The Apple that tempted IBM

Apple and IBM are teaming up to sell more products to the enterprise market at a time when the BYOD trend is taking off. (Don Emmert/AFP)

It’s hard to deny that, on the surface, the recently announced deal between Apple and IBM to target the corporate market makes a lot of business sense. Apple gets to sell more of its iPads and iPhones to enterprise customers and expand the scope of its app developer ecosystem, while IBM gets a chance to benefit from close association with the vaunted Apple brand and prepare for the post-PC era.

The risk, however, is that the deal may end up alienating Apple’s core fan base and, therefore, end up not delivering as much value to IBM as expected. And that’s especially true in the new BYOD (“bring your own device”) era, where if workers aren’t bringing their Apple iPads and iPhones with them to work everyday, then the whole argument about Apple gaining a foothold in the enterprise loses some of its luster. Research firm Gartner predicts that by 2017, half of all enterprises will embrace BYOD. This is a fundamental shift that will change how enterprises think about IT.

Remember that famous Apple commercial in 1984, comparing IBM to “Big Brother”? For 30 years, Apple and IBM have stood for entirely different things in the world. Apple has always been about “thinking different” and being creative, and now it’s all but admitting that it’s perfectly OK to sell more of its iPads and iPhones to traditional corporate customers – the same people who were the subject of its 1984 commercial. Think about it: If there are Apple devices in every corporation, Apple risks turning into just another tech monolith like Microsoft.

At the end of the day, any business can be divided into two distinct groups of users – the “suits” and the “creatives.” What IBM and Apple are betting is that there is actually some form of common ground between the two — that the “creatives” now want to hear about “information purification.” What always made Apple unique was the design aesthetic of its products. That attracted a certain base of Apple user — the “creative.” But what’s your millennial creative going to think when the cubicle-dweller in accounting is also walking around with Apple products? Have you ever seen a Dilbert cartoon with an iPhone in it?

As always, the root problem is that Wall Street investors are continually putting pressure on Apple – now one of the largest companies in the world by stock market capitalization — to turbocharge its earnings. The tablet and smartphone markets are showing signs of maturity, the smartwatch market is still years away from being a reality, and as a result, shareholders are putting increased pressure on the company to create a new source of earnings. If you were the CEO of Apple, what would you do? You’d try to find a new, multibillion-dollar business segment – and that’s either China or the enterprise market.

Yet, the whole enterprise market argument assumes that there is a captive audience of users – that instead of selling an iPhone here and an iPhone there, Apple will suddenly be able to sell hundreds or even thousands of new devices at a single pop to enterprises. IBM will suddenly have hundreds or even thousands of new people using its apps. That may have been true back in 1984, but this is the BYOD era.

The BYOD trend means that market share is more important than ever: Enterprises will use devices their employees use, not the ones the CEO buys for everyone. What IBM is ignoring is the worrying signs that Apple is beginning to lose its ability to dominate market share. That was perhaps more true before Apple surprised everyone with the sales numbers for the iPhone 5s, but it’s clear that we’re rapidly approaching a period of “peak Apple.” Android devices are the ascent, and that’s chipping away at Apple’s global market share.

Yes, you can view Apple’s recent $3 billion deal with Beats as evidence that the company knows how to continually reinvent itself to protect its brand and add new users. Or, you can view it as final proof that Apple lost touch with its core users years ago. In the choice to build or buy, Apple always chose to build. Now they are buyers. And there are other, highly unscientific, factors to suggest that Apple is losing its innovation edge —  like anecdotal signs that the volume of foot traffic at its retail store locations is starting to flatten.

IBM stands out among the other partners that Apple has considered of late – like Tesla or Beats. IBM is big, IBM is innovative, but IBM is not “cool” in the way that Dr. Dre and Beats is cool. IBM is about “business machines,” Apple is about “consumer machines.”

Back in the day, the saying was that “no one ever got fired for buying IBM.” You can update that for the mobile and digital era: “No one ever got fired for partnering with Apple.” Who wouldn’t want to have some of that vaunted Apple mojo rub off on them? Which CEO wouldn’t feel a little cooler if he or she walked around the floor of their company and saw workers with Apple logos everywhere? Apple may be tempting for IBM, but then again, tempting apples have always been a problem since the beginning of history.

Apple is asking suppliers to make 70 to 80 million units of its new larger screen iPhone, a lot more initially than its current model. (Reuters)
Dominic Basulto is a futurist and blogger based in New York City.



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