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The history of Apple doesn’t bode well for its future

By March 27, 2009 March 30th, 2009 16 Comments

Let me start with an admission – I have never been an Apple fan.  My issues stem from my time working at my dad’s computer rentals business – we used to rent computers for as little as one day and were constantly moving them around the country, changing memory configurations, swapping out hard drives and installing and un-installing software – and the Macs used to break all the time.  The build quality was horrible.

At the same time I also started to take offence to their insistence on sticking with MacOS as a proprietary operating system when the rest of the computer industry was converging on DOS/Windows.  It was around this time that IBM effectively gave up on OS/2.

Being a Mac owner wasn’t enough to change my mind – the first computer I had when I went to Uni was an SE/30 (a device that I’m pleased to see was iconic enough to get it’s own Wikipedia page).

So, ten years or so later, I disliked the idea of being forced to use iTunes and have struggled along with generic MP3 players instead of buying iPods (although I’m happy now with my music on an SD card inside my Blackberry).

The arrival of the iPhone and before that the latest generation of Apple Laptops started to change the equation though.  On the laptop side the build quality problems were history and the reliability of the software is now what puts them ahead of the PC, and on the iPhone side here was a beautiful device that finally delivered on the promise of the mobile web.

It is worth dwelling a little on the astonishing success the iPhone has had since it’s launch in June 2007.  First there is unit sales, in the 21 months since then Apple has come from ground zero in the mobile phone market to the third largest player by revenues (behind Nokia and Samsung), having sold 13m units by October last year.

Then there is the app store – since the firmware update of July 2008 which effectively opened the App Store for business, third party developers have written 25,000 officially available applications with 800m accumulated downloads, as per wikipedia.  (It took Windows Mobile nine years to get to this number of applications.)

Yet despite all this I believe their current dominance of the Smartphone market (at least as defined by momentum and mindshare) will be fleeting.

History has taught us time and time again that open wins, and Apple just doesn’t get that.  It cost them dear before and I think it will do so again.  Worse, I doubt that Jobs will rescue them a second time.

The reasons for Microsoft’s success against IBM’s OS/2 are instructive here.  The following is from Wikipedia:

Much of its success was because Windows 3.0 (along with MS-DOS) was bundled with most new computers …. Microsoft favored the open hardware system approach that contributed to its success on the PC; IBM sought to use OS/2 to drive sales of its own hardware.

There were of course a number of other factors, but these are the most important.

In the phone market, as with PCs, the hardware over time will become commoditised and it will be the software that makes the difference (as noted above one of Apple’s USPs on the PC side is now the superiority of it’s software).  Right now the number of apps available in the App Store puts the iPhone way out in front on this measure but I doubt that will last.  Rather I think that Google’s Android will soon become more attractive to developers because of a) the number of devices they can reach and b) Apple’s track record in abusing it’s developer partners.

It is in fact this last point that prompted this post.  As you may have seen Apple yesterday announced a refund policy that is to say the least developer unfriendly.  From Techcrunch:

We reported yesterday about Apple’s alleged delay in payments to iPhone app developers, but there is more alarming news from iPhone developers about Apple’s refund policies. Apparently, if iPhone users decide that they want a refund for an app (users can get a refund within 90 days, according to Apple  policy), Apple requires that developers give back the money they received from the sale. But here’s the kicker—Apple will refund the full amount to the user and says that it has the right to keep its commission. So the developer not only has to return the money for the sale, but also has to reimburse Apple for its commission. Apple charges a 30% commission on all paid apps sold through the App Store.

And this comes on top of Apple blocking apps offer functionality they regard as their’s to deliver like  email or music, or which they determine to not be of requisite quality, and of having a track record of treating their developers like dirt.

Once other smartphones start to get close to the iPhone in terms of gadget appeal it is my contention they will start to win out in the market place because there will be more and better software available.

Further, I think the ‘closed’ mentality is so strong within Apple that they won’t respond well, instead clinging to the belief that by more fully controlling the user experience they will ultimately deliver a better service.  AOL anyone?

To finish it is worth noting that despite their great start, and being the third largest player in the mobile phone market by revenues they are still only a small part of the mobile market by devices sold – 1% of worldwide cellphone sales and 17% of smartphone sales.

These positions are not exactly unassailable.