What Uncle Ben Taught Me About Mac Hardware
Standing in the local mega store some time back I found myself in a quandary. My attempt to purchase a household staple, a simple task some would think, was becoming very burdensome. You see the product I was after was produced by a myriad of manufacturers and each box claimed, for one reason or another, to be the only logical option. My head was abuzz with the completing claims and I found myself unable to reach a decision due to information overload. As I was reaching for my cell phone to call a more decisive friend a wizened face appeared that seemed to lift the fog. While staring silently the piercing yet friendly demeanor were both reassuring and reproachful. If my hand moved towards a plainish choice the face would become leering and derisive. If my hand drifted towards a more carefully packaged option the face would beam with glowing approval. I chose the box that seemed to be the most pleasing to my newfound advisor and tossed the chosen box of instant brown rice with firm reservation into my cart. When I exited the isle I offered a small gratitude to my grocery guru by mumbling: “Thanks Uncle Ben, I never would have made it without you.” There was an upside to the experience, I realized that Apple could offer OS X for the masses and still make computers profitably. So there you have it, all the naysayers and worriers are dead wrong, Apple won’t be chased out of manufacturing anytime soon. Thanks for reading.
Well, I suppose the conclusion reached above does practically scream for a little more thorough explanation. To begin it should be noted that many people are predicting that Apple will, at some point, release OS X to the wider world. I predicted Apple would take the same road not because of piracy but because software is a more profitable venture than hardware. The natural response to these prognostications is to note that Apple relies on hardware sales for a significant chunk of their profits. A telling observation but not a real hurdle if Apple releases OS X for most and still manages to sell a fair number of Macs.
That notion seems contrary to common sense. Why would anyone buy a Mac if they had the option of running OS X on a Dell? The Dell will surely at least appear cheaper, as will the HP, the Gateway and any computer you felt the need to build yourself. This is where Uncle Ben proved so enlightening. Rice, much like the bulk of computers sold today, is a commodity product. When something is a commodity it more or less means that all versions perform to the satisfaction of most users. To use rice as an example Uncle Ben’s Instant Brown rice performs exactly as generic instant rice. Both varieties are limited governmentally by the number of rat hairs and insect parts present and both cook up precisely the same. Yet a lot of people buy Uncle Ben’s rice. If, as I did, you ask yourself why you’ll realize that in a commodity based market there is room for a few brands to actually be desirable for reasons unrelated to function. Whether the brand is hip, or provides prestige to the buyer there are loads of people willing to buy something that reflects their lifestyle or taste.
That segment is precisely where Apple can shine. There are Linux users out there who use Macs exclusively to run Linux. Sure they will tell you that the equipment is better, that Apple has better quality assurance but really, those people just want to be cool. Which is fine, I am apparently lame enough to think rice brands differentiate me from the rest of humanity, so people in glass houses and all. To take a more concrete look at the matter take a look at the computers Sony makes. The prices Sony charges are comparable to the prices Apple charges. Yet in a sea of Dells Sony manages to sell computers. The reasons people buy Sony computers are the same ones people will buy Apple Macs even if they don’t need one in order to run OS X. Sony has a good reputation for quality, adds a touch of style to their machines and these factors move computers for Sony when folks could get the same machine more cheaply. There is every reason to think that Apple could easily out do Sony in this regard. What, you desire a specific example? I exist to serve: Option A, Option B.
The other major objection to releasing OS X for commodity hardware is the plethora of components out there. Can Apple really support a white box PC with a homemade motherboard and a video card made by Joe’s Video Shack? Of course not. There are a thousands of components out there and just as many drivers. What they can do is sell a version that will only work on Apple Certified equipment. What exactly is Apple Certified equipment you ask? Why it is a revenue stream for Apple of course. Apple would certify that the equipment set up from Computers by Z would run OS X. Then, in exchange for some cash Computers by Z would be entitled to stick an “Apple Certified” sticker on the box.
