In a joint press release, Apple (NASDAQ:AAPL) and IBM (NYSE:IBM) announced a partnership to collaborate on mobile tools for enterprise, developing new apps to provide big data and analytics tools for iPhones and iPads.
Under the partnership, the companies will develop more than 100 “industry-specific” iOS apps for businesses in areas like retail, healthcare, banking, travel and transportation, telecommunications, and insurance. IBM will introduce the MobileFirst Platform for iOS, which will integrate cloud services, device management, security, analytics, productivity, and mobile integration, optimized specifically for iOS. Apple will offer business-tailored AppleCare service and support, which will be available to IT departments and users 24/7. And IBM will sell iPhones and iPads, along with new and industry-specific services, to help businesses worldwide more easily buy and manage iOS devices.
The press release notes that the first apps created under the partnership will debut this fall, likely coinciding with the launch of iOS 8, which is expected to offer enhanced productivity, security, and device management. Readers are referred to IBM’s MobileFirst for iOS site and Apple’s iPad in Business site, where Apple notes that the collaboration will also bring more tools for enterprise developers to develop “killer apps” for any industry.
The press release also quoted Apple CEO Tim Cook, who called the partnership a “radical step” for enterprise clients: “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. 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.”
As Re/code’s Arik Hesseldahl points out, Apple has never “made much noise” about its enterprise sales, or even dedicated a specific sales force to business customers. In spite of that, the company has gained momentum as a supplier of devices to large companies, and corporate customers deploy thousands of Apple devices among employees and executives. IDC recently reported that iPhones accounted for 82 percent of smartphones used at U.S. corporations and 36 percent in corporations globally, while iPads accounted for 73 percent of tablets used at U.S. corporations and 39 percent globally.
A Piper Jaffray report echoed Cook’s comments on iOS’s high levels of penetration into the enterprise market, but downplayed expectations that the partnership with IBM would represent a significant financial benefit to Apple. The report notes that Piper Jaffray doesn’t expect the partnership “to have a measurable impact on the model given that Apple has already achieved 98% iOS penetration with Fortune 500 companies and 92% penetration with Global 500 companies. While we believe that the partnership could strength [sic] these existing relationships, we believe continued success with the consumer is the most important factor to Apple’s model.”
The report argues that even if half of the Fortune 500 were to purchase 2,000 iPhones and 1,000 iPads in addition to what they had already planned to purchase, the result would be a gain of only “half a percent” to Apple’s 2015 revenue. The profitability of the partnership for Apple is limited not only by the number of corporate customers already using iOS devices, but also by the improvements brought by the services offered in concert with IBM. Piper Jaffray expects functionality to be improved “incrementally,” but notes that the Apple-IBM collaboration “is unlikely to be the make or break factor for a large corporation in utilizing iOS.”
How IBM will benefit from the collaboration is pretty clear: The partnership grants IBM access to a large number of business customers. Almost every enterprise-focused software company, established or startup, develops products compatible with the iPhone and iPad, pointing to Apple’s primacy in the market. And even if Apple won’t see a strong uptick in business as a result of the partnership, the deal with IBM does enable Apple to offer enterprise solutions while focusing its own development power in the consumer market. That could be especially important if the advantage afforded by the IBM partnership is short-lived — if IBM, as Piper Jaffray expects, offers similar solutions to Android users as an alternative to iOS.
Even if Apple, in its position of dominance, doesn’t have a lot to gain statistically from its partnership with IBM, it does stand to benefit as existing and new corporate customers perceive iOS being strengthened by new apps and services. Instead of just providing hardware and software that happen to work well for enterprise, Apple is moving to provide dedicated solutions specifically for businesses. It likely won’t be long until competitors scramble to forge similar enterprise partnerships to offer alternatives.