Apple and the Jaws of Intel
Published on 8 Aug 2005 at 11:24 am |
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Filed under The Cargo Cults of Business, Total Quality Madness, Pathetic Success, Brain Trust, Winners and Losers, Apple Computer and Macintosh Related, Business and Corporation Related, Information Technology.
Most of you catching the title of this article via pings or RSS probably think this is going to be a rant denouncing Apple’s decision to switch to Intel processors. A rant it may be, but that’s not where I’m going. I’m very hardware agnostic; it’s the software angle that continues to concern me in this latest Apple escapade.
Now, I’m the first to admit positive bias where Apple is involved. Where computing is concerned, they make the best product. IMNHSO, the best got better with the switch to OS X. My desk at home has held something with an Apple logo on it since I was loading BASIC programs from my cassette recorder, and I was fan and fool enough to even boast an employee badge for a while. But if I’m such a devout acolyte, what exactly is my problem with these folks? Well, like the I.T. industry back when Macs were still a going concern in business, my problem isn’t with what Apple does. It’s with what they don’t do.
At Cargo Cult, Apple is our darling, our poster-child, our shining example for just about every award we can give, from Pathetic Success to Brain Trust. Sure, Apple is top-of-the-tops in product design. Sure, the iPod is hot stuff. Sure, they are techno-trendsetters par excellence, a veritable sensei to the IKEA’s and IDEO’s. But that’s all window-dressing. It’s all bamboo airframes and coconut-shell headphones. Because none of this is in any way relevant to Apple’s core business, and never has been. All the flash plastics, fly icons, and grinning CEO’s are just a huge coverup for their failure to target and fight for core computing platform marketshare. And, what’s even more staggering– it works! As long as the eye is on the CEO reaching into his black top hat for another rabbit, nobody really pays much attention to the numbers. They are the paragons of personality, they are the sultans of swing, they are the undisputed rulers of all things form over substance. Their fancy footwork can make an entire industry think they actually know what they’re doing. They’ve done it many times before, and once again, we’ll get a ringside seat for the latest encore performance.
I am speaking of the steadfast refusal to just target Redmond and start in with the broadsides. This is the core problem that all the glitz and glitter keeps covering up: Apple just won’t try and take down the neighborhood bully. Now, I don’t know whether Apple actually thinks the glitz and glitter are a product of some sort; that seems like a mistake an advertising company would make. But time and time again, Apple has been placed in a position where they can absolutely conquer the personal computing Universe, and every single time they have backed away rather than duke it out with Gates and Co. Whether this is incompetence or cowardice is a darn good question. Certainly, Apple’s consistent mismanagement of this opportunity has been done to death across the length and breadth of the Net. My point is that there is a pattern to all this madness, and it is about to repeat itself.
Ever since John Sculley (may Wall Street rest his options) was at the helm in the early 1990’s, Apple has had brief epileptic fits where it will refer to itself as a "software company." Mind you, the fits never last long– at least, not for any given CEO– but sooner or later they all seem to do it. Now, most of us jaded Mac cynics regard these grand mac episodes as sudden lucid insights into Apple’s actual situation. For a moment, the CEO is able to apprehend the true state of affairs: Apple doesn’t make boxes, they make an operating system. More to the point, in the grand language of the advertising sorcerors, they offer an unbeatable experience.
But as we’ve seen with Jobs and the Attack of the Clones, the mania quickly passes, and the focus of the CEO– and his lackeys– returns to making boxes that are the very embodiment of flash and glitz, the no-go showboats of the computing world. The iPod is a hit, no argument there. But how else could we get a cheese-grater aluminum frame that looks like it escaped from a WWII B-17? Of course, the design world seems to eat this stuff up, a case I’m sure of the viral engineers somehow embracing the notion of memetic contagion at a personal level. But scrape off that whitewash and what do you have? A Tower of Power that has two hard drive bays. Two! No PC tower manufacturer would even dare to try such a stunt in a battleship of a case like that. There would be a revolt. In the PC world, you get a full-size tower, you expect to be able to cram every spare cubic inch with disk drives. And you expect the cooling options to support that. But not only does Apple cut their installed base loose by going to a SATA-only motherboard (so you can just dump all those IDE drives on the floor), they have the cheek to expect high-end graphics work– which eats disk space like popcorn– to either subsist on two internal drives, or go hang Firewire.
