Apple's Leopard: Closer to the Enterprise but Still Too Far

Thursday Jun 14th 2007 by Rob Enderle
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Apple's attempt to build its enterprise business faces many obstacles - most created by the company itself.

I often wonder why experienced companies focus so much time and resources on Enterprise sales. I know why inexperienced companies do this but a lot of firms, and I would include Apple in the mix, probably don’t have to. The reason firms like to sell to enterprises is the commission check to the sales rep can be legendary in size. I’ve seen reps do one of these sales in a year and make enough to take the rest of the year off. I’ve also seen enterprise sales reps consistently make more cash (though not options) than the CEO they work for. But, having looked at the numbers, I know that much of this business is not profitable for the selling company.

That is a serious problem because, unless the selling company is incredibly large and diverse like, say, IBM, HP, or EMC, it’s very difficult to sustain an enterprise sales effort. The margins are very tight, the expectations (read: costs) are relatively high, and, if you screw up, the results can often be material within a month or quarter. Lots of risk coupled with very little profit, not exactly your Harvard Business School best test case.

Be that as it may, companies like Netscape, Sony, and Google who should (or should have) known better, continue to chase that market, and Apple is positioning to once again go after this elusive goal. But, going after the enterprise has little to do with the product; it has everything to do with the approach and having enough patience and/or money.

Apple’s Historic Problems

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Apple faces three critical weaknesses when it comes to Enterprise sales, though they just may have fixed the fourth. (And some argue passionately there is a fifth, prejudice against Macs, but I won’t go there.)

The first is they don’t partner or share well. Enterprise buyers want their vendors close, and when they aren’t, customer satisfaction and vendor displacement events occur very frequently. They demand road maps and want some say in future products, and if it is a government account, actually want some say in your employee mix, security, and quality metrics. Particularly if they are government account, they demand most favored nations clauses in contracts which assure them the best price and even want to constantly check your books as a result. Finally they demand an impressive amount of support, something Apple is apparently not even equipped to supply. Apple is far from the most sharing company and typically won’t even acknowledge most of these demands.

The second is enterprises have policies that make it very difficult to sole source anything. They want competitive bids because without them they can’t show auditors they actually did get the best price and that nothing underhanded was done for the vendor to get the business. Originating from the belief that there is active bribery (not as uncommon as you would think) in the vendor bidding process, a sole source agreement is an immediate audit flag and enterprises want vendors who can bid against each other. Apple, after the first bid, is the only vendor who supports the MacOS, nearly assuring a sole source arrangement after the first year (which can be bid competitively).

The third is trust and this has been a big problem for Microsoft for much of this decade. Enterprise IT likes to know that, if a vendor promises to do something, the vendor will remain behind it. Apple was in the enterprise once and abandoned the market, embarrassing significantly their enterprise supporters. Trust is hard earned and Apple has a long way to go before getting back the trust they lost when they abandoned this segment.

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The fourth is interoperability, or, more accurately the non-compliance with shop standards which are currently mostly based around Microsoft’s platforms. With Tiger, Apple made broad strides to address this weakness and the changes were well received by the businesses that still used, or subsequently initiated, Apple use. Interoperability, interestingly enough, is now one of the primary Microsoft goals brought fourth out of their own Developer’s conference. The MacOS is, at the core, UNIX and a great deal of effort has gone into making UNIX work with Windows and Linux. If Apple could leverage that, solid progress could be made here.

Apple Progress

It is this last area where Apple showed solid progress at their Developers Conference. With networking interoperability improvements, a Leopard-based Mac should more easily integrate into a Windows shop, and has always worked reasonably well with UNIX and Linux. It comes with Bootcamp built in, which should help with at least some of the custom Windows applications. However, I expect most IT shops will prefer either VMware of Parallels as better (read: more compatible) alternatives as both have been historically better.

Microsoft’s own interoperability work targets UNIX and Linux and should dovetail nicely with what Apple is doing, suggesting there may be some unintended synergy in both efforts. Kind of like two competing train companies starting at opposite sides of the mountain and being surprised when the tunnels met in the middle. Granted, in this example there would likely still be some gauge problems but the tunnel would be done way ahead of schedule. The same things could happen here and with a maturing Vista also going in this direction we could have a level of compatibility between both platforms that has never existed before.

Apple Servers: I Know Server Vendors and Apple is No Server Vendor

Given we have dropped into an election year here in the States forgive the reference to the old Dan Quayle debate (still a kick to watch). Apple Servers, unfortunately, remain a non-play in medium and large business outside of a relatively small number of Apple shops (though a number have shown up running Linux).

Apple never really understood you need to embrace the analyst community to move servers, something AMD did to move around Intel by hiring one of the leading Gartner analysts, Kevin Knox, to lead the effort. While it’s nice to ignore the rules, I think AMD has done a vastly better job penetrating the Enterprise than Apple has in vastly less time simply because that company played the game, and Intel is just as powerful in AMD’s space as Microsoft is in Apple’s.

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If none of the analysts take them seriously the large business buyer won’t either and they’ll never be more than a small niche player until they step up to what is required in this market. If they are serious about servers they likely should just buy Sun and use them to leapfrog into the segment (it wasn’t that long ago that Sun looked at buying Apple and concluded the company, at a fraction of its current value, wasn’t worth it – bet Sun would like to get a do-over on that deal now).

They may be trying to force servers into some shops but that is incredibly dependent on the iPhone’s success which is anything but certain From Lisa to Today

Apple is making some solid progress but they still don’t fundamentally understand the large business and enterprise market, which is kind of funny given they are a large enterprise themselves. But, from Lisa till now, Apple has refused to play the game as it needs to be played and until that changes, product progress alone simply won’t close the gap.

They can continue to do well at the low end of the mid-market and with small business though, and maybe, that’s where they should remain. Generally it is more profitable and the large “enterprise vendors” haven’t done that well with this end of the market so, even if it was intentional, it wouldn’t be a bad strategy.

I guess I’m saying, if you expecting Apple in the enterprise anytime soon: don’t hold your breath. In the mid-market or education (I’m getting a lot of folks asking if they should buy their college bound kind a Mac all of a sudden) they are looking vastly better though, and who knows, they may hit the enterprise yet.

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