If you’re not thinking of the clone fiasco right now you’re probably a switcher. For those out of the loop: Apple allowed licensees to produce Mac compatible computers. The Licensees proceeded to consistently make computers that out-performed Apples machines and were substantially less expensive. Apple hardware sales suffered mightily. A replay of that scenario is highly unlikely. One of the reasons was mentioned earlier and that is Apple’s industrial design. When the original clone debacle was in full swing Apple was making plain beige boxes just like everyone else and it very difficult to see something as a lifestyle product if it looks exactly like every other option. Going back to rice: the orange box moves a lot of grain. The second reason is that Apple will not be so easily undercut and out performed this time. Apple was making their own machines at during the clone period and had to endure the associated costs. Now Apple contracts out their manufacturing to Asia and this allows for more competitive pricing and more flexibility in manufacturing.
While it all seems plausible on the surface there are many risks associated with such a move but it is a move Apple seriously needs to consider if they wish to accelerate the growth of the platform.
Finally I would like to cordially invite you to post on Apple Matters new forums. Apple Matters has some of the most discerning and knowledgeable readers of any website and there are many times comments on my articles will exceed the articles quality in both terms of style and information. From a personal perspective I want to hear more of what the Apple Matters crowd has to say, the readers teach me a ton. Thanks.
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If Apple allowed OS X to run on any x86 box, would their Macintosh marketshare increase or decrease (or stay the same)? I suspect it wouldn’t suffer much at all.
As you say, it wouldn’t be like the Mac clone problems. Another reason is because that was essentially limited to the Mac marketshare. The clones by their very nature, had to take a slice of Apple’s marketshare. It was also hoped they would increase overall Mac marketshare. I don’t know if that happened or not.
Whereas with x86, they would be clearly competing in the whole of the PC market, just as Linux does. So yes, the sales of genuine Macs may suffer a little, but maybe not since everyone who owns or is buying an x86 machine would be a potential OS X customer. Apple could keep their 5% sales of genuine Macs (maybe slip a little) and Dell and HP could increase the OS X PC market through the reduction in sales of Windows PCs.
In other words, I would see the sales of Dell and HP Macs eroding the Windows PC market much more than the Apple Mac market - provided, as you say, Apple’s own price remains competitive - since there’s some of us who will always want the real Mac.
A good article Chris.
The problem I see with OS X on any X86 is Apple’s loss of control over the “whole thing” concept, the total non-arbitrariness that Macs represent, bringing with it a loss of product identity and a whole new level of challenge for the poor souls at helpdesk. Could Apple really provide this amount of support, even with “certified” hardware? One of the most important things about Apple products is the three-step-happiness: You plug it in, you turn it on, it just works. Anything that could endanger this has to be approached with extreme caution.
In tody’s diversified product market there is plenty of room for Apple to become the Lexus of PC computers. As in the automotive world there are a myriad of choices for the consumer but plenty choose Lexus, Mercedes, Infinity and Cadillac when numerous cheaper choices are available. Those that want the best are always willing to pay for vehicles that have smarter styling and greater reliability. If Apple can capture a significant volume of PC users to its OS it will reward the company with greater profits and benefit the user with more developers wanting to pile on to increase their own profits as well.
So the concern being voiced is this: Apple = exclusive. If Apple not= exclusive then Apple = Chapter 11. Yet, should one code a little deeper one would find the line: iPod = nonexclusive yet Apple = ROI * N. The concern for Apple is not pushing their hardware but how to market themselves. Should they decide that it was in their greatest interest to expand marketshare in order to improve their non-PC business then allowing non-Apple machines to run OSX86 would not be detrimental. Why on earth would they support non-Apple hardware? Why is that a concern? Would it not make more sense for them to limit their liability by ALLOWING their software to be used on non-Apple hardware but limiting their support specifically to Apple branded hardware? No techie would be intimidated by that stance. And if Dell and HP and others decided to sell OSX on their machines, whose tech support is called? Surely not Apple’s… and once people start using OSX on a system not specifically designed for it and then compare that to an actual Apple ‘all-in-one’, how many would choose Apple completely for their next machine?... Just my two cent’s worth…
Apple has no need to release OS X to ‘Apple certified’ hardware.
Steve Jobs keynote at WWDC left me with the impression that the OS X porting to x86 was done ‘just in case’ the Mac hardware market tanked. In other words, Apple would have turned into a software company as a last resort.
