Hidden Dimensions - Apple's Paradoxical Approach to Business

October 4th, 2006

"Inconsistencies cannot both be right; but, imputed to man, they may both be true."

-- Samuel Johnson

These days Apple can hardly do anything wrong with their product design or marketing. Revenues are soaring. Along with this clarity of vision by Apple, we like to think that we understand the company. Of course, we're fooling ourselves if we think that our approval and after-the-fact understanding of the vision and execution is the same as conjuring up the vision. So many other companies, with Apple's values and vision in their face as an example, are sill not able to execute.

Only stress and failure trigger introspection.

There are murkier waters for Apple when it comes to working with the business world. The strategy is much harder to understand, issues are thornier, and success is not so straightforward. Useful introspection is hard to come by.

In the September 25th issue of InfoWorld, the editor in chief, Steve Fox, says, "History hasn't been kind to Apple's Enterprise Ambitions." It's the lead off for a special report by Tom Yager called "An Apple for the Enterprise."

Now Tom Yager is a hero when it comes to promoting Apple in the Enterprise, and his article clarifies many of the outstanding issues for Apple in the Windows-dominated business world. Despite the clarification, the flavor of the article is similar to previous articles InfoWorld has published, namely, it's very hard to figure out how and why Apple approaches this market.

I have some experience in this area, and I'd like to share with you what I've learned.

Apple's Major Business Issues

There are five fundamental issues that drive Apple's relationship with the business world: Degrees of Freedom, Partnerships, Consistency, Infrastructure, and Business Software. Here's how they affect Apple's business sales.

1. Degrees of Freedom. Every company is an organism. It needs nourishment (revenues) and a friendly environment in which to flourish. There are competitors, natural enemies if you will. Every constraint placed on an organism takes away from its ability to adapt, survive, and grow.

Apple steadfastly minimizes constraints. Government regulations are complied with, but handled behind the scenes so that managers and engineers can just get to work. Internal policies tend to be simple and minimalist. (Yet strictly enforced.) As a result, one feels a certain level of freedom and technical empowerment working for Apple.

Business relationships tend to generate constraints. For example, client companies that want to, for example, fixate on a particular product line will suggest that Apple guarantee that a certain product will be available for X number of years. Apple could never have done this just before the Intel transition. In just about every business relationship, there must be promises and constraints so that the client can depend on an enduring scenario. Apple is a quick change artist in the consumer world, responding rapidly, inside the competition's decision cycle. Apple's response to business is this: here's the product we're selling today. Take it or leave it. But you will love it.

2. Partnerships. Companies that want to do business with Apple often need to have a say in the products they're going to buy. Perhaps they have special computing or storage needs. Or, as happened recently, they need to switch from PCI-X to PCI-Express quickly to support peripheral products. Every time Apple agrees to operate on the customer's schedule, without taking into account global impacts on their product line and system integration, it takes away another degree of freedom.

Apple doesn't always jump on new technology bandwagons fast enough to suit their high technology customers, and that upsets the customer. Apple, however, knows that new technologies in the hands of, say, a government scientist are handled differently than 15 year-old Jimmy at Escambia High School in Pensacola, Florida. Often, an integrated layer of UI must be gracefully inserted, and this takes time and care. As a result, Apple is very hard to manipulate into customer partnerships. They would impact Apple's flexibility an design principles.

Moreover, Apple is a high profile company that's fun to love. Apple customers often want to become a part of this successful company, and that desire to insinuate themselves into Apple's success blurs the rational distinction between fandom and customer requirements. Apple is alert to this phenomenon and must often distance themselves just when the customer is seeking a closer relationship.

3. Consistency. Apple is a company driven by Return on Investment (ROI). If it doesn't make money, it's dropped quickly. Contrast that philosophy to Microsoft which seems to have an endless supply of money to lose, dabbling in markets it views with incestuous intentions.

One year, Apple buoyed by a big customer purchase and its own fan-the-flames marketing, got very excited about a certain enterprise market segment. They spent a lot of money on a booth at the flagship conference for that market. But Apple doesn't think in terms of carving out and sticking with a business market because that's too suffocating. Instead, they throw some money out and see if it generates revenue. In this case, it didn't generate revenue because their booth was at a conference that is used to demonstrate corporate commitment to scientists, not to generate sales. The next year, Apple's presence at the conference was miniscule compared to the previous one -- which sent terrible messages to that community.

Fast money has its allure. Long term, steady commitment is harder to justify. And harder yet to walk away from when market conditions change. Even so, that long term commitment is just what many enterprise customers look for and require.

