Following in the dubious footsteps of such notables as Jim Louderbeck, Don Reisinger over at Ars Technica has come up with a “unique” proposition for Apple, pretty much guaranteeing that if Apple follows his advice, they’ll be propelled to success and a much higher market share. Wanna know what this gem of an idea is? Why, license Mac OS X, of course, and let the clones thrive! Yeah, I know—it hadn’t ever occurred to me either.
Apple’s unprecedented success over the past few years has propelled the company from its place as just another tech company to the most respected brand in the entire industry. But for all its success, it’s still a distant second in its battle for operating system dominance. With just 8 percent market share, Apple has significant work to do if it wants to catch up to Microsoft and solidify Mac OS X as a major force in the software business.
Right in the first paragraph, Reisinger reveals that the whole premise of the article is flawed. Why does Apple need to compete with Microsoft anyway? Right now, Apple is widely regarded as the coolest company around while Microsoft has earned itself the reputation of a staid corporation that churns out lousy products and can’t keep up with the times. Sure, they earn several times more than Apple does but Apple is still making money hand over fist, and that gap isn’t going to change dramatically anytime soon, no matter what Apple or anybody else does. Wanting Apple to makes as much money as Microsoft is greed, plain and simple.
Apple’s competitors are the HPs and Dells of this world, not Microsoft. Now, I’m not sure where Don’s been all these years but it’s pretty clear to me that the primary reason that Apple is able to thrash the competition and that such a large number of customers are switching to Macs is their exclusive ability to run Mac OS X. That, and Apple’s industrial design prowess. If either of those qualities were to become truly commonplace, Mac sales would take a nosedive.
Let’s take a look at the rest of Reisinger’s argument.
Just five years ago, Apple was woefully behind PC vendors in the hardware market and Microsoft in the software market. But since then, the company’s Macs have gained in popularity and more users have found reason to switch from Windows to Mac OS X.
Yes, reasons like stability and security, both of which have a good chance of being rendered invalid if Apple unleashes Mac OS X in the form of a mass market product that can be installed on any computer you want. Mac OS X is stable, in large part, because it only has to run on a handful of configurations and one of the reasons for its being so secure—though not the single or even most significant by any means—is that it occupies a small niche in the market. I don’t think Steve Jobs would be very pleased with the prospect of compromising either of these qualities.
If the company wants to capture significant market share from Microsoft and see Mac OS X become more ubiquitous, it needs to stray from its comfort zone and start making more innovative decisions.
Yeah, and when has going the Microsoft way ever been the innovative decision? The only reason many of us are Mac users is because Apple chose not to go the Microsoft way, deciding instead to maintain a certain quality standard in their products. That’s what I call being innovative—realizing which model suits best for your company and not following others’ lead just because they happen to make more money.
After all, customers will only be willing to pay so much more for a Mac before they decide to save money and stay with Windows.
But that’s where you are wrong. Oh, how woefully wrong you are! The customers who “decide to save money” and use an inferior product instead have never been Apple’s target market. Nike won’t stop making high priced shoes just because customers who can’t spend that much are buying cheaper products from other companies that have no brand value and make inferior quality products. Customers who want to buy a Mac will buy a Mac, no matter what the price—and, in fact, those who are willing to spend in the Mac’s price range tend to buy a Mac.
[Apple] can’t simply overlook the fact that it commands just 8 percent of the OS market and Microsoft is pulling in billions of dollars in profits each quarter because of its stranglehold on the industry.
Well, to be fair, Apple’s also been pulling in over a billion of dollars in recent quarters, even without having a stranglehold on the industry. If Apple opened the floodgates and allowed Mac OS X to be installed on any computer, they’d be playing on Microsoft’s home turf, conferring a huge advantage on Redmond—it would be like running against the incumbent.
See, if Apple were to start licensing Mac OS X, they would have to beat Microsoft at their own game. They would have to forge partnerships, sign contracts, and make various deals with a multitude of PC vendors, drop the prices and profit margins of Macs, deal with rampant piracy, and try to make sure that every single machine that Mac OS X is 100% compatible with it.
And, make no mistake about it, they will fail. Apple is no Microsoft and I suspect Steve Jobs knows that. Right now, Apple is the big fish in a small pond and has a pretty strong market in its own right. In Reisinger’s scenario, Apple will be the little tadpole in the ocean, with no friends and the same big boy attitude from its past. Apple will have surrendered their biggest advantage and customers will not have any reason to switch to it. Microsoft will crush Apple.
