business on the mac

The case for Mac Clones.

November 10, 2005 on 6:39 am | In Mac Business |

“You can paint it any color, so long as it’s black.”
Or, in this case, either white or aluminum.

The first Mac that I ever purchase was a Power Computing Power 100. One of the original Mac-compatible “clones” that were present in the early nineties. I loved that thing. It had a nice tower-case configuration, ran well and cost almost $1000 less then the “Real Thing”, aka a PowerMac 8100. From my vantage point as a user, aside from a slightly fuller feeling in the wallet, I couldn’t tell the difference between the Power Computing computer and the Apple PowerMac. Except I could. It seemed to crash less than the PowerMac’s I was using in the classrooms.

Things were pretty bleak though in those days for Apple. I remember reading serious articles about how Power Computing, Umax or Motorola should purchase Apple, just to keep the OS going. Well, we all know how the story worked out… Apple took back its prodigal son who then promptly kicked out the cloners.

Was canceling the clone program a good idea? I think so. Consider the situation. Apple had lost its way and was bleeding red ink so much so that the “death watch” of Apple was a perennial favorite activity for many. In addition, Apple’s primary source of revenue was its computer hardware, and by allowing other manufacturers to produce essentially the same hardware for a cheaper price, Apple effectively turned their once premium and “unique” computer system into a piece of commodity equipment practically overnight. For a company that lived on the fat profit margins of its computers, this was practically a suicide attempt.

Time has progressed and the world has moved on from the Mac clones. We’re now in a substantially different place then when OS 7.5 roamed the land and cloners swept up all of Apple’s marketplace with reasonable priced computers. The dominant computer platform are variations on Microsoft Windows. The new and energized Apple, with its powerful OS X operating system and well designed consumer and professional software and equipment, is still very much in the minority.

Yet hope remains, and now Apple has some unique opportunities to capitalize on its competitors missteps and changing market conditions to expand its market share significantly. Changes in how people use their computers have made the once invincible and indispensable Microsoft much less so, and the PC manufacturers that bundle Microsoft’s software are having problems of their own. Consider the following and you’ll see what may be keeping Bill Gates and Michael Dell up at nights.

• Microsoft Windows, and Microsoft in general, has been slammed in the public domain over and over again for its “swiss-cheese” attitude to blocking foreign nasties like virus, spyware and the rest of the general online rif-raff. Even my Dad knows he has to put on a firewall and buy anti-virus and spyware software, and he’s not particularly happy about it. The general public, as opposed to just the leading edge geeks, are now being regularly inconvenienced, and sometimes very expensively, by the issues of Microsoft Windows. Aunt Betty will only go to Circuit City to “de-louse” her machine for $90 so many times before wondering if there is a better way.
• Beige-box PC makers just can’t cut it financially. Do you really wonder why IBM sold their highly regarded and beautiful laptop (and desktop) production to Lenova? IBM isn’t run by dummies. The manufacturing, marketing and sales of a Windows PC is quickly becoming a penny-margin game. Dell is so successful because Michael Dell, wether by amazing prescience and skill, or by luck, built an organization that caters to exactly that game. Companies that used large profits from sales of PC systems just can’t count on that profit anymore. Gateway, Compaq and many, many other now-defunct PC makers have learned that lesson, or are learning it now the hard way.
• More and more people who use computer are now just “users”. They don’t want to fool with their computer to make something work. It used to be, especially back in the nineties with Windows 3.11 or 95 and Mac OS 7-9, that if you wanted to be really productive with your computer, you had to be reasonably well versed in the black-arts of system maintenance. Naturally, there are only so many people who are interested in these arts, and as computers became more and more integrated into our society, especially beyond the workplace and into the home as an entertainment option, the percentage of “just users” increases significantly versus those users who can also tinker. Windows XP, while more stable then its earlier renditions, still requires a bit of tinkering just to keep it operating at a decent level. Most users are either unaware that this tinkering is required, or just don’t have the desire or skill to do so.
• The internet has (almost) made the computer’s operating system irrelevant. The biggest driver of computer purchasing for the home in the last decade has been, without a doubt, the Internet. Be it expressed in email, web “surfing”, blogging, instant messaging or Skype-ing, people are more and more using the computer (at home) for online tasks. I say the OS is almost irrelevant but not completely…. Man does not live on Internet alone, and there will always be non-online tasks. Still, users need a stable OS that’ll run their web browsers, fast computers that’ll decode their online videos and other local hardware based resources that are the unsung heros of the internet experience. In addition, with the aforementioned virus and spyware problems, the operating system does make a difference when it comes to helping you (and your web browser) keep your data and local hardware resources safe.
• Microsoft Windows, and the hardware that it’s often run on, isn’t very elegant. I realize that this is very much a subjective opinion, however, I tend to believe that most people would agree with me on this point. Notice all those little icons at the lower-right of the task bar that keep popping up warnings, messages, whatever? Click on the Start Menu, and navigate through a zillion folders to find the application you want. This is not an elegant solution. PC hardware, while functional is also not very elegant. Bring home your shiny new laptop and spend an hour of your time trying to take off the half-dozen “stickers” (and I use the word loosely, they’re more like glued-medallions) that are plastered everywhere. Feel the cheap plastic of your palm rest bend as you rest your hand on it. Notice how clicking on one of the trackpad mouse buttons gives a very “cheap feeling” tactile feedback on it as well. Lights flash at you from the cryptically coded hieroglyphic status bar at the top of the keyboard for apparently no reason. Access ports for decades-gone-by technologies populate the back, and air vents that look like they belong on the side of a fighter jet decorate the side of your new computer.
  
