Saturday, May 1, 2010
This post is a response to this post by Charlie Stross and the discussion that it has prompted across the Internet. I don't entirely understand why people across the web are nodding their heads in agreement with this. I presume that most people are struggling to understand some of Apple's recent moves, and any explanation will do. That said, this line of thinking should be strangely familiar to all of us from a few years ago.
Charlie's basic points seem to be:
- The future of computing is Software as a Service (SaaS), content on the Internet, and data in the Cloud
- Because of this, desktop computers will become a commodity market, margins will disappear, and hardware will become much less profitable
- Desktop computer makers (e.g. HP, Dell, etc.) are doomed
- Apple is in even worse shape since they make premium computers and no one will want to pay for premium hardware to access the same Internet services
- Apple has decided the way forward is to stop focusing on hardware sales and instead create an ecosystem where they control access to content, since that's where the money is
Anyone else feel like it's 10 years ago? All the money is going to be in SaaS, and hardware will be a commodity market like electricity. Everyone will only care about getting the cheapest computer possible to access all the wonderful content and services. This shift keeps getting predicted, despite the fact that the real world seems to indicate the opposite shift.
You need look no further than Apple's latest quarterly results to see that Apple's focus is on making money on hardware. Mac and iPhone sales are way up, and that's been the story for some time. These premium computing devices that are theoretically dying off are becoming more and more popular.
You can see this around you as well. More and more people are paying attention to what devices they purchase and choosing to spend more money to get something they deem better. Sure, there will always be a market segment that just wants whatever is on sale at Best Buy, but the segment that is willing to pay for something nicer is the one that is growing. That's why Apple has been so successful over the past decade. More people are choosing to pay for a premium product.
Apple knows this, and that is why they are moving into more and more hardware segments (phones, tablets). They want to be the premium brand in all these segments that discerning customers choose. Content and software are mostly important because they help drive hardware sales (though they're happy to take money there as well).
Apple doesn't want Flash or other cross-platform tools used with the iPhone because their worst nightmare is a world where the user experience on an iPhone is no different from an Android phone. That would take away their ability to charge a premium for their hardware. It really is that simple. Imagining that this is part of a larger shift in Apple from making money selling their hardware to making money on content/software distribution is just an effort to rehash failed predictions from 10 years ago.
Comments
6 comments
Chris Ashworth
Saturday, May 1, 2010
Started to write a long comment, and realized it's probably better as a blog post. More anon.
Zach
Saturday, May 1, 2010
Not only has apple continued to sell more Macs year over year, but they did so even through 2008-2009 when the economy was in the toilette and Dell and HP were tightening their belts. I wonder if one reason people are willing to spend more for a premium product is that they'd rather buy something that you keep and use for years rather than something that costs half as much that you toss out after a year or two.
Chris Ashworth
Saturday, May 1, 2010
My thoughts here: http://bit.ly/info/b9sRGp
Chris Ashworth
Saturday, May 1, 2010
Bah. Stupid copy-and-paste error. Let's try that again: http://chrisashworth.org/blog/2010/05/01/on-the-future-of-mac-os-x/
dante
Wednesday, May 5, 2010
Premium computers are already dead, they just don't know it. What apple is doing is selling software. All of their hardware work is going into their mobile devices - which is where the software couldn't make that much of an impact. Notice at the end you are saying "premium brand" , not "computers". So the important thing is - can they keep differentiating themselves enough in order to maintain their premium prices? I personally think no, because I've seen some serious infastructure work on interface design in free software communities. That leads me to believe that there will be a massive increase in the talent for the kind of interdisiplinary work that apple is currently using to its advantage. Also .. Stross is a futurist, so talking in terms of history and quarterly results is like taking a sword to a laser gun fight, and I would caution with the "does anyone feel like it is ten years ago" line, because although people being all about the SaaS may have been wrong then, that doesn't mean they always will be. Also, note that with the stores, Apple is stepping into the SaaS field.
Chad Sellers
Wednesday, May 5, 2010
dante,
Thanks for reading this and commenting. I'll try to respond to your core points.
> What apple is doing is selling software.
On the Mac side, Apple is not selling software. They're selling computers, which include both hardware and software. Yes, OS X is a great differentiator, but so is the hardware design of the MacBook Pro sitting on my lap.
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> Notice at the end you are saying "premium brand" , not "computers". So the important thing is - can they keep differentiating themselves enough in order to maintain their premium prices? I personally think no, because I've seen some serious infastructure work on interface design in free software communities.
It seems what you're really suggesting is that others may catch up to Apple. That's entirely possible, but it doesn't mean premium computers will go away. It just means others will have premium computers too. As long as some companies are able to create products that are seen as better by consumers, they'll be able to market them as premium and charge accordingly.
Also, please don't look at the free software communities as the challenger here. I've spent most of my career in the Linux world, and I've been told that it was "the year of the Linux desktop" every year for the past decade (see http://en.wikipedia.org/wiki/Desktop_Linux#Year_of_Desktop_Linux if you don't believe me). Open source communities can create great technology, but it usually takes a focused company (like Apple with OS X or Google with Android) to make a compelling consumer product out of it.
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> Stross is a futurist, so talking in terms of history and quarterly results is like taking a sword to a laser gun fight, and I would caution with the "does anyone feel like it is ten years ago" line, because although people being all about the SaaS may have been wrong then, that doesn't mean they always will be.
Futurists generally base their predictions on what's happened in the past, so I'm using the same ammunition as him unless he has some psychic abilities I'm not aware of. As far as the SaaS part goes, it may come true at some point, but it has nothing to do with this conversation. If Apple saw SaaS as the future, they'd be spending huge amounts of effort on things like Mobile Me and iWork.com, as those are Apple's flagship SaaS offerings. I think it's obvious that Apple is not focusing much energy on those.
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> Also, note that with the stores, Apple is stepping into the SaaS field.
I think you don't understand what SaaS is. Neither the Apple Store nor the iTunes store fall into that. Both of those are online stores through which you purchase goods that you receive and use. SaaS means that the software is out in the cloud, not on your local device. If Apple was thinking toward a SaaS future, music and movies would be streamed from iTunes servers (not stored locally). If you're interested in more info on SaaS, this page is informative - http://en.wikipedia.org/wiki/Software_as_a_service .
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