Well, the Mac hardware market is doing well. With Macintel machines, performance will match the general PC. We will have powerful machines running OS X from Apple.
Such a superiour machine alone would drive converts and sales.
I expect with either OS X.5, or OS X.6, the ability to run all Windows apps.
I think the problem with the whole “software vs. hardware” strategy is the interplay between software sales and hardware sales these days. Sure, software is more profitable in terms of percentage, but you have to sell much more software to equal hardware revenue.
What’s better? Making a 60% profit on $1 billion in sales, or 20% profit on $10 billion in sales?
That’s the kind of dilemma Apple is in these days, and why the whole shrinkwrap OS X for PCs is a lot more difficult to execute successfully than pundits would have you think. Everyone points to how much money Microsoft is able to print because of its software business, but Microsoft always had instant software revenue guranteed when it licensed DOS to IBM. Apple doesn’t have that luxury because OS X for generic PCs would have to INSTANTLY sell tens of millions of units to keep the BUSINESS growing. What are the chances that this is going to happen? The chances are small and the risk is very high that you’ll end up undermining your business for years until software revenue catches up.
Sure, a lot of people by Macs because of industrial design, but that won’t prevent a drain on hardware sales. There are a lot of people who would prefer the industrial design of an Alienware rig running OS X to that of an Intel PowerMac. There’s no way Apple will produce a 9 lb. “laptop”, but there are plenty of people who will go with a Dell XPS gaming notebook that has a top-of-the-line vid card running OS X instead of buying a PowerBook.
Apple can’t actually compete with the specialty PC makers because and the problem with OS X for Generic PCs is that Apple would suddenly have competition from a hundred companies like Alienware. People will still buy Macs from Apple, but just like the early cloning experience showed, hardware sales will fall through the floor. So Apple has a $499 Mini? There will be a dozen competitors selling $299 Mini-like machines running OS X, and these are areas that Apple doesn’t want to compete in.
This is why OS X for Generic PC will never happen - it’s far too late in the game for Apple to become like Microsoft. Apple’s strategy is focused on the hardware/software synergy. Once you realize that it’s the artificial hardware/sofrware dichotomy imposed on the tech world that is the root cause of crappy hardware and even crappier software, you realize that the Apple Way is becoming the Holy Grail of the entire industry. Is it any wonder why Windows Media PCs are still so crappy after years and billions of dollars of development? And somehow Apple should replicate that strategy by releasing its software to vendors who are largely without vision nor have an understanding of consumer values?
Chris wrote: “Apple was making their own machines at during the clone period and had to endure the associated costs. Now Apple contracts out their manufacturing to Asia and this allows for more competitive pricing and more flexibility in manufacturing.”
I would also like to point out that this is the very reason that Apple would be more DISINCLINED to license OS X. When Apple operated their own factories, they had a hard limit on the number of boxes they could produce every year. Sure, they could make 4 million Macs a year? But if they needed to make 5 million? Apple needed to build a new factory, which took a lot of time and money.
Now that manufacturing is contracted out, Apple can build 4 million or 10 million Macs a year. There is no need to rely on clone makers to increase marketshare today, which was the intention with the previous cloning effort. Thus, there is even less of a rationale for Apple to give away those hardware sales to competitors in return for a piddling licensing fee. You have to remember that Power Computing was offering as much $100 in Mac OS licensing fees for every box, yet that wasn’t nearly enough to offset the lost hardware revenue. Apple went from being an $11 billion company to a $6 billion company partly as a result of that experiment.
Now Apple is back to being a $12 billion company and has aims to become a $20 billion company. To get there, it’s going to need every last hardware sale it can get. And it can do it without licensing OS X precisely because it contracts out all manufacturing like Dell.
Let me clarify one thing. I am not positing that computer folks ship PCs with OS X pre installed. Rather I am thinking that Apple should certify some computers as capable of running OS X. The purchaser would still have to actually buy OS X and install it. If you installed it on a non certified machine, fine it is your money and all, but no support for you.