This kind of nonsense throughout their history is why Apple shouldn’t be building boxes. It’s tempting to suggest that Apple just keep a high-end box design group off in a corner somewhere, let the clone warriors do their thing, and start pressing CD-ROMs by the millions. But I don’t think they’d be able to resist the crystal meth that box building clearly is for them. And, congruent with the drug analogy, that’s a dead-end road of dwindling market share. The PC world has shown, conclusively, that reference-standard clones are the way to keep things moving forward on the hardware front. And users want things that are moving forward. Users with even the least need for speed aren’t going to pay premium kilobucks for a Mac when they can get an AMD-64 that buries everything else out there for a fistful of dollars. The PC’s advantage in hardware evolution (not just the capabilities, but the ability of the PC’s clone-based market to rapidly evolve those capabilities) has been seriously hurting the Mac. As part of Apple’s literal change of heart, the redoubtable Register offers a substantive exposition of the current landscape. Apple is at last in a position to just step off the taffrail of the crushing commodity hardware market and swim off into a golden sunset of OS and application profits.
Which, to no end of irony, leaves us with Apple once again in a position to conquer the computing universe. And once again ready, I’m sure, to do their duty to Redmond and muck it up.
I am of course referring here to Apple’s ability to simply port MacOS X to PC hardware. To get it through their head, once and for bloody all, that they are a software company. That they make operating systems and applications, not pretty little boxes. Embrace the 60% margins that go with such a destiny, and cast the commodity forecasting aside. Of course, I’m hardly the first to spot this possibility; I’m even sure I’m among the last to articulate it. For instance, the folks over at The Unofficial Mac Weblog have an interesting take on what Dell selling Macs could mean. As expected, they immediately apprehend that this is (yet another!) chance for Apple to conquer the Universe. Every Mac advocate on the planet has been convinced since Day 1 that if you pit MacOS directly against Windows on Intel hardware, the wave of defections will be staggering. The only thing holding back the flood is Apple’s artificially high hardware prices. As we saw, all too briefly in the clone wars, once you get the hardware cost down, the defectors will come. And if you could dual-boot Aqua with XP? My gosh, there’d be a stampede all the way to Apple’s boardroom. There’s no doubt about it: Apple is once again in the grip of the Jaws of Victory.
And, precisely because they have such a chance, I’m convinced they’ll miss it, once again snatching away defeat. Cowardice against Redmond is a possible reason, but with such a history of missed boats, I think at this point it’s pervasive in the corporate meme pool. Apple just can’t conceive of itself being bold enough and successful enough to take on Microsoft and win, no matter what it takes. Especially when what it will take is giving up those glitzy boxes. It has become conditioned as an institution to take the table scraps Redmond throws it, and not to do anything to disturb that status quo (presumably to prevent Microsoft from cancelling Office for the Mac and causing everyone to switch to Open Office instead). To go to our site analogy, Apple is now so entrenched in the building of their bamboo airframes that they cannot suffer structural aluminum and aeronautical engineering to come into existence lest they imperil the arrival of the sacred cargo of "like, wow!" design.
