Apple is, at its core, a consumer electronics company that makes two-thirds of its revenue from iPhone sales. However, as the technology world shifts from a hardware-driven model to one in which software, services and data deliver more value and innovation to both consumers and business customers, Apple could find itself on the outside looking in.
For the better part of a year, the company has dealt with the perception that its online services and apps are in decline. Frustrations with iCloud, Apple's online storage vault, and its many confusing cloud backup and sync options are cited by some as evidence of the company's gradual descent into mediocrity.
Apple's cloud, online services simply aren't … simple
Apple would like its online services to be as intuitive and easy to use as the company's devices, but that's not the case for many of the 782 million iCloud users. And Apple's problem with software and services could eventually impact its play in the enterprise, which the company accelerated in 2015 with the release of the business-focused iPad Pro.
"Apple's cloud services thus far aren't directly helping them in the enterprise, nor are they focused on the enterprise," says Christopher Voce, a vice president and research director with Forrester Research. Apple's cloud-based services do, however have an "indirect impact [on enterprise] as they shape an individual's experience with their devices," including photo- or location-sharing features, or syncing documents with iCloud, he says. The mere suggestion that Apple dropped the ball on one of the most important components of its ecosystem could also affect its perception among IT professionals, according to Voce.
Apple's senior vice president of Internet software and services, Eddy Cue, and senior vice president of software engineering, Craig Federighi, addressed these challenges in arecent episode of The Talk Show, a podcast produced by longtime Apple commentator John Gruber. Cue admitted that the company earned, even deserves, some of this criticism because of its missteps with MobileMe and Maps, but he said Apple corrected those problems more than four years ago.
"The vast majority of our customers are quite happy with our products," he said. "It's not to say that we don't have any bugs or that we don't have any issues — every piece of software does. We care deeply about it, which is why we all do all of these different touch points [on usage data and behavior], monitor them, look at them, make sure we're addressing them and … up the game even more. Because part of upping the game is not just standing still and making the things that you have work, but making them even better, making them easier to use."
Has Apple's success elsewhere hurt it in the cloud?
Apple's online services are in high demand, Cue said, and that demand is on the rise. The company delivers as many as 200,000 messages via its Messaging app every second; users upload billions of images to Apple's Photos app every day; the App Store and iTunes complete 750 million transactions every week; 11 million people currently subscribe to Apple Music; and the company completed "billions of dollars" in payments via Apple Pay to date, according to Cue.
"You look at the scale of Messages, you look at Apple Pay, you look at our stores, we run some of the largest services in the world very successfully," Cue said. "The scale of this is huge and I would compare it to any company out there."
However, Apple isn't complacent and the company knows it has to keep up with the market for software and services. "I know our core software quality has improved significantly over the last five years, but the bar just keeps going up and that's a bar that we embrace," Federighi said. "Every year, we realize that the things we were good at last year and the techniques we were using to build the best software we can are not adequate for the next year because the bar keeps going up."
Apple executives and other leaders frequently meet to discuss the state of its software and online services, as well as how the company can improve both, according to Federighi. "The bar is higher and we will continue to adapt every year to meet that challenge."
Apple downplays role of cloud
Apple seamlessly ties together hardware, software and services so that users don't necessarily know that they're using cloud services, according to Federighi. "Apple Pay is a hardware feature, it's a software feature, it's a cloud feature and it just works," he said. "It's a tremendously complex undertaking, but the customer doesn't have to think about any of those component pieces."
Apple's Cue was also careful to specify that the company doesn't want its customers to focus on Apple's individual services, but instead see the brand as one overarching experience. "The service isn't the thing — it's the experience," he said. "So when you're typing a note on your iPhone and it's on your Mac, we're not advertising this as note services or anything."
"We're frustrated of course to hear it overall characterized as the quality is dropping … because we know that's not true," Federighi said. "At the same time there's certainly a reality that if people are having these experiences then there's something we can improve."
Some of the criticism that surrounds Apple's services is directly related to unwelcome changes it made in the past, such as moving users from iPhoto to the new Photos app, according to Federighi. While such transitions can be jarring for people accustomed to certain ways of doing things, Apple pushes users to new features and experiences when it believes they will benefit the greater good. "When you have more customers, those things are harder to do," Cue said. "We're still willing to push, we just have to make sure that we think about the ways that people are using the product, and when we make the changes that they're not significant, and we're improving more than we're taking away."
In addition to challenges related to online services, Apple is also trying to divert investor attention away from its shrinking device sales numbers. "This is a big reason for Apple's recent emphasis on its services business and the power of its installed base," wrote Jan Dawson, chief analyst and founder of tech research firm Jackdaw, in a recent column. "Apple wants investors to see that at least part of its long-term trajectory is more predictable than it appears because of its ability to generate revenue off the back of its installed base of a billion devices."
Apple hasn't announced specific plans for business apps or services, but the ways users perceive these consumer-facing efforts today will influence the company's chances for future success in enterprise. However, the longer it waits, the steeper the slope it must climb to compete. Forrester Research's Voce says the enterprise communication and collaboration market is already extremely competitive and complex. "Microsoft, and even Google, just have tremendous head starts with email and other communication, authoring and collaboration services."
Google gained traction in enterprise when it introduced consumers to the free Gmail experience more than a decade ago, according to Voce. Microsoft is also way ahead of Apple in business. The "Office family is such a powerful force and [the company's] moves to ensure non-Microsoft devices (including Apple's) play better with their services only helps them grow stronger."
Apple clearly faces an uphill battle in its competition with Microsoft and Google when it comes to enterprise services, according to Voce. While the company often thrives in the role of challenger, this time it won’t be attacking from a position of strength.