What Apple and IBM’s alliance means for government

Apple CEO Tim Cook


Apple’s iPhones and iPads may have become the default device for government and corporate boardrooms through their intuitive usability, but when it comes to the business of selling into enterprise and the public sectors, sometimes it’s just easier to outsource the lower margin work.

That’s the real wash-up from the announcement of the landmark deal between the company has that staged the biggest comeback ever witnessed in corporate history… and what is arguably now the white dwarf of the computing industry, IBM.

In very blunt and simple terms (we’ll spare you the fanspeak) Apple and IBM have struck a deal that allows Big Blue to officially flog Apple’s kit, at significant volume, to the kind of clients the world’s best consumer brand can’t realistically turn away… but also knows it can’t deliver the kind service expected.

There’s a whole bunch of stuff about apps, mobility, cloud, support, activation etcetera, but let’s cut to straight to the chase: Apple’s a consumer company, it knows it, and the enterprise and government market is littered with the hollow remains of tech companies which either dismissed Apple’s rise on the mobile front, or pooh-poohed the deflationary impact of cloud computing.

What Apple has proven over the last 5 years is that it’s very good at capturing imaginations and maintaining its cool.

And not dropping its prices or margins. For anyone.

If you want the Apple experience, you either accept their blatantly proprietary terms or get a Samsung. Apple are up-front about that too, rather than pretending to subscribe to allegedly open standards.

Such commercial discipline is often portrayed by competitors as arrogance and hubris.

But it’s the highly proprietary execution and locked down nature of iOS and the Unix-based OS X operating systems that makes Apple’s products so sought after by government and enterprise (after the usability).

There’s a reason why 5-eyes iSpooks in charge of government IT and mobile security appear to find Apple’s kit easier to nail down than competitors’. That’s a real challenge for some vendors.

The big problem for big customers (to date) is that Apple just hasn’t had the cultural bandwidth to deal with the demands of government and corporate clients who expect  meaty volume discounts and heavy-duty, customised support that goes hand-in-hand with +$100 million deals for thousands of users at a time.

IBM, on the other hand, has managed to survive on its industrial grade software and services which spans across everything from big-iron mainframe hardware, heavy duty transactional systems, databases and all manner of consulting and development.

The new Apple-IBM deal could, by and large, fix that enterprise and government disconnect (which is a really nice problem to have).

You could characterise it like this: IBM retreated so deeply into the back-end of computing it’s now come full circle to bump into Apple on the front-end. It’s kind of reminiscent of how puritanical anarchists find themselves accidently agreeing with ultra-capitalists.

It’s also worth contemplating what the acronym IBM actually stands for: International Business Machines.

The company’s DNA is in enterprise solutions but its problem over the last 20 years has been that the raw power under the bonnet has often been let down by more accessible front end designs: as the contest between Lotus’ products and Microsoft’s offerings have borne testament.

Like many B2B companies, IBM figured out in the 1990s that sustainable profits would most likely flow from services rather than kit. IBM’s gradual retreat from consumer and midmarket IT hardware manufacturing followed.

But what IBM never let go of was its founding foothold in distributed computing, and at scale. The cloud and the endurance of internet have now substantially revived that.

Part of this evolution was the development of RISC (Reduced Instruction Set Computing) that saw Apple take-on IBM’s ‘Power’ architecture and CPUs.

Although Apple subsequently moved to Intel’s chips for its laptop and desktop range, the launch of the iPhone and iOS returned to RISC architecture by using processors from British-based ARM.

ARM first stood for Acorn RISC Machines … as in the early Acorn computers … and later Advanced RISC Machines.

The significant point here is that there’s a greater cultural synergy, at least at an architectural level, between Apple and IBM than anyone else in the running to pick up a deal reselling Apple’s gadgets.

And Apple is not so stupid (or arrogant) so as to forfeit influential market share it can pick up with little effort or market development cost. It knows it’s won, at least for the time being.

That counts for a lot, but the other big factor is that IBM has deep, decade-plus relationships in government and corporate outsourcing and systems development markets that Big Blue can potentially renew and reinvigorate if Apple’s products are baiting the hook.

But the realpolitik of that transaction is the likely subsidisation of Apple’s fashionista-priced hardware (by IBM and its resellers and partners). That will come in return for consulting, software development and service provider revenue.

It’s a very timely marriage of convenience and the only customers likely to be hurt are Microsoft’s.

Think of it as iPhone/iPad/iOS-as-a-service. (Unfortunately a Gartner analyst gotten in first and designated iPaaS as ‘integration Platform as a Service’ so another acronym will have to be invented.)

The back of the envelope math is that if a rack-rate iPhone comes in at circa $1000, government and big corporate customers can trade-off routine development and IT services spend for discounted Apple product; and a benchmarked level of mobility systems support that would otherwise be inaccessible.

Roll over on that IBM contract renewal and you might get a very cheap iPhone or iPad.

In terms of productivity uplift, security and overall bang-for-taxpayer-buck, that’s likely to be a pretty compelling offer.

Just don’t mention the Queensland Health Payroll.