However, Apple’s 8th chance may not be forthcoming at all. As noted in The Register, Apple’s precipitous switch has got an Osborne effect going that could leave them falling back on their massive cash reserves. Had they planned with their eyes open to just abandon hardware manufacturing, the switch could have been pretty painless. In fact, they could have kept cranking out PPCs under their logo and let Dell (or Sony, or Lenovo) take over the Intel line. It’d be like, the switch is coming, but meanwhile, you can get a PPC that you know is a better machine. If you want something cheaper, you can buy the Dell and Apple gets the software revenue. You can’t say the model doesn’t work; all things Redmond say otherwise. As it is, Apple has defined their own Scylla and Charybdis to navigate. Unfortunately, as in the past, the installed base is along for the ride; I doubt we’ll see Apple change its ways and start responding to user community demands at this late date, no matter how vocal, legitimate, or widespread. (Just ask the erstwhile MacIS forum about Apple’s responsiveness to industry professionals).
For the sake of all of us Mac users out here, who are all desperately hoping that this time Apple will get the transmission downshifted and start making some hay in the PC market, I really hope Apple’s board decides to wake up and smell the whitewash. Mandating that Jobs get OS X ported to a PC clone platform– whether CHRP-like or not– is the most sensible move at this point for any advancement of market share. And if Jobs refuses, it’s time for Apple’s board to remind him– and his successor– of who is really in charge. The moment a board starts thinking it’s CEO is irreplaceable, they’ve embraced a downward spiral of stagnation. Of course, that’s historically not been a problem for Apple. So here’s hoping they at long last decide to throw their weight at the right cause at the right time. Two years from now, the hottest thing running on an Asus motherboard may be OS X. But unless Apple gets their act together, ten years from now, the hottest thing running on any motherboard is going to be KDE, and Apple will be in a face-off with Fossil and Casio in a mall kiosk near you…
From Firefox on OS X,
Paul
-- Paul
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August 8th, 2005 at 11:08 pm
And a big “You guys rock!” to our new friends over at MacDailyNews, who have picked up our article. Way to go, MDN!
August 9th, 2005 at 2:41 am
[These comments were originally posted as two due to length limitations on MacDailyNews. Apologies for any variances between this content and MDN’s.]
Such flattery just leaves me breathless.
There are always robust rebuttals to any proposed execution strategy in the PC industry. I’ll try to note the salient ones raised here; my apologies if I’ve missed anyone.
First, though, to a particular point: Yes, I understand a “whole widget” sales model. The whole contention of my argument is not that Apple can’t operate in this model (they obviously can), or even turn a profit. It’s that such a model does not serve their long-term interest. And, you can thank Clayton Christiansen for my views on this one; vertical markets are notoriously susceptible to disruptive technologies. And that goes doubly true for anything in the high-tech sectors.
It’s a common sentiment among pro-Apple folks that Apple is engaged in an enlightened mission on behalf of its user community. You know, the whole 1984 thing. Well, the enlightened mission is gravy. The meat and potatoes are keeping the balance sheets in the black.
Some have pointed out that there is nothing wrong with a “Steady State” mode of execution in which Apple keeps its corner of the PC universe sacred and lets all the Windows licenses slowly be consumed in the flames of open source software. The classic “boutique manufacturer” model. And in most ways, I agree with this; it’s a great trick if you can pull it off.
But the reality of the PC market is that the average consumer (not the informed and enlightened crowd that have already or always chosen Mac) buys primarily on price, with performance as the secondary criteria. The markets unequivocably show this. That being the case, I am taking it as read that without a price/performance offering that directly matches the Dells, Sonys, and HPs, Apple will continue to lose marketshare. However, to the extent that disagreements with my rationale are raised, these assumptions are the points where they should start in order to be logically robust.
Moreover, as Viridian quite accurately notes, at the end of the day Microsoft will not simply “allow Apple to exist”. They’re the Borg, and nothing less than a Microsoft logo will do. And if Microsoft doesn’t target them, Dell, HP and Sony will. “Getting as much as you can” has been roundly derided in this thread. But that’s the way the markets work; that’s what corporations in a capitalist economy do. It’s literally their job. They don’t call it “dog eat dog” for nothing. Congress can change those dynamics. Apple can’t.
