The challenges faced by Apple

Apple is really successful, yes we know. Somehow it has $40 billion US in the bank on selling just 7-12 per cent of the world's personal computers (depending on which market and who you're talking to).

Then, of course, there's the iPod, iPhone and iTunes music and apps, all making money hand-over-fist for Apple.

All this might sound like capitalist nirvana, but Apple faces challenges.

Steve Jobs' vision was always to bring technology to the status of appliance: devices useful to the masses, usable by the masses.

Just maybe not cheap enough for the masses.

Code and computer aficionados may quail, but the masses vote with spending. As Luke Tomes of Auckland software developers Kiwa Media told me last week, the iPad has been designed from the user's point of view backwards, rather than tacking on a user interface on a system designed by logic by a computer engineer.

This approach is what makes Apple's products eminently usable.

Technocrats whose inclination is to guard the tech temple view this fact with misgivings, but as I keep saying, you don't need to be a mechanic to drive a car. And thank goodness.

The challenges Apple faces:

Position

What is Apple's position? Is it just to make money? I think not, otherwise it would not have revolutionised your world.

And it has revolutionised your world. Apple drives tech by dropping old standards and adopting new ones in hardware and software.

Despite charges that Apple is a closed shop, Apple participates in much that is Open Source (like HTML5) and releases SDKs and WebKit and a lot more to the developer community. Apple produced QuickTime, then made it work on Windows.

Your Windows' system is better now because, despite having massive market share, Microsoft's product was lame compared to Apple's OS X. Now it's much more usable, thanks to Apple building a fundamentally better OS that Microsoft was then driven to equal or improve.

You could argue that (going back to the car analogy), Porsches had all-round disc brakes first, and now common cars do, too. Is that not good?

But where does Apple position its products? In New Zealand, anyway, they're pricey. Possibly the price difference between Apple and non-Apple products is a lot less in the US, where everyone seems to have at least an iPod. Or maybe they just have better wages.

But it's also about perception: I have a friend on four times my income who thinks Macs are 'too expensive'. So, every day, he struggles with and swears at his 'affordable' PC.

Some think Macs are for the elite, for snobs, or for dabblers, musicians and 'creatives'. This is, frankly, a crock. I have spoken to many professionals in New Zealand over the last three weeks who love their Macs and use them to code, create apps and move data. Above all, they generate profits.

Many Mac user perceptions are wrong, dated and redundant – but hey, I still hear people saying "Apple only has a one-button mouse..." Wrong.

iPhone

If anything ever perfectly encapsulated Apple's 'appliance' thing, it's the iPhone. Its cellphone function may not be the best in the world, but once you have a couple of screens' worth of apps on it, who cares? Certainly not me. The iPhone is sensational.

But the rest of the world is not standing still. Apple has to continue to innovate. Tying iPhone users to the iTunes Store is very clever, but that can't hold back the tide if better, cheaper, usable competitors do emerge.

iPad

There have been many 'tablet' computers. Apple's has certainly generated a lot more press. But what is it? If Apple can't bring media to it like it did with apps for the iPhone, it's just another beautiful device you don't need.

iPad media will be in the form of books and periodicals, plus apps and games that will benefit from the larger screen – especially multiplayer, small-wireless-network games and apps that use maps.

There has been a strange reaction to the iPad around the world, after the initial rush. People started panning it sight unseen because it's not the magic, affordable device that will run their home theatre systems, give them a massage and make the coffee. They should never have expected such a magical device in the first place, sure, but since then pundits assert the world is divided into two camps – those who need to input, and those who hardly ever need to.

The second category is larger.

Apple has now let the 'worldwide late March' release date for iPad go. Now iPad will be on sale in the US on the 3rd of April, and some other countries by late April. Since Australia is on the list, and Apple NZ is run from Australia, we're got to hope we're included with Australia, but I haven't had confirmation.

You may criticise, but it's better to get a late device that's ready for market than an on-time device that's not.

Secrecy

Apple is obsessively secretive. It protects its intellectual property as closely as possible, understandably, but this leaves to paranoia and inconsistency. Its factories are closely guarded inside and out, and some Apple departments operate as non-communicating cells to guard against leaks.

So the press is either loved and courted, or abhorred and avoided.

We never know where we stand. We are both Apple's biggest helpers and worst threats. Apple, for example, stopped advertising in Apple-specific magazines years ago – the industry that Apple helped set up has been in decline ever since.

This was logical – why advertise in a magazine in which every page boosts Apple? But it was also hurtful.

R&D

Apple has loadsa money, right? That's why it can develop a whole manufacturing process to get MacBooks slimmer. That's why it can spend eight years developing a tablet before it's happy enough to announce it. That's what gives Apple leverage to get Intel to modify chip designs (as it did with the MacBook Air).

But Apple's bulging coffers also make people resentful. A reseller gets less than 10 per cent when selling a Mac in New Zealand (Apple sets this profit margin). Resellers have to try and sell you extended AppleCare or a printer or a bag or ... anything along with it to keep them in business.

Obviously, Apple makes a hell of a lot more from these sales. Bernstein Research's Toni Sacconaghi issued a 13-page report in which he estimated that the iPhone's gross profit margins were an < ahref=" http://www.tuaw.com/2010/03/03/iphone-gross-profit-margins-nearly-60/"target="new">astounding 57.8 per cent...

The resellers are not complaining. Mac sales are up in New Zealand. A lot – Australia's figures (of which NZ's figures are included) were up 75 per cent over the year-ago quarter. Basically, resellers I have spoken to say they could sell more if they could get more, which brings us to ...

Labour

Almost all of Apple's hardware is put together in Mainland China. The People's Republic may have a super high tech and progressive thing going on, but some of its labour (that's the 'people' part, Republic of China) is abused and underpaid. I trust and hope that Apple and others do their best to ensure workers building our high tech consumer products are well treated and suitably paid.

Apple recently released a Supplier Responsibility report, but the Telegraph in Britain claimed at least eleven 15-year-old children were discovered to be working last year in three factories which supply Apple.
The Unofficial Apple Weblog disputes this.

Unscrupulous people might do bad things in some Chinese factories – but we'd like Apple products to be squeaky clean for the money, please.

- Mark Webster mac-nz.com