Apple currently stashes well over $18 billion in its coffers and has no debt in its financial structure. With that much in the bank, it not only can afford to reduce its margins, but it can afford to do so for quite some time.
This is weird logic, in my opinion. Apple isn’t making all that money just so that it can reduce their profit margin and start earning less. They don’t intend to have just enough in the bank to get by. They’re a company that wants to rake in as much dough as they can, while still maintaining brand value and quality. Also, it’s very easy to lower prices and revel in the temporary adulation from the media and potential customers. But, in the end, it’s a one way street: They can reduce the prices whenever they want but it’s impossible to go in the opposite direction without suffering a huge outcry from customers. There’s a reason that Apple nearly always introduces new versions of its existing products at the same price points of the products they replace.
The iTools to .Mac transition is a good example. Until its last day, .Mac was considered an expensive service by even the most loyal of Apple fans, hence its lack of widespread adoption in the market. Yes, it was expensive, but was that really a surprise? Are all of Apple’s other products competitively priced? No, they aren’t, but they’ve always been expensive, so people tend to assume that that’s what they’re worth. If Apple were to lower the prices of Macs, that’s what they’d become worth and Apple would never be able to price them higher in future.
Resinger goes on to suggest that Apple should become cozier with the enterprise, bring on the business applications, and license Mac OS X. In other words, to sum up the entire three-page article, Apple should become Microsoft. The mistake the Don Reisinger, and every other analyst who treads this path, makes is in assuming that Mac OS X, when put in the same conditions as Windows, will continue to outperform it.
That’s just a mistaken assumption if ever there was one. Many of Apple’s claims of “making the whole widget” may be marketing fluff, but there is a certain degree of truth to the assertion that Apple’s computers run as well as they do because Apple controls the entire experience. If Apple were to imitate Microsoft’s business model, the former’s products would soon start taking on the characteristics of the latter too, and that’s something neither Apple nor its customers want.
At least in the opinion of this humble blogger, Apple is never going to license Mac OS X—especially under the reign of Steve Jobs—and that’s how it should be. Clearly, Apple has been doing a lot of things right for the past several years and I’d assume that Jobs knows better than to jeopardize all that in what would almost surely be an unsuccessful attempt to gain market share. There is already one Microsoft out there—I’m not sure why Mr. Reisinger wants there to be another.
This would be a huge mistake, and Apple knows it. While it would be nice to see Apple gain more dominance in the OS landscape, and maybe even see some price drops in Apple computers, Apple's secret-sauce, as it were, has always been that they control the platform.
Apple can ensure that their OS runs smoothly, quickly, and bug-free (relatively) because they know exactly what hardware it's running on. Open up the hardware, and you reduce Mac OS X to (*shudder*) Windows, where for every bug you fix, you create 20 others.
Additionally, more time spent having to cater to 10,000 different makes and models means less time developing, improving, and innovating new features.
Even though my MacBook Pro was way more expensive than a Dell or Gateway, I have confidence in the product, and that's worth every penny. I've had Dells, and Gateways, and HP's and they all more or less had issues. Even today, you still get what you pay for.
Apple should stay the course. Their numbers are steadily rising, and while Windows may be dominant, the steady trend of its users jumping ship for Mac or Linux will eventually narrow the margin. That is, of course, as long as Apple continues to produce a product that works, instead of one that hopefully works.
BTW, Don Reisinger the author of the article has been fired from Ars Technica over the weekend.
Kudos to Ken, Jon and Eric for doing the right thing.
If Microsoft makes 'lame' products as you put it, then why did they have to license Exchange/ActiveSync support for the iPhone/iPod Touch? If Microsoft's products are so crappy, why doesn't Apple tell Microsoft to stop developing Office for Mac? Let me see how long your precious last then. Apple is just marketing and its no better, stop drinking Steve Jobs kool aid, its making you sick.
Andre, you missed the point of the article.
"Apple's competitors are the HPs and Dells of this world, not Microsoft."
Apple's position has always been to make the user experience enjoyable with integrated hardware and software. Microsoft does make decent software as you stated MS Office. In the same regard there OS is pure and simple crap (any version)..
