The Power To Cloud Men's Minds

Will Apple take on building a business mobility support system in the cloud? Here's why they won't, and why they shouldn't.My colleague Bob Evans over at InformationWeek argues today that Apple's next big opportunity is in building the "iCloud" to connect mobile workers with the information repositories they depend on. Bob envisions a "place into which enterprise data and information can securely flow and from which mobile devices can pull all manner of real-time information as comprehensively and simply as if they were using their desktop" -- data from SAP and Oracle systems, from Microsoft and Symantec sources, from IBM and Accenture projects. And he argues that only Steve Jobs and Apple have the "political skill, personal will, technological vision, marketing muscle,...big and bustling built-in base of followers, and...charisma" to pull together the various players to build such a cloud.

I'm not going to argue with his characterization of Jobs and Apple -- they do have those qualities. But I don't think that, as they're expressed at Apple, they'd be of much use in this project. I don't believe even Jobs could overcome the suspicion and resistance in the particular market he'd have to sell this idea to, and I think he'd see the potential for a huge, expensive, public failure for Apple, the last thing a company that trades so much on its image needs.

Bob cites the iPhone App Store as ways Apple has already shown itself able to bring together disparate parties to create an opportunity. And he mentions iTunes as evidence that Jobs can convince a reluctant industry to embrace a new model. But I think his analysis misses a few essential difference between those and what he proposes.

First, in both those instances, Apple is acting as a broker in what remains a one-to-one transaction. Furthermore, they're selling discrete packages of digital information -- all they needed was a server to store them on. In the iCloud, however, Apple won't have the SAP and IBM data themselves to sell -- they would need to do the hard work of translating information from a bunch of incompatible silos that they don't have control over.

And for what? The App Store and iTunes exist to support devices that Apple makes. Estimates of Apple's profit margin on iTunes music range from 10 to 30 percent, while their profit margin on iPods and iPhones may exceed 50 percent. What's the device that gives Apple that kind of margin from the iCloud?

I also don't think Apple would be able to pressure SAP and Oracle the same way they could pressure the record companies. The latter were already losing sales to digital downloads and had no alternative way to monetize what was already happening (easy to forget now, with the proliferation of digital music stores). But the companies supplying data to the iCloud aren't threatened in the same way -- it's not like there's a Napster for acquiring ERP systems.

Finally, I don't think the real customers for the iCloud are going to embrace an Apple-mediated solution. Apple wouldn't be able to market the iCloud to end users, they'd have to sell it to the IT crowd, who've never been particularly trusting or enamored of Apple. Furthermore, the things Apple does well -- design, user interface, and so on -- don't carry as much weight with IT folks (who sometimes seem to view them as negatives) as they do with consumers. And can you imagine Microsoft's reaction if Apple started approaching vendors about participating in the iCloud? You'd have an announcement of the Microsoft ShareCloud as soon as they could put together a canned demo, and that sound you'd hear would be the stampede away from Apple. At that point, it wouldn't matter if ShareCloud ever materialized or not.

No, while there's a real need to be met there and the Apple iCloud is a tempting picture, I think it would be a disaster for Apple to pursue. The rewards (for Apple) are too few and the risks are too great. Steve Jobs has never been one to put the key to Apple's success or failure in someone else's hands, as he'd have to here.