Apple in the Enterprise: Possible but Creativity Is Key

Rob Enderle

With alternatives to Windows, particularly given Red Hat's pullback, looking less and less viable, companies are looking for choices.


A natural would be Apple, which has had small loyal groups in companies since its founding, primarily in graphics and Web content creation. IBM has been doing trials with Apple deployments in the enterprise.


While IBM has fallen off against a more focused HP of late, and is increasingly at war with Microsoft, it remains the most powerful enterprise services organization on the planet. IBM is largely responsible for getting Microsoft started and it has a very strong Windows/UNIX/Linux practice, which could come up to speed very rapidly on Apple.


In addition, IBM has a complete suite of back-office software and hardware offerings that don't compete with anything Apple has, and it got rid of its desktop hardware business, so there is little in the way of conflicts. I'm going to first talk about what will be very difficult to overcome and then talk about how this could come about.


So why wouldn't this work?


Apple in the Enterprise: A Bridge Too Far?


I'm about a third of the way through a new book, "Inside Steve's Brain," which I can already tell you should be required reading for anyone who wants to sell technology in the consumer segment. Unlike most of the Steve Jobs books I've read, this one focuses very little on Steve's bad behavior and more on what Steve does right in order to create amazing products.


But some of the very things he does to win in the consumer world will work against him in the corporate world. His weaknesses, particularly his inability to partner well, would be a huge problem with IBM.


In consumer, Jobs focuses solidly on the consumer experience, from packaging to delivery. His products aren't the most robust, but they are some of the most beautiful in the segment and they drive impressively large margins as a result. He maintains very high secrecy to ensure he doesn't "Osborne" his offerings and has excitement at launch. In effect, if he were building cars, Apple would be very close to Porsche.


Enterprises, on the other hand, buy largely on price. Appearance, while becoming more important, is still not a primary driver in this market. Buyers want to know what is coming one to two years out before they make their purchase and want products that are very robust. In effect, this market wants to buy Chevrolets or Fords.


Now we add IBM, which would effectively be buying from Apple at an even lower cost so it could sell at a profit (either directly or by wrapping the products with expensive services), and you have a very serious mismatch between what Apple is good at providing and the way they do it.


Add the facts that Apple doesn't partner well, and that IBM can change its mind very quickly, and you have what is likely a non-starter. But, just because something is incredibly difficult doesn't mean it is impossible. We are talking about two companies that have done incredible things in the past. So how could this come about?


How Apple Could Get into the Enterprise


I'm sure some will point out, just like I did in the beginning, that Apple is in enterprises today, but only in relatively contained and small groups. It isn't mainstream.


The problem to solve is complex: How does Apple enter a market with IBM's help without destroying its margins or disclosing things it wants to keep secret?


Let's back up. The problem that IBM is trying to address is the over-reliance on Windows, which comes from a company, Microsoft, which they compete with broadly. The problem for Apple is that it wants to expand into new areas but doesn't want the overhead, or rules, that come with that.


One of the ways to do this is to bring back the clones, which may be coming anyway, on a limited, controlled basis. In effect, allow IBM to re-enter the PC space with Apple clone products. Apple gets the license revenue from the OS but IBM owns the solution and has the requirements associated with disclosure; IBM already operates under enterprise margin levels. IBM then wraps the offering with IBM software and services and Apple potentially gets even higher-margin business than it would if it sold hardware into this segment at current prices (software margins are vastly better than hardware margins). Both sides come out better than they are.


Problem is, long term, the value will increasingly be with the IBM side of the offering. IBM could eventually create its own desktop UNIX/Linux product and take back this very high-margin business. Plus, as much as you'd like to contain the clones to enterprises, they would undoubtedly drift out and pull down margins on Apple's products.


The better path is that IBM gets behind the idea of employees buying their own hardware and helps enterprises put in place programs that enable either Windows or Apple machines, with incentives favoring Apple. A number of us think this will eventually happen anyway, and were IBM to get ahead of the trend, it could be well positioned to ride this wave.


This would preserve Apple's revenues, eliminate the disclosure requirements, reduce the partnering risk to acceptable levels, and position both companies for a future that, if done right, IT and users should love.


Getting It Done


The biggest problem is change, and IT does it very slowly. To make either of the two success scenarios play out, IT would have to change dramatically. Ideally, and were this HP and not IBM, the partner company would move to this model first and lead the way.


IBM hasn't done that for decades; not walking the talk in this instance will badly cripple the effort. In addition, there is still a lot of bad blood in IT from when Apple exited this segment, and Apple fans have a reputation for being very difficult. To make this work, IT will want to be able to assure a level of standardization that probably won't be acceptable to most Apple users.


But, with virtualization there is a way around this. Let's talk about that next time as we continue to speculate about Apple in the enterprise.

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