4. Infrastructure. Apple has a field sales system that depends on sales executives and system engineers dispersed around the country. There are far too few of these people to support a local agency, company or even a city. So they must travel extensively. As a result, every time a business customer needs on-site support, it results in a call to their sales representative to schedule a visit by one of these engineers. Except for special cases (as well as the geography around Silicon Valley), this means a corresponding delay while an engineer is scheduled to come visit them. The delay is often intolerable because Apple is spread so thin in this area.

It's not something that's impossible to fix. Rather, it's simple mathematics. Apple business sales are too small a percentage of overall sales to justify business support engineers in every major city. It's a Catch-22. Perhaps, some day, when Apple's business revenue is soaring, the investment will be justified. But considering the other constrains mentioned here, it'll be a long time coming.

5. Business Software. Companies have broad ranging software needs to support their operations. The have special requirements for sales reporting, finances, taxes, inventory, secure communication, storage and backup, video conferencing, and customer services. While we as Apple enthusiasts like to focus on what Microsoft does wrong, we have to remember that they are very good at meeting the overall needs of a corporation. Even if the circumstances surrounding the extraction of database technology from Sybase are suspicious, Microsoft has a database system, SQL Server, that fills the bill for many small to medium sized businesses. Microsoft's Exchange Server is a behemoth, awkward and fitful, hard to maintain, and a disaster when it goes down, but it checks the boxes for a corporation in ways that a simple IMAP/POP server cannot. Microsoft, a software company, supplies every business tool that a company could ever need, and they make a best effort at integrating them. Often it isn't pretty, but what they produce, in terms of raw technology is light years ahead of FileMaker, iCal and the Apple Mail app.

As a result, when Apple approaches a company for business sales, it has to be on a very focused basis. Often, there are Apple friendly gatekeepers within the company who recognize the special cost-benefit ratio of selected Apple products -- like the Xserve RAID for specialized projects. And Apple makes it their business to make these products as reliable and capable as any product made by HP, Dell, Sun or EMC - if not more so. But IT managers look at the big picture, and it's abundantly clear that the big picture for a corporation involves Microsoft's business software and legacy PC hardware manufacturers who'll sometimes promise anything to close the deal.

I don't believe that most American corporations are really very smart about the whole process. Conversely, I have a lot of respect for organizations that pick the best technologies of Microsoft, Open Source, Apple, a sprinkle of Java, and a smattering of Linux and IBM, and are smart enough to make it all work together. But financial pressures, dumbing down of employees to pay them less, rolling the money upwards in the corporation, and endless cut-throat competition force companies to keep it simple. And so they go 100% legacy PC technologies -- which is a prescription that guarantees with 100% probability some serious operational and security failure modes.

And so, Apple must settle for being no more than a small piece of the pie in some very smart companies that recognize the benefits of a genetically diverse, smart, and quality configuration. And can live with Apple's independence.

The Bottom Line

Apple knows that Microsoft has the business solutions that companies need. Apple keeps its options open, restricts non-disclosure agreements, shies away from close business partnerships with customers, declines to let customers define their product strategy, and occasionally exhibits some frenetic testing of the waters, jumping from ROI to ROI, not really committing to any business sector that doesn't, in turn, embrace them strongly.

There are many, many unexplored opportunities for companies to embrace Apple enterprise-grade products. As the InfoWorld article I mentioned points out, CNN uses Apple Xserve products to "create, store and air content." That's fairly impressive. Most companies, in fact, tend to overlook the security and industrial design of Apple products and would do well to integrate them more extensively. And be as savvy and smart as CNN.

Apple sales people work hard to explain the benefits of this quality equipment, and if a customer is willing to embrace Apple's enterprise hardware and Mac OS X Server on Apple's terms, they can benefit greatly. Apple's enterprise sales are, in fact, growing rapidly.

But Apple's insistence on the fundamental business rules that provide them the degrees of freedom they need to flourish means that Apple is a perpetual enigma in the eyes of the business world. Apple goes its own way, responding to the beat of a different drummer and is unwilling to let corporate customers shackle them.

In turn, some analysts like to flatter themselves with pious pronouncements that since Apple doesn't kowtow to business customers in traditional ways, Apple isn't a genuine enterprise company and its products are not worth investigating and exploiting.

That's pure B.S.

Now you know why Apple is not an enterprise-class company for its customers. And now you know why you should be buying Apple enterprise gear. Only those who can embrace a paradox like that and intelligently devise an optimum mix of secure systems and efficient, smart business tools will survive the external threats to and internal competition of American business.

John Martellaro is a senior scientist and author. A former U.S. Air Force officer,he has worked for NASA, White Sands Missile Range, Lockheed Martin Astronautics, the Oak Ridge National Laboratory and Apple Computer. During his five years at Apple, he worked as a Senior Marketing Manager for science and technology, Federal Account Executive, and High Performance Computing Manager. His interests include alpine skiing, SciFi, astronomy, and Perl. John lives in Denver, Colorado.

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