Blog Entry

May 12
2010 

Can Enterprise Hardware Companies Learn from Apple?

First of all, I’d promised myself I would not write about Apple just based on how popular the topic is. Obviously, I’ve broken that promise. What strikes me most though about Apple’s current success is how it seems to go against the currently espoused play-book for success. Secondly, does Apple’s focus on hardware actually result in better software development practices?

In my role I meet with many hardware and device manufacturers. One theme is very consistent: Historically, we ignored our software as it was only really there to facilitate or drive our high value hardware sales. Now though we are looking to monetize our software as we find hardware is becoming commoditized. They want help from us to help them protect, manage and deliver their software. As I mentioned, this driver is one of the most prevalent trends in our overall industry today. 

So how do we explain Apple? This is a company that is still fixated on high hardware margins as the engine of growth. The iPod pulled them back from the brink. The iPhone put them into overdrive and the iPad might very well send them into orbit. A good percentage of those people who stop by to pick up an iPod end up leaving with a new Mac desktop or laptop – thus adding more fuel to the engine.

Their software still is completely focused on driving new hardware sales. Look at the iPhone. It appears that essentially ever summer they release a major new version of their OS. They don’t charge a penny for it. However, many of the newest versions of the OS have features that require the latest version of the iPhone to work. The GPS chip was the first major example. The next might evolve around the phone hardware configuration for performance – or cameras for video conferencing etc. The message is clear – you’re not left out in the cold if you have an older iPhone but if you really want to get the most from the software you’ll need the latest hardware to enjoy.

The irony is that this was a central theme of the WinTel strategy that fueled the growth of the PC companies like Dell, Gateway etc. Web browsers were evolving rapidly and each browser required significantly more RAM and processing power to get the most from new web applications. Windows upgrades were a) required as the operating system was still immature and b) significantly more demanding on the hardware as well. Microsoft’s Vista broke that model. When I joined SafeNet one year ago I received a Dell machine running Windows XP and IE 6. That’s essentially the same configuration I’d received 5 years earlier at my last company. No wonder we saw massive consolidation in the PC space over the last 5 years.

Back to Apple. Shouldn’t that fixation on hardware result in “inferior” software? It appears the opposite is true. There is an extra degree of focus on software as it’s critical to driving the next major hardware cycle. It’s kind of like Microsoft, HP and Intel all being one company. That new version of the OS better be great so that the Intel division sees strong demand for more powerful chips and the HP division sees a push for more RAM, disc space and graphics capabilities etc. Indeed, this pressure does exist to some degree today in the PC world. However, it would be much more powerful if it were one company.

Coming back full circle to enterprise hardware companies looking to monetize their software as they see margin erosion in their hardware offerings. Each situation is individual and unique but it is worth looking at Apple before determining the hardware component is futile. One answer might be to instead implement a very tight entitlement management and upgrade cycle that results in a tremendous customer experience. Very tight coupling of the hardware/software upgrade cycle could result in customers maximizing the business ROI with your solution much more effectively than your competitors. Or it could be that Apple is a blip and the decoupling of hardware and software is an unstoppable freight train. I’m open to thoughts or feedback.