I seem to have run afoul of a second disconnect in the matter of Apple trying to support every Intel PCI card and USB toenail clipper in existence. This happened because my use of the word “CHRP” in my original post got missed. For those of you joining the program late, CHRP means “Common Hardware Reference Platform.” It’s the standard Apple forced its clone makers to adhere to. It’s equivalent is desperately needed in the PC world (and I laugh in the general direction of Plug-n-Play). So, to clearly state my view, I assume that hardware reference standards are not only desirable for Apple to be able to effectively offer OS X on third-party Intel boxes; I suggest that they are essential. My apologies for not expanding on that point initially.
A third area of slippage is in the matter of those historians who, rightly, have pointed out that Apple’s previous dalliance with a clone army didn’t go too well. The reason it didn’t go well, however, wasn’t because the clones weren’t selling. It’s because the Apple-branded and Apple-manufactured Macs weren’t selling. The reason the attempt faltered is an issue that I directly addressed: The need for a transition strategy to work through the shortfall of the switch to a bundled OS model and the closure of the hardware business. The transition may not have been well managed. But it’s wrong to think that “we’ll burn cash reserves to carry us through” is necessarily a bad business decision. It could easily be the right one, although I obviously prefer my alternative suggestion of offering dual-lines of Apple-PPC and clone-Intel boxes until the software sales are in place. But back to the previous attempt, the reason it didn’t work is simple: Jobs got cold feet. It wouldn’t suprise me to learn that he bounced Amelio specifically to return all that clone revenue to Apple’s coffers. He didn’t share the vision of Apple as a software company.
Fourth, many suggested that Apple actually plans to get OS X onto non-Apple Intel PC’s. That’s not a rebuttal of my argument, that *is* my argument. I just hope they actually do it. Timing, of course, is the big question. And the need for, or disregard of, stealth is the next one.
Specific responses in a subsequent comment.
AFN,
Paul
[Hopefully MDN will forgive me for hazarding two lengthy comments]
I’d like to move on to address individual comments:
Hammer, if you weren’t speaking in multiple sentences I’d detect a troll. At no point do I suggest Apple abandon the stewardship of reference standards so critical to defining “the Macintosh experience.” If that wasn’t clear before, I hope it is now.
Neil, I’m all for it. How do you suggest they build that marketshare against $499 Dell PC’s that will run rings around the Mini. *And* include displays and keyboards, as noted in the Register article I linked in my original article.
Synthmeister, you may have a point. While I don’t have my back issues of MacWeek handy, to say nothing of IDG and Dataquest reports, a substantive portion of the clone sales could have come from the installed base looking to go with more powerful machines for less. But this is not my memory from the trade press at the time. If someone has stats to prove me wrong, please, get ‘em out here.
Kenh argues that Apple is finally learning about marketing. I’d believe that if they ever reached the high school level in that discipline, that’d be enough to fuel a marketshare turnaround… were it not for the $499 price point I mention above.
Amis suggests that alerting Microsoft may not be wise. FWIW, I think that if Apple was executing such an approach, their actions would be congruent with what they are currently doing. But then, so would they be congruent for incompetence. Only time can tell us which it is, but this is a salient point.
Zupchuck, the only way Apple is going to play with open source is as a closed source application layer GUI. It may take OSS 10, 15, even 20 years to wear down the other closed-source OS’s. But like the ocean going after a mountain, it’s only a matter of time. This is the future Apple needs to address. This is the “threat” that’s coming.
Loganson, there’s a fly in your argument. You’re assuming the user base views 12-18 month OS upgrades as a good thing. Consumers may find this desirable. Traditionally, enterprise markets do not.
R (and mikaL), I have to call out your response directly. This is a very naive position, because it assumes reciprocity: If I leave them alone, they’ll leave me alone. But it’s the Japanese who have the right of it: Business is war. You don’t have the option of being left alone; there’s no such thing as a static market.