So only new PCs will have the cert and you’d still have to buy a copy of OS X, iLife. Macs, with OS X preinstalled and with iLife will look cheap in comparison. Plus the compy makers can charge more because of the nifty Apple certified sticker
Just a minute. How many x86 boxes exist worldwide? If Apple could offer OS X to the x86 market and get just 10% of those for $100- that’s a LOT of money. I’m thinking that instead of everyone upgrading to Vista in a year and half, they upgrade to OS X (or will it be XI?). In any case, going from 3% to, say, 50% of installed OSes would have to be good for Apple. I think the numbers would show that whatever hit they’d take in future lost h/w sales they could easily make up in OS sales. And there’s no way they could produce enough boxes to reach that market share even if everyone did want to buy a Mac.
I actually suspect that the real reason Apple doesn’t go head-to-head with MS is because
a) Previous agreements between the 2 companies limit what Apple can do
b) Apple doesn’t yet have an Excel replacement and can’t afford a full-fledged war with MS where MS might pull all its Mac software in retaliation.
When Numbers is released, Apple will have a Word, Excel and PowerPoint replacement and could then think about “going it alone” (of course they still need to tackle “Enterprise” computing, but that could come soon enough too).
Just my $0.02 worth…
I must admit, that sounds like a lovely version of the future.
However, there is one assumption required for the Uncle Ben’s relevation to be valid, and I’m not sure it is. The assumption is, that the reason OS X market share isn’t a majority now is because of hardware. If the reason most of the world doesn’t buy a mac is the price or selection or some other hardware aspect, but otherwise the world is itching to get on OS X, then naturally, letting tiger loose would bring in loads of money at no additional cost, and surely apple could obtain 5% of harware market share, while they’re at it.
But, if people love those powerbooks, imacs, and other machines, and just aren’t comfortable with a new operating system, need (or think they need) Windows only software, or simply don’t want to think that much about their purchase, then apple would be screwed if the liscenced the OS. Without a huge influx of former Windows customers, we WOULD have the clone fiasco. If the reason people aren’t on the mac platform has something to do with their not wanting to be on the platform, then the only market share the platform has is what it already has. And if that’s the case, then liscencing the OS simply spreads the wealth of those on the platform more thinly, and Apple volunarily created competition for itself.
So talk to your PC friends. If they are afraid of software, then you should be very afraid of clones. But if they want different hardware, then please, Apple, let them.
Good point. However a BIG impediment to getting people to switch include:
1) Incompatible Hardware
2) Incompatible Software
3) Perception: “Nobody else” is using it.
It used to be that going to Mac meant tossing all your peripherals (from keyboard to printer). Those days are gone, but many don’t realize it.
A bigger problem is software. If you’ve invested hundreds or thousands of dollars in MS software (not just OS, but productivity software), none of it will run under the Mac OS. It’s hard enough to convince someone to switch their OS AND all their software, but Apple now makes them buy a new box as well. It has to be easier (read: less painful financially) to get people to switch to Mac if they can avoid having to get a new box too.
Finally, image is everything. Riding the wave of iPod’s success could turn the tide on “no one uses a Mac” (which, btw, is sadly true: 3% is NOT an enormous installed base). However, no matter how “cool” it is to use a Mac or how much more productive people can be, the cost of replacing all the software is huge. The only major advantage Apple can leverage is the fact that there are no viruses, spyware or adware on the Mac. This could be worth the investment in new software (at least to some businesses)....
Good points, aviinc. Any chance Steve might at SF next January say, “Oh, and one other thing… Rosetta will run Windows apps.”
And I must say, there’s one incompatibility I do like about the Mac… I can’t get any of those dang Windows viruses to run on it!
I am not positing that computer folks ship PCs with OS X pre installed. Rather I am thinking that Apple should certify some computers as capable of running OS X.
Hmm… Others have made good points about hardware vs software revenue, so I won’t go back over them, but I there is a point that a few people approached but missed somewhat.
Brand.
There was a comparison to Lexus that I think may be especially important. As mentioned, Apple controls both the hardware and software which cuts out a number of customer support issues. Since they control the platform from both sides, problems are easier to troubleshoot and resolve since the variables are fewer. But, just as important to that is the fact that any troubles that arise are fully controlled by Apple.
