April 11, 2007
The future of Apple: OS X
Yesterday, I wrote in support of the theory that Microsoft is no longer relevant in driving the computer industry forward. One of the points that I used to buffet my argument was "that in the age of web-based applications, the OS that you run is largely irrelevant". To put it another way, the idea of selling a computer operating system in a box for some sort of profit is an idea that is on it's way out.
I think that Apple has figured this out, and rather than trying to rest on their laurels and wring the maximum amount of profit out of their old business model, I believe that they are innovating instead.
As evidence, let's examine a not-related-to-Mac-OS-X bit of news that happened earlier this week. On Monday, Apple announced that they have sold over 100 Million iPods. While in and of itself, this announcement has many implications for the future of music and media (and of course the Zune, which is looking more and more screwed by the minute), I want to focus on something else that I noticed in the press release.
At the end of every Apple press release, they have some standard boilerplate text, which is meant toot Apple's horn about all of their great accomplishments. It is normally the same thing every time, and usually looks something like this:
"Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning desktop and notebook computers, OS X operating system, and iLife and professional applications. Apple is also spearheading the digital music revolution with its iPod portable music players and iTunes online music store." (emphasis mine, from "Apple Unveils New iMac with Intel Core Duo Processor")
In the 100 Million iPod press release, however, this boilerplate text was changed slightly, and now looks like this:
"Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and will enter the mobile phone market this year with its revolutionary iPhone." (emphasis mine)
The main change between these two passages that I wish to highlight isn't the iPhone, but rather the fact that in the newer passage, Apple has de-emphasized the Macintosh. It is a small change, but important nonetheless. I also want to highlight the fact that in all of Apple's press releases since July of 2004, they call their operating system "OS X", and not "Mac OS X". This change has been noted before (most recently during the iPhone announcement), but I find it interesting that Apple has been using the "OS X" moniker publicly since 2004.
What I think that these changes signify is that Apple is dealing with the commoditization of the operating system in a fairly novel way. Instead of divesting themselves from their OS, by either open sourcing it or selling it to a 3rd party, Apple is instead moving OS X into the core of the company. Even after the iPod became a huge success, the core of Apple was the Macintosh - that was at the core of the "digital hub". Yet, now we are seeing the Macintosh being de-emphasized, in favor of OS X.
I believe that Apple has had a very key insight into the future of digital devices. In the "old days", the way you made any digital device more capable than a stop watch was to start off with an embedded operating system. Something that was built from the start to be small and efficient, both in terms of memory utilization and CPU requirements. This is what Microsoft has done with Windows CE - which isn't really Windows at all - it has a totally separate kernel from the Windows NT line. However, when you start with a small OS that has limited features, so that it can run in a limited space - it is very hard to build a "next generation" digital device. I'm talking about a device that can play back media files (audio, video), multitask, and provide robust networking requirements.
Instead of playing the same game that Microsoft and others are playing (starting with a small OS, that you make bigger with newer functionality), they did the reverse -- they stared big, and got small. They "shrunk" OS X down to the point where it could run efficiently on an embedded device (which, if you know software engineering at all, then you know that this was a fairly amazing accomplishment). This means that Apple is going to be able to make digital devices that accomplish amazing things, all by leveraging their investment in OS X.
Going forward, Apple's product mix is going to look like this:
OS X at the center of Apple's world (also in PDF, OmniGraffle)
On the left-hand side of my diagram, we have the devices Apple is (or will be, come June) shipping that are powered by OS X. On the right-hand side, are all of the things that Apple could build, now that they have a sufficiently powerful embedded operating system.
What's in it for Apple? Not only do they get to continue to leverage their investment in OS X, but they will also be able to run circles around their competitors (Nokia, Motorola, Palm, RIM, Microsoft) - none of whom have such an advanced OS. In addition, as the market for personal computers levels off, Apple has found several new revenue streams for their OS division. Finally, by virtue of making OS X, as well as several of its premier applications (think iLife and their professional apps), Apple is sitting on the premier Cocoa development houses in the entire world. Going forward, they will be able to leverage that incredible engineering talent to make new and amazing applications for their embedded OS, extending the innovative hot streak that they have been on for the last decade.
Wow. Now, more than ever, I can't wait to see what the future holds for Apple.
-Andy.
Nice post, Andy. I think WIndows fell apart partly because of the number of combinations of devices it had to be able to support as it grew. Apple has limited this by controlling the core hardware, but I'm not sure they can limit it forever. Either way, the more platforms they have to keep going simultaneously with OS X, the harder it will be to get full test coverage.
I can see google docs and some other stuff displacing MS Office for home users or people in a kiosk but what about huge corporations that don't trust external companies to host their data or at least have the potential to look at it? I can't see a situation in which a corporation would want to move from a locally installed editor to a web app. Not to mention that massive investment in Windows in most companies and the migration costs and fears involved. Is the home user who wants to play with apple TV enough to make Microsoft irrelevant or is that just some Dvorak style lunacy?
Posted by: Mark at April 11, 2007 11:55 AMMark,
A couple of things. I agree that if a company (large or small) has a massive investment in a computing solution (Windows + Office, for example), then there is going to be a lot of inertia against switching. But don't confuse this with the thought that switching will *never* happen. There are valid business reasons for a business to change its IT infrastructure. For example, a competing product might offer a required feature, a new product might have been invented that increases worker productivity, or Microsoft might have upgraded Windows and Office and now the versions being used are no longer supported.
Web applications tend to be compelling because they are cheaper to operate, and easier for employees to use than traditional applications. As evidence that this shift is already occurring, I would like to point at Salesforce.com:
http://www.salesforce.com/customers/
If you look at that customer list, you will see that there are some fairly large companies that have outsourced their CRM applications (and consequently all of their data) to Salesforce, and their servers. The reason why they are switching is because Salesforce offers them greater functionality that traditional applications than SAP, at a much lower cost.
Turning to Microsoft Word, I agree with you that companies are unlikely to start switching from that to Google Docs in droves. However, Wiki's offer a level of collaborative functionality that Word cannot match. Thus, I *can* see companies switching away from Microsoft Word - not to a competitive word processor, but to an entirely different sort of application (a Wiki) which increases worker productivity. Check out this BusinessWeek article for how Wiki's are already conquering Corporate America:
-Andy.