Mike Buonarroti: There’s only two kinds of people like you; the ones who work for Apple, and the ones who are going to work for Apple. Go get ‘em, tiger!
ndelc: You’re right, Apple may not want to take MS down. But I guarantee you, MS wants to take Apple down. Just as soon as they can dig a tunnel under the anti-trust regulators… Point the second, the switch from OS 9 to OS X wasn’t made possible because of Apple’s size. It was made possible because of their brilliant engineers, and the fact that their CEO realized those engineers needed to be empowered to do their job. Jobs’ insistence on getting the migration to OS X right is one of his many success stories.
Peter, your points are valid. Bundling is an essential part of any business strategy involving a transition to software/OS and third-party clone manufacture. I think that Apple’s clone sales– and by this I mean sales of clones that only run OS X, not OS X and Windows– would be sufficient to maintain their profits. Consider, currently they make 35% or so on a box. With clone manufacture, they make 60%. On the same box. Because now all the overhead of fiddling with the atoms is out of the way; it’s all pure bits. Customer support is a wash; that’s factored into the 60%. But you are correct, that might not be enough. This is why I think that for a pure software model
to really succeed, dual-boot capability on whatever is running OS X (presumably a CHRP-like certified architecture box) is essential. As for why disturb the status quo, see previous comments to that point.
Bob C, I’ve addressed most of your issues elsewhere already. However, note that by the time Apple bought NeXT, NeXTStep had been evolved to support color displays. Also, you’re assuming that Apple won’t go ahead and offshore the majority of their operations; I’d suggest a closer read of the annual reports, with particular attention to U.S. factory closings over the past several years.
John, well, the idea that Apple is actually in the hardware business, not software, is a completely different take. But that concept leads right back to the challenge of retaining and gaining marketshare against those $499 Dells. If you’ve got ideas on how to overcome that problem, now’s the time.
Thanks everyone for a great discussion!
Paul
Note: Cross-posted back [here]
August 9th, 2005 at 1:52 pm
[Another cross-post from the ongoing discussion over at MDN. We’re going to have to dump the registration requirement here at Cargo Cult; I’ve got discussion envy
]
Troubling the ether once more here at MDN,
I think odyssey67 makes better points than I did. First, his exposition of Apple’s need to switch to Intel (or lack thereof) is a more lucid treatment of that situation than my own. I concur with nearly all his points on that score, seeing the switch as somewhat precipitous. Absent some concealed reasons, such as media pressure or a stealth Ninja takeover of the PC market.
Second, he’s the first to bring up the very real possibility that the end game here isn’t general computing consoles, it’s media management consoles. Or at least, Apple’s end game lies there, effectively allowing them to exit a hostile market and summarily assume the throne in an area where MS’s lead race horse is the Xbox. Not that the Xbox isn’t bad, but can you imagine an Apple-designed game console? Ay caramba!
I’m not convinced that Apple couldn’t provide effective DRM on the PPC platform. But that’s based on a rational technology argument. Historically, Big Media hasn’t been known for favoring rational execution strategies. I can easily see the MPAA/RIAA insisting on an Intel architecture. You also gotta figure some smoke-filled room machinations in here among the various constituencies. The media, consumer electronics, and computing industries are in the classic Mexican stand-off from The Good, The Bad, and the Ugly. I can’t begin to speculate how that power struggle is going to turn out (except that whatever happens, the majority of consumers will probably get screwed, simply because of the political dynamics, which I won’t go into here since they’re off-topic for this site). But the bottom line here is that Jobs and Apple may well be executing a superior exit strategy; it’d be awesome to watch that unfold.
I’d like to focus in on the clearly very popular view that the quintessence of Apple’s success is that success for them is going their own way. ndelc (apology accepted, danke schoen
I think sums up the prevailing approach Apple has taken rather nicely: “The big difference between Apple and MS is their corporate culture. MS says, “Let’s make it good enough to market, and then force them to buy it.” Apple says, “Let’s make the best product we can, and hope they buy it”.