  Now look around you in the real world. How much cheap “stuff” do you have around the house, especially the stuff that you use on a regular basis? People buy nice cars because they like the feel, performance and looks of nicer, and generally more expensive, cars. Branded merchandise with a higher “quality and/or aspiration feeling” is more popular then ever. iPods are a fantastic hit in large part because of their style and elegance (both hardware and software). Target does a good business in providing fashionable items at a lower price point. When a person sits down at their computer, why must they throw their sense of aesthetics and style out the window? The computer is increasingly more and more a device that a person uses on a very regular basis, and inelegance and poor style is an increasingly unacceptable baseline behavior for that device.

How does the Apple of today fit into this brave new world that Microsoft seems to be having such a hard time dealing with? Exceedingly well. Comparing the above list of “weaknesses” for Microsoft and its hardware partners to Apple, and we see a very different picture. Security and stability? OS X has it in spades. Profitability? Apple makes a nice healthy margin on every machine it sells. An OS that is centered around the “human experience” and not the “computer experience”? OS X is as much of a “get out of the users way” operating system as it gets, much more so than any OS that I’ve ever used (except, perhaps, for OS 9). The new Internet-based world? Mac OS X lets you use the internet just fine, thank you, and also helps you along with a nice secure system so that you can sleep better at night. Elegance and style? I don’t think I need to elaborate on how Apple fares with that point. I won’t even posit on the ease-of-use and UI element comparisons of Mac OS X and Windows. That could fill an entire article by itself (and has, many, many times).

On the other hand, however…
The above is all fine and dandy for the consumer, but how about the corporation? As everyone knows, when you’re selling something that you make money based on the volume you sell (which is just about everything), corporations are way better at making you money then consumers. Why? Selling to a consumer is essentially a 1 to 1 sales transaction. You spend money on sales and marketing support essentially to try and get that one consumer to go buy one computer and take it home with them (and have that action hopefully repeated by millions of consumers). When you sell into the corporation, you generally have a 1 to many sales transaction. Sell to one corporation, and you could be pushing dozens, hundreds or even thousands of units based on that one sale (an action you also hope you can repeat many times). Your profit is much better when you can “sell” something once with multiple units, then when you have to repeatedly sell for each individual unit.

