The upside – and potential downside – of Apple’s WWDC twin OS PC strategy

One of the more interesting announcements at Apple’s WWDC indicates they finally seem to be making the move from x86 to ARM for their desktop PCs. It appears to be the opposite of what Microsoft did in the 1990s…which didn’t work out too well. But unless Apple shores up their cloud shortfall, the move will likely represent more downside risk than upside benefit for the company.

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One of the biggest mistakes Microsoft ever made was when they decided to port Windows NT – which was initially designed to displace UNIX – to the same general consumer market as Windows 9x. [Disclosure: Microsoft is a client of the author.]

Servers and workstations have very different priorities than a typical desktop OS. So when they blended the efforts, the general user and consumer OS became too complex, and the workstation and server OS picked up consumer elements that made the result less attractive to IT buyers and engineers.

At WWDC, Apple appears to have announced they are taking iOS to where Windows 9x used to be and allowing the MacOS to mainly focus on their workstation products (they’d tried servers last decade and that effort ended badly).

Once done, the iPad version of iOS (along with what I expect will be a broader iPad line better embracing PCs) will be on most of Apple’s general user PC-like products, while the MacOS will only be on high-performance products targeted at animators, graphics artists and the few remaining Apple engineers (I’d bet most of these likely work for Apple).  

Benefits

The benefits of such a strategy are that each OS then is more tightly targeted at its apparent audience. This means engineers get a massive focus on performance, no one messes with their UI much and it is their voice that drives MacOS development. This not only should lead to a far higher level of loyalty between these engineers and Apple, it might even bring some across from Windows. Engineers, in particular, tend to favor companies that build them custom products, which is why most of the OEMs have dedicated workstation lines and don’t reposition consumer or general-purpose commercial notebooks for this segment.

This should shore up Apple’s professional installed base, which has been in decline for some time. This decline appeared to be connected to Apple’s massive pivot to iPhones, which are about as far away from workstations as you’ll get in the technology market.

Downside

While workstations are a lucrative market, it isn’t a very big market…at least not when compared to the typical user segment. Parts are priced based on volume, and workstations and x86 PCs have a lot of common parts which effectively reduces the cost of the hardware and helps Apple maintain margins.

The result of this move will eventually kill off most of their x86 PC sales and attempt to move those customers to iPads, which use very different ARM-based components. Even the memory modules are different between the classes. This means, to hold margins, Apple may have to significantly raise prices on their workstations – and those machines are already priced up into nosebleed territory.

I should add, though, given the economic impact engineers and animators have on their respective businesses, if performance jumps as well, they may gladly accept the higher prices and, in this scenario, Apple could sustain margins.

Unanticipated risk

We are moving into a time when our PC instances will largely operate in the cloud, and, this will potentially significantly benefit Apple’s move to the iPad as their go-to PC. However, Apple largely sucks in the cloud, they don’t seem to have an initiative like Virtual Windows yet. This reminds me a bit of Novell who came up with the idea of SuperNOS as a strategy not realizing that Microsoft already had a SuperNOS product in market called Windows NT.

Currently, while the iPad Pro could be an ideal front end for cloud-based desktop experience, Microsoft has this, and Apple doesn’t. This move, rather than brining users back, could instead move them to Microsoft Azure and this would open the door for Microsoft’s similar Always Connected platform to displace iPad Pros.

Now Apple could close this gap with one of their partners. But they don’t partner well, and the resulting value will be in the cloud, the part of the solution that Apple doesn’t own, causing this to again end badly for them.

If they are truly committed to this move, they need a cloud-oriented desktop instance solution in order to avoid a likely pivot to Azure, AWS or Google for a better cloud solution.

I think what Apple is attempting is really interesting and, on the face, it appears to be the opposite of a mistake that Microsoft made in the 1990s. However, to make this pivot properly they will need a cloud solution in order for the other half of this strategy to work properly…because this will need to compete with Microsoft’s similar moves with the Always Connected PCs and Azure.

If Apple doesn’t sort this out, they could find most of their market has effectively again moved to Microsoft – in this case Azure – and they will certainly regret that outcome. You’d have to be deaf and blind to miss this move to the cloud, but companies tend to avoid things they aren’t good at and Apple’s really botched their cloud efforts.

I’d argue that fixing Apple’s cloud problem would likely pay far bigger dividends for the company than creating a Tesla-like automobile. We’ll see if Apple agrees.

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