Although, I would contend that Apple’s vision has been solid enough that it’s not “hope they buy it”, it’s “expect they buy it.” In nearly all ways, Apple’s understanding of this dynamic– that there is a real and present market for Porsche’s and luxury sedans– is what has allowed it to astonish the world time and again with its successes. Heck, with it’s very existence, given how many analysts with “The end is nigh!” sandwich boards have been walking around Wall St. all these years.
To reiterate: I think the “we’ll just do our own thing, thank you very much” approach is highly meritorious. But there are these dogging questions with that approach, the chief of which is “how do you get everyone to leave you alone?” By which I mean, how do you dig a moat wide and deep enough to keep your marketshare from eroding in the face of pressing competitive factors.
I’m among the first to think that everyone buying those $499 Dells are idiots. (Anyone buying them for use as Linux or BSD servers excepted, of course
I am boggled, just boggled, at how long Microsoft has managed to maintain a stranglehold on the enterprise environment given the support cost burden that goes with running a PC-based shop. Between the viruses, the Exchange server outages, the service pack treadmill, and the perpetual re-installs to recover from corrupted DLL’s, I honestly don’t know how a PC-based shop actually gets any work done. It certainly seems like the bigger the PC base being supported, the more catastrophic the outages are.
ndelc makes the point that the world is basically on one operating system. A few years ago, I would have agreed, but I think the tide has turned for the better in the new millenium. I would contend that, thanks to the twin terrors of Apple and OSS, there are now basically two OS’s: Unix and Windows. Unix, in the form of Linux, has got Microsoft on the ropes in their cushy corporate gold mine, and it’s a joy to see. That leaves Apple, with Darwin/BSD, on the consumer front, where there is no question that they have the high ground in terms of a superior product.
But the market clearly shows that the vast majority of buyers, corporate and consumer, aren’t interested in getting the best, and aren’t even interested in managing to TCO. They are a herd of lemmings, and will go where the majority goes, even if it’s off a cliff. That being the case, how do you stop the erosion of your marketshare? We know that box buying per se isn’t the problem; it’s keeping developer support heated up for the niche platforms, so that I’m not crippled in terms of what I can do on a Mac vs. on a PC (modulo that downtime factor, of course
.
That’s why I like odyssey67’s points so well; if you can’t win at that game, change the game. But absent such a continental shift, I think it’s naive to think that Microsoft will just collapse under their own weight. They have way too many corporate slaves holding them up. I think sense and sensibility are slowly making their way into that environment, but it will be open source that takes down MS, not Apple.
Which brings me back to my thesis, which is that Apple needs a strategy now to a) defend it’s market position against MS and b) position itself for the open source battle to come. Seizing the consumer media throne sounds to me like a great way to go to make that happen, because we know that open source and big media don’t play well together. But meanwhile, you’ve got this erosion in the personal computer market going on. Apple may well succeed with every other product they make. But as the Mac drops off, they will become just another consumer electronics company, albeit one that can generate terrific heat.
I don’t really care how they escape the difficult position they seem to be in the PC market. I recognize that there are many who don’t see them in a difficult position. But as a Mac advocate (at least, that’s how I think of myself, obviously in this forum the mileage varies
, I would like to see the Mac desktop in a solid advance against MS. 15 years from now, I want to be on OS X 20 (though they will have undoubtedly renamed it somewhere along the line by then). My fear is that Apple is at a crisis point in the market with their switch to Intel, and all the expectations of price points and performance that will go with that. Here’s hoping I’m mistaken in my assessments, or at the least, that Apple’s seemingly infinite supply of rabbits for those hats doesn’t run out anytime soon.
Once again, thanks for a great discussion.
Paul
Crossposted back to The Cargo Cult of Business