The recent glut of articles debating Apple’s interest in the enterprise space has been interesting to watch. The feeding frenzy peaked with rumors, and then validation, that Apple vice president of enterprise Al Shipp was leaving the company and Apple was not going to replace him. The tone of coverage varied from doom and gloom to euphoria. Headlines on the apocalyptic side included Apple in the Enterprise rudderless?, Apple’s Taking a Pass on the Enterprise Prize, and Steve Jobs Still Doesn’t Get Business Customers. On the positive side we have How Apple Is Secretly Eclipsing Windows in the Enterprise, Next stop for Apple marketing? The enterprise., and our favorite Snow Leopard Endangers Vista.
So Apple is walking away from the enterprise market and Snow Leopard will be the death blow to Vista? How can we have such dramatically divergent views on the same subject over a 30-day period of time? In part it is because Apple remains an emotional topic, representing one of the true information te4chnology culture wars. This story line is not new, this is not the first time people have raised warning flags about Apple’s interest in business customers. Things are different this time around because the iPod and the iPhone have been tremendous retail successes and Apple’s financial situation is stronger than it has ever been. Apple is selling one in every five retail computers, with an even larger share in notebooks. Some see this as evidence that Apple does not need, and therefore will no longer pursue the enterprise space.
We see no evidence that Apple has changed its approach to the enterprise market. Apple has never competed for the bulk of the enterprise market, the low-powered PC that most knowledge workers use for word processing, spreadsheets, and presentations. That is a high-volume, low margin business. Slap a $500 machine and $500 worth of software on someone’ desk and they can email all day long. Apple’s niche has always been power-users; businesses that load up high-performance machines with more complicated software and spend five to 10 times per employee. Those customers are much higher-margin customers, but they have traditionally been a small segment of the marketplace.
If you look back 10 years and consider that print design and printing represented the bulk of Apple’s business audience, you would wonder how Apple survived at all. Then came the iPod, iTunes, the iPhone, and retail customers became the Apple story. But that view is too limited. Apple continues to sell to business customers, and over that time they have expanded the businesses they serve. Apple’s business sales have increased 25 percent year-over-year. Web development has been a big driver, more than compensating for the decline in print. And then there is video. Apple’s release of Final Cut Pro was incredibly disruptive to the professional video market. A market once dominated by Avid running on Windows is now saturated with Final Cut Pro running on Mac OS. Just look at Avid’s market share and you can get a sense of how disruptive Final Cut Pro has been. To a lesser extent professional audio is also succumbing. The differentiator for Apple have always been the combination of power and quality. There are plenty of powerful PCs, but if you care what something looks like on screen, or when it is printed or rendered, you need to work on a Mac. The user experience — ease of use — has always been the go-to market message for retail and education, but it is the combination of power and quality that drives Apple’s enterprise market. That is why you see more and more Macs in research, product development, and health care environments, supporting users working with complex imaging and 3D modeling.
Now let’s consider some broad market trends. High-speed broadband has driven the growth of video and audio, and of course web-development. Not only are these markets that Apple dominates, they are expanding from creative to the broader enterprise market. So Apple dominates markets that are expanding, not a bad position to be in. And as we noted in an earlier post, the iPod and the iPhone are creating inroads into the traditional enterprise IT space.
Still, what about the enterprise announcement? Is Apple, flush with retail success, abandoning its enterprise customers? Not replacing the enterprise lead. Killing the Xserve Raid. Abandoning FireWire for USB 2.0. Replacing the beautiful, and creative pro-friendly matte monitors with consumer-friendly glossy monitors. Isn’t the evidence there?
John Welch at Macworld strikes an appropriate tone in his post entitled Apple’s enterprise strategy the same as it ever was: Why Apple’s failure to replace a retiring executive isn’t the end of anything. But Welch argues that Apple never had an enterprise strategy, never wanted to sell into the enterprise space. We don’t see it that way. What has been missing from the the recent buzz is an understanding of the reseller’s role in the Apple sales model. Business customers have always relied on Apple resellers to provide the knowledge, integration, and customer support that business customers require. Not that the head of enterprise-marketing has always been an empty seat, but we don’t expect to see negative consequences from this move. If anything, we are hoping to see more attention paid to the critical role resellers in the enterprise channel. The bigger move for resellers and business customers was the decision to have the previously independent direct channel report into the head of channel marketing. This received less attention but is actually more important as it may signal an end to Apple’s efforts to compete with their own business resellers. Apple’s direct channel was able to build direct sales, but it had to do so by sacrificing margin and service quality. So while the buzz is that Apple is abandoning the enterprise, we think the inside scoop may just be that Apple is realigning to better serve the enterprise market.