Apple’s Enterprise Inroads

2009 was the worst year in IT spending. Ever.

I’ll let that sink in for a minute.

Now, 2009 was a bad year for many aspects of business — sales, capital management, making a profit — but IT departments had it especially bad. Because IT is a support organization, everyone wants to use it but no one wants to pay for it, which means that IT almost always gets the budget leftovers. It’s hardly a surprise that IT got the seriously short end of the stick in 2009. According to a report by Gartner, spending on IT declined 5.2 percent overall last year among all verticals, and the fall was even worse in enterprise businesses, where spending fell 6.9 percent.

Naturally, that kind of drop in funding completely changes how IT departments prioritize their spending. For one thing, in the face of such spending cuts, standard hardware upgrades go right out the window. According to the same Gartner report, hardware spending dropped 16.9 percent in 2009. To make matters worse, IT departments also reduce headcount to save money — in 2009, fully 62 percent of companies cut IT headcount — which makes matters worse because there are now fewer people to support more work on the same hardware.

This is not a recipe for success.

[inline-ad align="right"]Fortunately, now that it’s July 2010 and most companies are fully embracing the second half of this new fiscal year, IT budgets are slowly improving. IT budgets across the board are expected to gain 3.3 percent by year’s end. This leaves IT departments in the interesting position of having a reason to change their operations, and a little bit of money to make it happen. This is unusual.

As a service organization, IT’s performance is measured on things like uptime, cost and so on. As a result, IT departments tend to be very risk-averse and resistant to change. Whereas IT organizations typically resist change to avoid breaking things — if it ain’t broke, don’t fix it — now there are some interesting pressures in play that make the way things are look broken already. Because IT headcount is depressed, IT corporations need to be focusing on reducing the need for support because there are fewer people around to do it. And, because of the clog in the hardware upgrade pipeline, there are more upgrades vying for the same dollars, which means that CIOs will be looking for upgrades that are either cheaper or serve multiple purposes. In short, IT departments are in the uncommon position of reevaluating their long-term direction in earnest.

Apple, being the savvy company that it is, has positioned itself well to capitalize on IT departments looking to make a change. Some of the largest organizations in the world are taking another look at Apple products, and with good reason. There’s good data indicating that Apple computers cost significantly less to support than Windows PCs, both in terms of TCO and simple ease of support. And this is no theoretical result. According to another report from Gartner, Apple is gaining market share in laptops and desktops faster than anyone else, beating out competitors like Hewlett-Packard, Lenovo and Dell. And companies are adopting Apple’s devices, especially the iPad, for positions like sales because they have the flash and panache to seal a deal, but are simple enough that workers can use them with minimal training and robust enough that fairly little technical support is required. And if an iPad does break, it’s simple and straightforward to fix: just send a replacement. All of these factors are making Apple products look more and more attractive to struggling IT departments.

That’s why large enterprises like Wells Fargo and SAP are adopting the iPad for jobs ranging from sales to simple paper replacement. Mercedes-Benz is so pleased with the results of using iPads in 40 of its U.S. dealerships to handle credit applications that it’s considering using iPads in all 350 of them.

However, Apple’s latest foray into corporate America is ostensibly only the inroad of a much grander scheme. Gartner makes the excellent point that, as virtualization and cloud technology matures and companies gain experience with them, such services will gain adoption very quickly because of the dramatic cost savings they offer organizations. Among the technology providers in this space, it will be the companies that develop these technologies into the most robust and easiest-to-use products that will win the day, and Apple’s track record combined with its new $1 billion data center show that Apple is positioning itself well to accept the mantle of leader in this burgeoning new field.

There has been much speculation about Apple’s new toy, but it’s fair to say that it’s building server capacity for something. Popular theories include a music streaming service because of Apple’s acquisition of Lala, and theories that the facility is for video hosting seem a lot more credible with the introduction of FaceTime and the iPad’s apparently impending camera. Data heads see a different picture, though: one that has Apple positioning itself for a strong enterprise presence. And ultimately, with Apple gaining such traction in the enterprise market, it would be foolish not to build cloud offerings for those customers, like simple file hosting or a virtual hosted Mac, to be delivered via its devices, like the iPad. And Apple’s no fool.

So, with Apple making solid gains in the corporate and enterprise markets, what’s next for technology’s golden child? You should expect to see more big-name customers adopting the iPad, and more iPad development shops springing up to fill the resulting need for corporate applications. However, ultimately, the real surprise will come when Apple reveals the purpose of its new data center.

For now, I like to think it holds the ghost of Newton.