Apple as Walled Garden: the Risks of Exclusivity

In one of my past professional lives, I worked in IT for a mid-sized regional bank. For a number of years, we were an Apple shop. Nearly everyone used Macs, including some of our front-line staff in the branches and most of our back-office managers, lenders and administrators. We had all the desktop software and applications we needed.

In IT, we loved the simplicity, security and ease of use. Yes, the individual hardware units were on the pricey side, but we more than made up for it with much lower maintenance and user support costs and higher user satisfaction. Our staff loved using Macs. And many corporate customers noticed, too, which helped our brand in that we seemed a bit smarter and leading edge.Of course no one could ever really get comfortable dragging the “disc icon” to the “trash can icon” to eject the real disc.  “Yes, Mr. Loan Officer—trust me; it won’t trash the disc’s content.”

But as the bank grew and Apple’s market share shrank, we increasingly struggled to find the programs we needed to run the business.  In particular, the bank was being pitched some powerful client server applications that ran on Windows, which provided numerous advantages: improved workflow, loan portfolio analysis and budgeting, to name a few.  At first, we tried to find workaround solutions, but over time it became clear that Apple’s strict platform didn’t support the applications we needed.

More importantly, developers just weren’t producing for Mac OS the way they were for Windows. I’ll never forget the day the Technology Architecture committee had the final vote on platforms. It pained me to vote against Apple’s superior OS, smooth user experience and easy networking, but I knew—and the rest of the committee knew—the business had to come first.

Now, you can argue Microsoft simply outmuscled Apple all those years ago, but the truth is some of Apple’s wounds were self-inflicted. It wouldn’t allow its hardware to be cloned and didn’t make life easy for developers. As a result, Apple’s OS and interface didn’t become the industry standard. If Windows has ever made you want to throw your PC out the window, Apple was part of the problem.

I’ve been thinking about those days lately, as Apple has become the world’s largest technology company. As strong as Apple’s position is, I see signs that they’re repeating those old mistakes. The company still keeps app developers at arm’s length and resists easy compatibility with anything developed elsewhere. From its proprietary music formats, to its requirement to approve every app for the iPhone and iPad, to its battle with Adobe over video formats, Apple continues to seek obsessive control over everything its customers see, hear, touch, click or download.

This is risky for several reasons. For one thing, it puts Apple in the crosshairs of anti-trust investigators. More worryingly, it opens a competitive door for Google’s Android platform. That company’s focus on ease of use, open platforms and mass access to products suggests they are playing the role formerly played by Microsoft, that of Apple’s chief rival. As one observer recently put it:

Because Mr. Jobs insists on keeping software and hardware under tight control, Google’s platform is the one that will benefit from competition among multiple handset makers, producing lower prices and faster innovation, including a flurry of soon-to-arrive tablets and a variety of new devices aimed at niches … you’ll need an Android phone to capture the full benefit of openness to the Web. Soon, Android users can expect their available services and apps permanently to outstrip those available to iPhone users through the App store.

There are other risks, too. Will businesses and online media properties be willing to reprogram all their video content for HTML5, instead of Flash? Are the eyeballs of a few million iPad users worth the trouble and expense? And what of the potential for re-entering the enterprise markets. As more computing moves to the cloud and business technology becomes “consumerized” (that is, people can use whatever they want for work), Apple may block itself from a huge growth horizon.

Not that I blame Apple for seeking growth through exclusivity. I certainly understand (and admire) Steve Jobs’ obsessive focus on the user experience. The results speak for themselves. Few would argue that any other company makes better music players, laptops or desktops than Apple. But it may be that which makes Apple great pushes it to second place—again.

The long-term risks of the “walled garden” approach are real.  (I should know: another of my past professional lives was spent at AOL.)  At some point, when the novelty of smartphones and iPads wears off, competitors will get closer. At that time, price, utility, choice and ease of access will more than compensate for some perceived loss of cool factor.

The day may be closer than we think when, say, the Technology Architecture committee of a midsize regional bank finds itself voting to choose Android over Apple.