They say that time changes things, but you actually have to change them yourself.
-- Andy Warhol
Ever since Mac OS X started shipping, licensing it for use on any other hardware than a Mac would have been crazy. Mountains of text have been written about why Mr. Jobs cancelled the clone licenses of the 90s and how it would damage Appleis hardware business today. However, times change, and three key changes to Appleis business could make the move as natural as the move to Intel CPUs.
I know full well what Iim saying here, and this is, after all, an editorial. Thatis where I get to explore possibilities. In this case, the exploration is the result of a phone conversation I had recently with a former Apple employee for whom I have great respect. We asked ourselves two interesting questions.
- What would be the conditions under which the licensing of Mac OS X makes sense instead of being lunacy?
- If those conditions were met, what would be the impact on Microsoft and the PC business?
So far, licensing Mac OS X on other hardware has not made sense because it would damage Appleis hardware business. Just at the time when the clear benefits of Mac OS X over Vista have never been clearer, and Mac sales, year over year, are booming, it would indeed be lunacy to risk that growth by allowing customers to buy Mac OS X in the box for US$129 and run it on PC hardware instead of forking over perhaps nearly $2,000 for a loaded iMac or MacBook Pro.
Apple is so vehement about protecting their right to license Mac OS X on Apple branded hardware only that the company is aggressively litigating against Psystar and expects to win. Winning in principle, though, does not preclude Apple from changing their licensing in the future.
As we know, nothing stays the same forever, and sensing key tipping points is what CEOs get paid to do while they gaze out the window of their business jet at 35,000 ft.
The Tipping Points
In fact, sizing up the possibilities, there are several tipping points worth exploring that could lead to such licensing.
1. Product Evolution. Despite the Macis growth, about 10 percent of the U.S. market now, a time might come when technology developments outpace the growth in Mac market share. They could arrive sooner than a long sought and wishful return to 25 or 30 percent PC market share. Extrapolating market share gains in the near term is fruitful, but using it to indulge in wish fulfillment is also lunacy.
Eventually, other products in Appleis lineup will earn a larger and larger share of Appleis business. Apple would like nothing more than to leave the rest of the PC industry behind with advanced mobile devices, new metaphors, a patented gesture language and a hearty farewell to the WIMP interface. When personal computing becomes predominantly mobile computing, sitting slaved to a desktop PC will be a thing of the past. I am reminded of the TV show, Life on Mars when I see the policemen sitting at their typewriters. How did we live like that?
There might come a time when, even though the Macis market share is peaking, its overall share of Appleis revenue warrants a change, with some attendant risk, that might place enormous stress on Microsoft with desirable consequences. That risk would be mitigated by Appleis multiple revenue streams, cash on hand, brand and Windows problems.
2. Differentiation via Hardware Last Friday, I wrote an analysis called, "Appleis Need for Speed Has a Mission, and itis Not Supercomputers." In it, I proposed that Apple could be about the business of designing auxiliary chips, ASICs, for the Mac that canit be purchased on the open market by competitors. These chips could be used to speed up MPEG coding and decoding, memory and storage access, faster boot ups, and so on. For the first time, observers who complain about the Macs being more expensive will be forced to admit the reality of that extra speed.
If Apple could achieve a position whereby Macs are demonstrably faster than their PC counterparts, it might make sense for Apple to license a simplified version of Mac OS X for PCs, that is one that doesnit have access to the custom ASICs. Customers could chose from Mac OS X on a plain-Jane PC -- which would be incremental revenue -- or continue to opt for the style, industrial design and speed of genuine Macintoshes.
3. Differentiation via OS. Apple has a history of breaking with the past in order to preserve degrees of freedom. The changes are incremental, developers are warned and customers gripe. Yet Apple always seems to make it happen. Apple could apply the same reasoning to a future version of the OS. Just as Snow Leopard in 2009 may leave the PowerPC behind, a future version of the Mac OS X could be tied to Mac hardware in such a way that the tangible benefits of Macs in terms of performance, not basic functionality, would be available only to Mac buyers. PC users licensed for Mac OS X would have a taste of the possibilities, but remain hungry for something better. In fact, specific apps in specific target markets could reap the the benefits, provided key developers seize the opportunity.
In addition, Apple has sought patents on OpenCL, a technique that makes the GPU available as an additional core, and GrandCentral that makes threading more transparent to developers. Those technologies could be reserved for Mac OS X on Apple hardware.
