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Apple and IBM: a tale of two tech frenemies

By Jeremy Hintz / August 7, 2014


Apple and IBM: a tale of two tech frenemies

The tech world is full of surprises. Product unveilings, impromptu software updates, and crazy funding of startups have taught us to expect the unexpected. But even so, it was hard not to be blind-sided by the recent partnership between Apple and IBM. The two recently announced that IBM will build over 100 iPhone and iPad apps in hopes of solidifying both organizations as leaders in enterprise mobility.

What were they thinking?

When you think about what this deal means for both sides, it’s pretty obvious why it happened. IBM has established itself as one of the leaders in mobile, and it would be hard to make a case against them being considered the leader in business IT. For Apple, this is a chance to possibly shut Android out of the enterprise space. When we covered WWDC, we said that Apple meant business. This deal shows that they definitely are not playing games, and are hoping to get that last 2% they told us all they were gunning for.

More importantly for Apple, this is the chance to put a shot in the arm of their slumping iPad sales. The iPad has long been seen as the tablet of choice for business pros, however quarterly shipments are down over 3 million units year-over-year. Getting iPads in the hands of employees across the country could prove crucial for Apple’s success. Tim Cook has been vocal that he believes 80% of work can be done on an iPad (and he backs it up by doing just that). If that is true, this partnership could allow Apple’s tablet line to slide into the void left by an aging and shrinking PC market.

One thing to consider is that the enterprise market itself is vastly different than the consumer market in that upgrade cycles are slower. So while getting iPads in employees’ hands will give Apple a nudge in the right direction, it isn’t going to up their tablet sales year after year. In addition, employees are less likely to surf the web or download random apps on a work device, so we might not see the same rate increase in engagement that we would anticipate from the raw sales numbers alone. What is more likely to happen is employees will find that their entire suite of devices works better when they’re all Apple products. This could have bigger implications for devices with faster upgrade cycles, meaning more iPhone sales. If Apple has shown one thing, it is that their robust and tightly knit ecosystem makes it more likely for consumers to turn to Apple for all of their hardware needs.

Let bygones be bygones

Ok, now that we see how this deal makes sense, let’s just take a step back and talk about how completely absurd it is. While this was centuries ago in tech years, Apple’s super bowl commercial in 1984 painted none other than IBM as the big brother of George Orwell’s imagination. Steve Jobs warned back then of an IBM-dominated future, and proclaimed that Apple was the only force capable of derailing the monotonous, industrial mindset that IBM represented.

Now it seems Apple has gone from being the hip, counter-culture, consumer-focused company from the Mac vs PC ads to being a major player in the commercial IT space. Just to be clear, this is definitely not a bad thing. It will almost certainly make Apple a lot of money and get their devices into more pockets and briefcases. But it is worth appreciating for a moment that history and culture are changing with this new deal.

IBM’s got a brand-new bag

Now let’s look at it from the flip side. IBM has been working to change their image from the old hat, business as usual tech company to a leader in mobile, and specifically in design. Over the past year, IBM has been busy building out their design studio in Austin, TX. IBM has said that they hope to hire hundreds of UI/UX designers and front-end developers. This transition from servers to design-focused products is anything but insignificant. But how can IBM hope to be taken seriously as a player in the design space? How about teaming up with the industry leader in design? By aligning itself with Apple, IBM has not only advanced their enterprise ambitions, but they have also made a giant leap forward in their quest to shift toward design.

It’s elementary, my dear Watson

Another aspect to consider for both companies is their respective roles in artificial intelligence. Almost all iPhone users are familiar with Siri, Apple’s AI personal assistant. She can be pretty fun to mess around with, and sometimes pretty useful for certain tasks. But she hasn’t ever won at Jeopardy like IBM’s Watson has. While Siri was designed for everyday use of consumers, Watson was created with data-intensive industries in mind.

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Since Watson got its own API this year, Siri could tap into that API for a quick upgrade, but something tells us the two companies have a slightly tight integration in mind. The potential there is pretty high, as Siri would be a nice package in which to deliver the power of 10 racks of IBM servers. There will undoubtedly be obstacles, such as battery drain and data usage, but be assured that Apple and IBM undoubtedly had the data and AI implications in mind when forming this partnership.

It’s better to work together

So based on all this, the move looks like a homerun for both companies. It is relatively rare to see companies in the industry collaborate like this, however. This could be a landmark decision that has the potential to shift the paradigm within the entire tech community. This partnership is a stark contrast to the usual interactions we see from the tech elites. We are used to seeing both sides pouring money into bringing the other down, whether it be through patent suits or negativity campaigns. This is win-win instead of lose-lose, and that dynamic is a good thing for the tech community as a whole.

Although this deal looks extremely promising for the reasons mentioned above, it is worth noting that some opportunity cost exists, especially for Apple. Apple is likely cutting itself off from the possibility of doing something bigger or better. It is the similar to the company’s acquisition of Beats, which just officially went through. Everyone can see the value in Apple adding on high-quality (not to mention high-margin) hardware accessories into its portfolio, but that acquisition, which was to the tune of $3 billion dollars, means that Apple can’t move into other areas.

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For instance, Google has purchased Deep Mind, Skybox Imaging, and Dropcam in the past year, for only half of what Apple just paid for Beats. Google is moving on to robotics and satellites tomorrow instead of headphones today. This is not to say that Google’s buys are solid or Apple’s are bad or vice versa. It is just something to stop and think about when considering the direction in which Apple is moving.

Regardless of what happens in the long-term, it certainly seems right now that IBM and Apple have struck up something really special in teaming up together. Competitors who had hoped to make a run at the enterprise space are likely back at the drawing board with little more than a blank slate. In addition to both companies winning, businesses and employees across the world win too, because they will be getting the best of a company who knows their business needs and a company that has proven it understands their personal preferences and desires. Let’s enjoy the good will and hope that others follow suit.

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