I'm not sure where I fall on the "to license or not to license" question, but Apple can't really afford to stay the course either. They need to make a play to expand their market share, and they need to do it in a big way. If I were The Jobs, here's what I would do:
1) The biggest barrier to buying a Mac is the cost of entry. We all know the arguments that TCO is lower, Macs last longer, etc., but that doesn't change the fact that as a potential buyer, I only have so much money to spend. If I could afford to wait a little longer and save up some additional coin, yeah I might wait and get a Mac, but if I need a computer now, I'm going to get the computer I can afford now, and for many that won't be a Mac. Apple's profit margins can take a bit of a hit, and the increase in sales will more than make up for the lost in per unit revenue. So slash prices.
2) But cutting prices isn't enough though - they need to do it in a big way. They need to do it at one of their special events, and ideally couple it with another bold move. My idea is a full refresh of the Mac product line - update everything and introduce a whole new pricing structure at the same time. And create a whole campaign around it - "We want to put a Mac on every desktop and in every backpack and briefcase" (not quite as catchy as "a chicken in every pot," but you get the idea).
3) Finally, Apple needs to make a push into the enterprise market in a real way. They have most of the widgets (OS X Server, Xserve, iPhone, iWork), they just need to market them together into an "iEnterprise" package (but PLEASE don't call it that). I don't think they need to bet the farm here, but they need to put some serious money into promoting it.
And that's my 2 cents...
I commented on Don Reisinger's article over at Ars Technica. In the majority of highly competitive markets, an 8% share of a global market would be considered a huge achievement. In the automobile market, for example, there are only four manufacturers who have a market share in excess of 8%. The only reason Apple's share of the desktop OS market appears small is because that market has an overwhelmingly dominant player.
Apple doesn't need to do anything to be successful. They already are.
A bigger market share will also attract more viruses and other shit that Windows users have to deal with. Personally I'm happy with Apple right where they're at. $18 billion in the bank, how could you want more.
Andre Da Costa - Dude, you've been beta testing MS products too long my friend. Talk about drinking the Kool Aid! Anyone who says Apple is all marketing is showing a severe case of ignorance - and I would not be too proud to show it off.
As a person who was involved many years with MS beta testing (which is how I know you...) and who switched his whole house to Apple right after Vista went TRM - I think I can speak a bit about both worlds.
You have no idea what you are talking about Andre - best to keep that to yourself.
The article referenced in the post is complete silliness and propaganda crafted I expect to keep the idea in people's minds that the MS way of the PC business is the baseline by which all else is measure. Truthfully - to anyone who knows both very well - Apple's is the better business model by far.
Stu
Shonine, thanks for telling us you like being locked up in jail. Because thats what Apple does to every customer. What's a little bit of aesthetics over choice and functionality?
Last comment to you Andre - as others here have contributed a far more intelligent discussion than what you or I could contribute arguing with each other:
I am not i jail at all. I have great hardware, coupled with great software. Fortunately, it comes in nice looking cases. However, I spend ZERO time pr day messing around with tweaks, system resources, registry settings, device drivers, WHQL, a yappy OS telling me everything that it does or does not like etc...
Andre - borrow a mac. use it for 2 weeks. then post an intelligent comparison on this thread instead of some silly MS marketing tags you read about. (Yes, we all know the Seinfeld spots will talk about "choice" and yet hypocritically MS has ALWAYS tried to tie us in to proprietary file formats - please don't insult our intelligence OK!)
I am at least 20 years your senior my boy and think you should take some advice form your elders.
Apple may have 8% of the market share but evidence shows Apple has about 50% of the photographic and graphic design market.
Listen to TWIP/TWIM ect Podcasts for good info.
I wouldn't necessarily base predictions of what would happen under a future licensing scheme to what happened last time. Market share during the old clone days was on the decline and Apple was making craptastic machines that were rightly considered overpriced. The reason a lot of people bought Power Computing machines was because they were legitimately better and cheaper than what Apple was putting out. Also, end users could not easily switch to the Mac OS because of the Intel/PPC architectural differences. Now, I'm not saying that licensing the Mac OS now is a good idea (I think the jury is out on that one), but it would be entirely different from the last time around.
"Apple's is the better business model by far."
From Ballmer's recent comments, even MS is coming to that realization.