Estimating the Tipping Point
Estimating the Mac OS X market share necessary to license it would be a tough judgment call. The more PCs that run Mac OS X, the greater would be the halo effect for real Macs, iPhones, iPods, and future products. An increase in mind share and market share of Mac OS X would have to be delicately balanced against the possible loss in Mac sales thanks to thrifty buyers who want the stability and security of Mac OS X without paying for access to Appleis entry point prices for their Mac hardware.
This necessary market share might be analyzed by a simulation, perhaps something more sophisticated than a Numbers spreadsheet, but less than a 25,000 lines of C code. The simulation would have to take into account:
- The rate of decline of the classic Mac business, as a percentage of revenue , as new mobile technologies and display technologies from Apple supplant it.
- The percentage of PC buyers who would buy Mac OS X for their PC, then later migrate to a Mac to achieve the speed benefits vs. the loss in Apple Mac hardware sales.
- The halo effect of PC customers using Mac OS X who would be more likely to buy an iPhone, iPod, Apple TV, and Apple peripherals.
The goal of the simulation would be to determine at what point it makes sense, in terms of Mac market share and percentage of revenue, to license Mac OS X. One can only speculate what that number might be, but my suspicion is that the necessary market share is far less than 50 percent, and might be as low as 25 percent.
Picking the Right Partner
Of course, no simulation can guarantee 100 percent accuracy at predicting the market. As a result, it would be wise for Apple to contain possible early and unexpected damage by restricting the license, as it has the right to do, to a single PC maker and platform.
Such a restriction would have benefits:
- If the model were wrong and Appleis Mac revenues dropped too fast, the venture would have the benefit of being restricted to a single PC maker.
- The license could be offered only for desktops, not notebooks -- which constitute two-thirds of Appleis sales.
- The duration of the license could have a negotiated time limit, long enough for the partner to obtain advantage over the competition, but short enough that Apple could escape relatively undamaged at the end of the contract if unforeseen conditions arose. The Apple agreement with AT&T for the iPhone is that kind of example.
- If the venture is successful, other PC makers without such a license could suffer a competitive disadvantage that would help Apple and its partner. That would result in accelerated market share gains for Mac OS X by Apple and its partner.
The Impact on Microsoft
There are several movements today by PC makers that reflect a business dissatisfaction with Vista. Netbooks running Linux for under $800 that can surf the Internet and read e-mail are getting traction in the current global economy. Hewlett Packard has been working on shells for Linux and auxiliary software that assists customers with faster access to their e-mail and Web under Vista. Vista (and Windows 7) have the inherit disadvantage of being designed for business and strain to meet the needs of home and student users.
As a result, a populist movement by consumers to Mac OS X, on their (desktop) PCs could slow Microsoftis growth, raise investor concerns about the direction of Windows 7, and force Microsoft into making critical decisions which, if misjudged, could seriously damage the companyis economic outlook. Enticing Microsoft into a critical failure path would be handy.
While that is happening, Apple would continue to take a multi-threaded approach to its marketing:
- Use the "Get A Mac" ads to continue to emphasize the problems with Windows for the consumer.
- Incite PC users to switch to a better OS on certain PCs.
- Market the speed advantages of Macs over PCs at the same price points.
- Sow seeds of dissension amidst the PC ranks by allowing only one partner to gain a competitive advantage with Mac OS X. Of course, that PC maker might incur Microsoftis wrath, but any PC vendor is in business to sell hardware, not OSes. That would be another element for a simulation: how much would Apple and its partner gain weighed against Microsoftis wrath -- somewhat constrained now by the U.S. Governmentis antitrust agreement with and oversight of Microsoft.
One of the many ways for Microsoft could exercise its wrath would be the cancellation or phase out of MS Office for the Mac. Apple has been covering its bets in that area as well with iWork. In the past, canning MS Office for Macs would have been a brutal blow to Apple. In 2009, it would simply make Microsoft look desperate, open more doors for OpenOffice and deprive it of a valuable revenue stream.
I donit have all the answers here. But just like Appleis migration to Intel CPUs, there comes a time when market conditions and prior, unsuccessful strategies dictate a fresh way of thinking. Alfred North Whitehead once said that the art of progress is to preserve order amid change and to preserve change amid order. I think that way of thinking applies here.
Watching for critical, enabling conditions is they key to remaining competitive. It may be that the time will never be ripe for this tactic. Even so, such a scenario is interesting to ponder and watch for.