Enterprise Mobility meets Platform Maturity

It's January, which means that the entire technology industry has converged on Las Vegas for the glitz and glamour of CES. The annual Consumer Electronics Show is an important event, but probably receives more press coverage than it actually deserves. The gadgets presented at the show tend to be either interesting or relevant to mainstream technology buyers, but rarely both.

This year is an important one for mobile technology. The launch of 5G will revolutionise the industry, even if most of the benefits will be enjoyed by carriers rather than consumers. Foldable phones appear to be finally a reality after years of hype, which should liberate smartphone design from current constraints assuming the technology works as advertised.

The Apple Question

It is the inventors of the smartphone that have dominated technology news so far this year. Apple started 2019 by issuing an unexpected profit warning after a sharp drop in Chinese iPhone sales. There have been rumours for months that the latest models have underperformed and this was confirmed by last Wednesday's announcement. It is now clear that we have reached peak Apple, the long-expected milestone that marks the pinnacle of the empire that Steve Jobs built. The company is in no danger of going out of business anytime soon, and their revenues and profits will continue to grow despite the recent miss. Their user base may continue to grow too, even if probably not unit sales. However, their cultural influence appears to be in terminal decline.

Apple's success is built on their ability to turn immature technologies into revolutionary new consumer experiences. In doing so, they have transformed the global economy half a dozen times in the past two decades. Very little of the technology they've popularised was invented in-house, but they did perfect numerous innovations in consumer electronics, polishing many interesting new innovations until they were ready to bring to market. They're still doing this today, but the maturity of the mobile phone market limits the impact. The markets have woken up that fact, with their stock declining by almost 40% from its peak in the summer reflecting a realisation on Wall Street that the company is now a bluechip stock rather than a growth stock.

Competitive Concerns

As a result of Apple's tanking stock price, the title of the world's largest company has passed to Microsoft. This is a remarkable turnaround for a firm whose most famous product is in terminal decline, but it's more to do with the failings of others rather than anything Microsoft have done. Their share price has remained broadly static while their rivals have dropped. Of all the leading technology firms, Microsoft have the broadest product offerings and the most diversified range of revenue sources. Apple (with iPhones) and Google (with Ads) are overly reliant on one product line for the bulk of their revenue, which only works when that product is growing. Amazon has also seen sharp declines in their share price with investors finally realising that the online retail giant is never going to be the monopoly provider their market capitalisation assumed they would be. There is plenty of competition in their core retail and cloud computing businesses. Both have low barriers to entry and are not natural monopolies in the same way that social network or other online services are.

All this market chaos does is remind people that the technology market has matured, with the market for mobile phones now resembling that for PCs. The hardware has become commoditised, with new product generations only showing incremental improvements over time. The operating systems that run on these devices have become interchangeable too. It is the apps that count. Nowhere is this more true than China, whose mobile market is dominated not by OS developers or handset manufacturers but by the ubiquitous WeChat. In the west, iOS and the app store guarantees the loyalty of Apple's user base even though every generation of Apple products is more expensive than the last. This dynamic does not exist in China, and Chinese consumers have reacted to increased iPhone prices by switching to cheaper local brands. The brewing US-China trade war has reinforced this trend, particularly after last month's arrest of Huawei's CFO following a US extradition request.

The Enterprise Dimension

The same is true in business contexts. The advantages enjoyed by widely used business operating systems such as Windows and IOS are disappearing. Companies now standardise on Windows PCs due to cost rather than any technical reasons. In any enterprise, a small number of employees still need to use Windows PCs to access bespoke or legacy applications, but most office workers would be perfectly capable of doing their jobs on either Mac or PC. Some companies allow users the choice, but most don't due to the cost and complexity of locking down and configuring two separate device types. A significant part of Windows continued success in the enterprise is down to the sheer configurability of a Windows PC when connected to an enterprise network running Active Directory. Apple can't match this, although there are third-party tools that come close. There are other benefits to Mac use, but there is not enough reason to switch unless the new platform provides an overwhelming advantage, which so far it doesn't. Windows, Mac and Linux are relatively evenly matched. However, Windows has a small advantage because it is far more flexible than any Apple device, and has far better software support than Linux outside of a few highly technical niches.

Apple have always prioritised ease of use over user choice, and this decision has been essential to their success. However, this does have costs, one of which is that it limits enterprise adoption. iOS overcame enterprise concerns about locked down platforms due to lack of alternatives, Windows Phone was too late to market and Android had numerous privacy and security question marks. Many of these concerns about Android have been mitigated, and it is now a fully enterprise-ready platform. In some aspects, it is actually superior to iOS, but the history of security issues needs to be overcome before it can fully displace Apple in the enterprise. The fact that it can is itself a risk to the market position of iPhones.

Apple has identified enterprise as a future growth area alongside consumer services. Rising prices won't impact this position. Business buyers are less cost sensitive than consumer buyers but do expect deep volume discounts. For now, the fact the enterprise has already standardised on iOS is sufficient to maintain their position. Much like with Windows, the investment in enterprise apps and the cost of porting them to a different platform will see to that. Businesses have put up with a lot of nonsense from Microsoft over the years and still use Windows. There is no reason for IT departments to treat Apple differently.