Corporations have different needs then consumers though. Needs which Apple hasn’t done a very good job at filling. Let’s review some of those needs:

• Sales, service and support. Companies like to have their hands held when selecting and using technology. A lot. From the initial sales period through rollout and deployment, companies like to know their getting the best deal, the best service and the best support out there. This takes a lot of “face time” from the seller, and generally having the company that’s trying to do the selling bend over backwards for the potential client (as much as worthwhile for the value of the client, at least).
• Options. Nobody wants to be the guy in IT who has to explain to the CEO that his company can’t do something because the vendor they chose for their IT solutions doesn’t offer that particular option. And, no, there are no other vendors that offer it. It’s just not possible with what we’ve got. That poor guy’s career probably won’t be long for this world.
• Responsiveness. Microsoft, for all of its flaws, knows how to listen to its customers. It may not do a very good job of completing the job asked of it, but it always gives the impression that it at least somewhat cares when a corporate customer complains. Microsoft, and the companies that provide the hardware to run their software and the services to fine tune and support that software, can offer responsiveness to a company’s problem in spades.
• Roadmaps. A regular person can wake up one day and decide to buy a new computer, switch their life over to it in an afternoon, and then live in blissful ignorance of what’s coming next. A company can’t. A company has to plan for the future of how their technology infrastructure is going to look 1, 3, 5 and even more years out. Obviously, technology in particular is a pretty hard target to pin down with those types of timelines, but companies still like to have the least amount of “surprises” as possible.
• Stability and security in their IT equipment. Companies want equipment that’s not going to be a headache. Virus, spyware, crashes, data corruption, and other faults just helps to create a larger IT budget along with the costs of downtime resulting from system failures. IT budgets and downtime are most definitely on the wrong side of the “Revenue/Non-Revenue Generating” budget category.
• Low training and user support costs. This one pretty much speaks for itself. Every day sending your users to computer boot camp for basic operations is a day you’re spending too much money as a company.

As much as Apple, and Mac OS X excelled in the first “consumer” comparison, it absolutely bombs in the corporate checklist. While sales, service and support is something that Apple offers, it comes nowhere close to the corporate services and sales options from the likes of Microsoft, Dell, HP and IBM. Options in hardware just don’t exist. If you don’t like the configurations of the machines that Apple is selling, you’ve got no recourse. Want a custom designed Mac-based kiosk integrated into a nice, flat-panel system (that’s not an iMac G5)? Better get ready to pay through the nose for that from a 3rd party and unauthorized hardware hacker.

Responsiveness is also not a strong suit of Apple. While Apple is pretty good at fixing broken things (and not producing too many broken things in the first place), how long are we going to wait for a decent IMAP and Exchange interface? (And please don’t tell me that it’s not Apple’s problem. They’re the ones who have to connect to the dominant network here, and therefore the onus is on them to make it work, not Microsoft who can just say, “Hey, if that Mac’s not working out for you, use this Windows client instead, it works perfectly!”). Roadmaps. With the move to Intel, we’ll at least have a better idea of what’s coming down the pike processor wise, but Steve Job’s famous secrecy still shrouds much of what to expect from Apple.

The only bright spots in this are the stability and security, and the lower training costs inherent in Mac OS X. And frankly, aside from the security of OS X (in terms of virus and spyware type applications), it doesn’t really have any particular edge over Windows with training or stability requirements. Both systems, in properly trained hands, will be relatively stable, and users will always require some training. Finally, a properly setup Windows network will have as near a secure setting as Mac OS X to make the advantage of OS X’s security near null.

What to do with with what you’ve got.
So where do we go from here? Apple’s got this great system and it’s a hit amongst the people “in the know” (the tech snobs), and a hit just waiting to happen on the consumer side (should Apple ever get around to marketing to those consumers). On the corporate front though, it appears to be a lead zeppelin collapsing into flames. How can Apple increase the penetration of OSX into the enterprise environment? Frankly, by itself, I don’t think Apple can.

To attack the corporate market and make that significant dent in market share, Apple needs to focus more on corporate customers, bending over backwards to meet their needs and generally making some wholesale changes to how it sells its products to the public. Unfortunately, with Steve Jobs at the helm, a man who obviously relishes changing the world in a highly public way with his gadgets, I don’t believe Apple’s focus is going to change any time soon. Steve Jobs can’t change the world by just selling a computer to other companies so that they can go change the world.