Here’s the official announcement, via Apple:

Apple and IBM Forge Global Partnership to Transform Enterprise Mobility

CUPERTINO, California and ARMONK, New York—July 15, 2014—Apple® and IBM (NYSE: IBM) today announced an exclusive partnership that teams the market-leading strengths of each company to transform enterprise mobility through a new class of business apps—bringing IBM’s big data and analytics capabilities to iPhone® and iPad®.

The landmark partnership aims to redefine the way work will get done, address key industry mobility challenges and spark true mobile-led business change—grounded in four core capabilities:

•    a new class of more than 100 industry-specific enterprise solutions including native apps, developed exclusively from the ground up, for iPhone and iPad;
•    unique IBM cloud services optimized for iOS, including device management, security, analytics and mobile integration;
•    new AppleCare® service and support offering tailored to the needs of the enterprise;  and
•    new packaged offerings from IBM for device activation, supply and management.

The new IBM MobileFirst for iOS solutions will be built in an exclusive collaboration that draws on the distinct strengths of each company: IBM’s big data and analytics capabilities, with the power of more than 100,000 IBM industry and domain consultants and software developers behind it, fused with Apple’s legendary consumer experience, hardware and software integration and developer platform. The combination will create apps that can transform specific aspects of how businesses and employees work using iPhone and iPad, allowing companies to achieve new levels of efficiency, effectiveness and customer satisfaction—faster and easier than ever before.

As part of the exclusive IBM MobileFirst for iOS agreement, IBM will also sell iPhones and iPads with the industry-specific solutions to business clients worldwide.

“iPhone and iPad are the best mobile devices in the world and have transformed the way people work with over 98 percent of the Fortune 500 and over 92 percent of the Global 500 using iOS devices in their business today,” said Tim Cook, Apple’s CEO. “For the first time ever we’re putting IBM’s renowned big data analytics at iOS users’ fingertips, which opens up a large market opportunity for Apple. This is a radical step for enterprise and something that only Apple and IBM can deliver.”

“Mobility—combined with the phenomena of data and cloud—is transforming business and our industry in historic ways, allowing people to re-imagine work, industries and professions,” said Ginni Rometty, IBM Chairman, President and CEO. “This alliance with Apple will build on our momentum in bringing these innovations to our clients globally, and leverages IBM’s leadership in analytics, cloud, software and services. We are delighted to be teaming with Apple, whose innovations have transformed our lives in ways we take for granted, but can’t imagine living without. Our alliance will bring the same kind of transformation to the way people work, industries operate and companies perform.”

Apple and IBM’s shared vision for this partnership is to put in the hands of business professionals everywhere the unique capabilities of iPads and iPhones with a company’s knowledge, data, analytics and workflows. Specifically, the two companies are working together to deliver the essential elements of enterprise mobile solutions:

– Mobile solutions that transform business: The companies will collaborate to build IBM MobileFirst for iOS Solutions—a new class of “made-for-business apps” targeting specific industry issues or opportunities in retail, healthcare, banking, travel and transportation, telecommunications and insurance, among others, that will become available starting this fall and into 2015.

– Mobile platform: The IBM MobileFirst Platform for iOS will deliver the services required for an end-to-end enterprise capability, from analytics, workflow and cloud storage, to fleet-scale device management, security and integration. Enhanced mobile management includes a private app catalog, data and transaction security services, and productivity suite for all IBM MobileFirst for iOS solutions. In addition to on-premise software solutions, all these services will be available on Bluemix—IBM’s development platform on the IBM Cloud Marketplace.

– Mobile service and support: AppleCare for Enterprise will provide IT departments and end users with 24/7 assistance from Apple’s award-winning customer support group, with on-site service delivered by IBM.

– Packaged service offerings: IBM is introducing IBM MobileFirst Supply and Management for device supply, activation and management services for iPhone and iPad, with leasing options.

Announced at Apple’s Worldwide Developer Conference in June and available later this year, Apple’s iOS 8 is the biggest release since the launch of the App Store℠, giving users incredible new features and developers the tools to create amazing new apps. For enterprise, iOS 8 builds on the new IT model for a mobilized workforce by improving the way users are informed of how their devices are configured, managed or restricted, with expanded security, management and productivity features.

Apple designs Macs, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.

IBM’s 5,000 mobile experts have been at the forefront of mobile enterprise innovation. IBM has secured more than 4,300 patents in mobile, social and security, that have been incorporated into IBM MobileFirst solutions that enable enterprise clients to radically streamline and accelerate mobile adoption, help organizations engage more people and capture new markets.

IBM has made a dozen acquisitions in security in the past decade, has more than 6,000 security researchers and developers in its 25 security labs worldwide that work on developing enterprise-class solutions.

IBM has also established the world’s deepest portfolio in Big Data and Analytics consulting and technology expertise based on experiences drawn from more than 40,000 data and analytics client engagements. This analytics portfolio spans research and development, solutions, software and hardware, and includes more than 15,000 analytics consultants, 4,000 analytics patents, 6,000 industry solution business partners, and 400 IBM mathematicians who are helping clients use big data to transform their organizations.

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