Look at Dell & Microsoft… If there’s a problem with your machine, do you call Dell support or Microsoft support? How many times have you heard of an instance where the support personell of one company blames the other company for the issue? Or worse, blames some 3rd party OEM part within the brand name machine? In that scenario there exists a problem of brand control. Both brands become sullied in the eyes of the consumer when a problem arises. Each company has to cede some of its brand image to the other company.
Now let’s go back to the Lexus example (as a hypothetical). Suppose Lexus allowed dealers to put any engine inside the car. On the outside, they all look and generally work like a Lexus, but some my have terrible repair issues while other work fantastically. The image of Lexus suffers as a result of the poorly performing engines they allowed dealers to switch out.
Apple’s brand is one of the strongest in the whole world. Think about that for a moment. The brand value is ranked up there with the likes of Coca Cola and UPS. It is world famous, regarded positively and considered “innovative”. In the computer industry, Apple is consistently near or at the top of consumer opinion for customer service (I believe they reclaimed the top spot this year).
Now put OS X on commodity hardware… When something goes wrong, whose image is going to suffer? Apple would lose control of a large part of the brand image. Macintoshes are more than just OS X. They are OS X on well designed hardware, both technical and industrial design. This is a large part of the Apple brand image.
It is my belief that unless market share numbers make a serious decline, Apple would be *extremely* hesitant to put the brand in jeopardy.
I’d say if given the choice between tarnishing the brand, but gaining more profit and marketshare vesus keeping the brand image at the current state or better, and maintaining the path they’re currently on, Jobs and the board of directors will choose the brand every time.
Or even more to the point, given the choice of a mediocre product that everyone uses vs a great product that only a few use, I know for sure Jobs would choose the great product. Like him or not, he’s a “I want to change the world” kind of guy, not a “I want to make tons more money” guy.
Apple could really learn from Toyota, not Uncle Ben.
I think if Apple really wanted to branch out, rather than letting other companies get “Mac OS X certified”, it might make more sense for Apple to create independent but wholly owned subsidaries.
The Lexus example above is appropriate for this reason. Lexus is actually a Toyota company, but Toyota realized that it couldn’t take on BMW and Mercedes with the Toyota brand. It would also confuse the Toyota brand - look what is happening to VW when it stopped becoming a funky “people’s car” company and started doing ultra-high end automobiles. Can anyone say “Phaeton” - that’s a multi-billion dollar bomb right there and look how the Phaeton-type projects sucked away resources from VW’s bread-and-butter cars like the New Beetle.
So Toyota created an entirely new brand and company called Lexus that would focus only on the luxury market, while Toyota would continue to do what it was good at (making quality, value-based cars).
A couple years ago, Toyota looked at its customer demographic and realized they were getting old. College grads weren’t buying Toyotas. So what did Toyota do? They created Scion, a car company that would be focused on really funky, low-cost hip designs that would appeal to the youth demographic. And Scion has been a hit.
Similarly, if Apple wanted to go after the high-end workstation/gaming market, then they could create a new company called “Xstation Inc.” This company would be responsible for its own profit and loss and would have it’s own marketing budget and strategy. It would be the Lexus to Apple’s Toyota. Freed from the pressure of creating mainstream designs like the Mac Mini and iMac, they could focus like a laser on bleeding-edge, performance designs. And “Xstation” Macs would have their own unique look and feel distinct from the regular Apple Macs.
And Lexus has paid off for Toyota in other ways, too, as the R&D Lexus has done has filtered to the rest of Toyota.
Just as Toyota has done with Lexus and Scion, there’s no reason Apple couldn’t do something similar, rather than rely on finicky outsiders who are, by definition, competing with Apple and dealing with the dangers of diluting the Apple brand.
I would just like to add comments that my $.02 might not cover: I switched to Mac in 2002, shortly after they released Jaguar. I used Adobe’s products extensively on Windows and had been humming and hawing about the added software costs of switching. Then a colleague of mine pointed out a little tidbit of quite valuable information: Adobe will exchange your software to run on different hardware for a minimal fee. At the time I think it was around $10. I have no idea whether other companies do this, or even if Adobe still does, however I’m surprised that this does not feature more heavily in discussions. It certainly helped make my choice easier. Does that help anyone else?