So, now Apple is sitting on another fantastic opportunity, one that it probably hasn’t seen since the 1980’s. This time, however, it’s not Bill Gates telling Apple they should license out their operating system, it’s other computer manufacturers practically begging Apple to do so. It’s also IT managers who need options that Apple’s not providing to implement their solutions. It’s users who want more flexibility. It’s an environment that is substantially different then the one in which Apple first introduced its clones. What’s different?

• Apple’s a strong, profitable company that can stand relatively well on its own
• Apple’s independent 3rd party software market is booming (to say the least). Just about every category out there has at least one native to OS X software solution for it, and if that’s not good enough, there are many Free/Open Source UNIX or Linux - based applications that are relatively easy to port over.
• Apple’s biggest competitor in the corporate arena (and one that’s wiped the floor with Apple so far), Microsoft, has made a series of long and painful missteps in security, licensing, software rollout and more.
• The rise of alternative OS’s, most notably Linux, combined with the various failings of Windows, has raised the visibility of other choices in the corporate IT department
• Mac OS X is really a fantastic operating system that addresses and resolves many of the problems that Windows has. Apple has also shown a consistent ability to deliver what it promises (except for that whole 3Ghz thing) by delivering year after year of OS improvements, on schedule. Credit to Apple where credit’s due.

Bring on the clones!
Why does cloning make sense now? Because Apple can negotiate from a position of strength. Apple really doesn’t need a thriving clone community. It can sit back and remain a niche computer company probably forever and make a good living. If someone wants to play in Apple’s sandbox, they’re going to have to play strictly by Apple’s rules. Those rules could enforce that the cloners do the one thing that Apple’s not good at, which is sell to the corporation and enterprise and not to the consumer. With a deal like this, especially if they anointed Dell or another tier-1 systems integrator as a cloner, corporations would be much more likely to choose Apple-based systems. Just for the sake of argument, let’s say Apple chose Dell to produce Mac OS X based servers. Dell knows how to make the equipment already, and they know how to make it cheap. They also know how to get into companies, sell to them, support them, and can handle just about every element of corporate interaction. The companies who would be purchasing these systems would know that it’s not just Apple supporting them, it’s also Dell. Dell who will also configure the machines they need anyway they want. The same Dell that they’ve probably already had a long and successful relationship with, or they know other companies have had. Apple merely needs to sit back and count the greenbacks coming in. Just like Microsoft does. Except in this case, Apple can also have it’s cake and eat it too.

While Dell supports and increases Mac OS X corporate sales, Apple can maintain its focus on the consumer market as it always has while continue to sell it’s high-profit hardware. In other words, doing nothing really different then what they’re doing now, except that Apple’s got more money in the bank. And, oh yea, a bigger market share. Also, as Steve Ballmer famously cried, it’s all about, “Developers! Developers! Developers!”. Corporate users love to develop custom computer software. This will mean an eventual increase in Mac OS X developers. The more developers you have for a platform, the more software that’s eventually going to get pushed out to the general public, and the healthier the Mac OS X software eco-system will be. The healthier the software eco-system is, the more users (corporate and consumer) will feel comfortable with the system. All of which leads to improved revenues and profits for Apple (and everyone else in the Apple eco-system as well, of course).

Finally, at this stage in the game, there’s one other thing that’s different this time around. Users really are a different breed from the users of the 90’s. They do care about fashion, style and elegance. This wasn’t the case in 1990’s when computers were all putty-colored boxes that only “sorta” worked. Apple changed all of that with the iMac. Even if Apple were to license a cloner to produce consumer machines, people wouldn’t all stop buying Apple products. Apple Mac’s are generally well-crafted, intelligently designed aesthetically beautiful pieces of equipment. A lot of consumers love this stuff, and they’ll continue to buy those devices. What Apple’s missing, though, is that there’s also a lot of other consumers that are willing to go with the “brown paper bag” approach to their computer, and would be willing to have a more generic looking Mac OS X computer if it cost less, or had more technology options than what Apple produced in-house. Once again, because of Apple’s currently powerful position, it could easily enforce even the most onerous of rules on its cloners… cloners who would be happy to pick up Apple’s “droppings”.