Back in 2014 when Apple & IBM’s partnership to transform enterprise mobility was announced, I felt like Apple & Moto Rokr once again & wondered what could be the “iTunes & iPod combo” next. Now, wondering no more as Apple introduces Apple Business Essentials (ABE) on Nov. 10, 2021. Which is more “the Salesforce for IT”. Even, it’s not really “the iTune next”, it may change IT as we know it forever.
Why?
No matter how big a business is, growth is an easy measure of how uncomfortably excited a business is. Even Apple’s P/E ratio: 27 is not high in Tech, it’s more than double that of its top competitors, such as Samsung’s 13. If Apple wants to keep it high or higher, it has to tell a new growth story. And, the enterprise business provides 3 good opportunities for Apple at least.
- Sell more iDevices, especially as iPhone shipment has been declining since 2015.
- To lock in more iDevice customers to bootstrap the Apple service business. This is not only a recurring revenue but also Apple service margin is 60+%, a 2x of that of Apple products.
- The enterprise market is pretty much untapped to Apple. Even Apple’s IT market share still grew from 5% to 6% between 2014 to 2015, it has been flat since.
Why small business?
I don’t know how Apple & IBM measure the success of their partnership. Sure, there could be many strategic advantages for Apple & IBM to complete each other. Such as IBM’s enterprise reach & data analytics expertise plus Apple’s design & a huge user base, etc. But, a scale always comes with collaboration complexity & high inertia to stay on the status of the quote. Just like it takes more time to mobilize crops than a seal team. Anyway, judging by the growth of Apple’s IT market share, Apple has to try something else.
I bet Apple learns a lot from the partnership at least. Just like iPod may be “Rokr v2” & iPhone may be “Rokr v3”. From the experience, Apple may find how hard to crack into big enterprises. On the other hand, small business is a better starting point for Apple’s take 2 to crack into the enterprise market because:
- Small business is №2 in IT spending & the fastest growing section. Even Windows is still the most used in IT globally, it’s not the case in the silicon valley or tech. in general. iDevices are the weapon of choices in most startups & even big tech.
- A good fit to enhance Proter’s 5 forces for Apple. Small business has less barging power than Apple & better flexibility to accept Apple’s standard IT service. iPhone & iPad have been a big thread to substitute notebooks for productivity already. Subscription will lock in customers to reduce the threat of new entries & competition. Further scaling up of iDevice shipment reinforce Apple’s dominant barging power to suppliers.
Why IT as a service can be disruptive
In 1943, “there is a world market for maybe five computers”. Since that, we’ve seen PC, Internet & mobile revolutions. Each time, the market grows 10x as computing becomes easier to use & more accessible to more. Harvard professor Clayton Christensen’s litmus tests for a disruptive innovation may help us to better foresee if Apple may “reinvent IT” successfully.
- Is there a large population of people paying for professional services? Yes, most companies typically build dedicated IT teams if they can afford it. For a small company or a startup, paying for IT professional service make much more sense. A pain point: good professional service does not only cost a premium but is also difficult to get.
- Will the low-end market buy a low-cost but good enough service? Yes, small business IT service is the low-end market section to accept Apple’s standard IT service.
- Can a company profit from the low-cost service? Yes, Apple’s vertical integration of device, software & service not only provides a much lower cost structure than its competitors but also enables Apple to bing “new magic” to IT service.
- Is it a sustaining innovation of the current market leader? Arguably no, Apple is not just doing the existing IT model: personal computer + Web app combo. Which has been Wintel’s lead. Instead, Apple is on to the next generation of computing model: mobile device + cloud combo. Where the market is still everyone’s game. For example, Apple is not just bundled iCloud storage, but also provides an easy data backup service. Furthermore, Apple does so by a self-serving model. So anyone can easily manage device & deployment.
Full Disclosure
The opinions stated here are my own, not those of my company. They are mostly extrapolations from public information. I don’t have insider knowledge of those companies, nor a whatever expert.
