the ones with which they will engage.

Attracting developers is crucial for success in this community-oriented strategy. An ecosystem can only thrive if it includes third parties who can add value to your company’s core offerings.

To support developers, your company must make it easy for these developers to participate. The specifics can vary depending on the model and structure of an individual digital ecosystem, but the overarching goal should be to make adoption and use as straightforward as possible and enable a self-service approach. Digital tools that support sign-up, onboarding, marketing, and pricing are key considerations.

Adjusting to the digital ecosystem concept

A digital ecosystem can lead to some strange bedfellows.

As long as collaboration supports the goals of all stakeholders, these group efforts should be seen as positive. While this mindset goes against a traditional business model related to restricting access by outside parties, it supports success through an ecosystem approach.

Your business likely won’t form alliances with direct competitors. However, developers that may have toed that line in the past could turn out to be valuable assets. They can take charge of innovation that introduces more offerings into your ecosystem, supporting the needs of customers as well as increasing the likelihood of sales for your company.

Shifting from an outdated mindset related to cooperation is a vital need that enables success in other aspects of implementing and operating a digital ecosystem.

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Establishing your digital ecosystem

AppDirect has the experience and expertise needed to guide an efficient, complete, and successful launch of a new digital ecosystem as well as the scaling of an existing one. Our teams can address all of the technical issues that so often impede implementation and address key needs, from billing to provisioning.

To learn more, request a demo today.