Sunday’s special meeting of Apple employees was about Apple’s “Joint Venture,” a new service Apple will reportedly unveil Wednesday that will provide extensive Mac service coverage on up to five machines to small businesses for $499 a year. If you’re in the business of providing Apple products, services or content to your customers, this and other developments are making one thing very clear: Those aren’t really your customer;, they’re Apple’s.
Before there were Apple Retail stores and the App Stores, Apple relied on third-party vendors to sell and support Apple products. Sure, some folks bought directly from Apple, and there was a support line, but for the most part, third parties provided complete after-sales customer care, and most importantly, acted as representatives of the Apple brand. Apple couldn’t be everywhere and do everything, and vendors filled in the gaps, helping make Apple the well-respected company it is today.
Once Apple retail came on the scene, third-party resellers struggled. Many went out of business or had to consolidate because their supplier was suddenly also their competitor. Obviously, that’s not an ideal situation, but it has worked well enough for about 10 years now. Yet in the past year, Apple’s relationship with third-party sales and support outlets has moved from uncomfortable coexistence to downright hostility.
Apple’s decision to kill off boxed versions of software like MobileMe, and presumably Lion (the developer preview is distributed via the App Store) cuts off the ability of resellers to provide these products to customers themselves. Predicting that iWork ‘12 and all future Apple software products will be App Store-only too is hardly a stretch. Profits on computers are usually pretty small for resellers, while software has much bigger margins. (It’s just a box with a disc or code after all.) It’s also likely that Apple’s most profitable product (from a margin standpoint), AppleCare, will also eventually be sold only online. These changes could easily push a number of struggling resellers off the cliff, even while they drive Apple’s revenue share up and keep costs to consumers down.
By selling software via the App Store, Apple gains an exclusive relationship with the user, leaving the developer out in the cold. Not only does Apple potentially get a higher percent of profit than when it sells a physical box, but it also gets to benefit from customer information. Developers still have to maintain the support costs of their product, yet don’t have nearly as much access to customer data. They can’t easily cross-promote products, upsell, or even solicit feedback for new features.
Furthermore, new applications that “push the envelope” of user experience or features will likely get marginalized since App Store apps are only allowed to use certain approved Apple development techniques. We see this everyday with the iPhone, but at least on that platform it was like that from day one. As a longtime Mac user, it’s not a “feature” I’m keen to see make the leap to OS X.
Apple’s new Joint Venture program looks to be a support and service division similar to Best Buy’s (s bby) Geek Squad. I wrote about it last year when Apple was awarded the trademark. For $499, business customers get prioritized access to Geniuses, along with workshops and loaner machines. On-site support is not directly mentioned, but is likely. Also, Apple is now using OnForce, and moving away from recommending independent third-party support via the Apple Consultants Network (ACN). The OnForce platform acts as an intermediary between end-user and technician, and technicians may not reveal their full contact information nor contact the customer directly when using the system.
For the record, I am a service provider for OnForce and a member of the ACN (see disclosure), so Apple’s decision to cut out the middle man affects me directly. If Apple stops referring third-party service providers like myself, many of my colleagues will go out of business just as many resellers did. When this happens, your main source for service for your Apple devices will have to be Apple Retail stores and if you don’t happen to live near one, you’ll be out of luck. And of course, as an exclusive provider, price and wait times for repair will be whatever Apple decides. High prices along with long wait times and considerable treks to Apple stores isn’t good for consumers, or ultimately Apple’s brand. Apple’s Joint Venture program promises much, but when some have priority access to a Genius, what happens to those who didn’t pay the $499?
One company, even one as powerful as Apple, cannot be all things to all people and will eventually spread itself too thin. If you don’t live near an Apple store or if you want an application or service provider not approved by Apple, the future isn’t bright. We’re moving one step closer to the day when “jailbreaking” the Mac OS becomes a necessity for users who prefer Apple’s more open past. In fact, I can easily imagine Steve Jobs responding to these concerns in his typically terse manner:
“These are our customers, not yours.”
– Sent from my iPad 2
Disclosure: Dave Greenbaum owns his own consulting business that supports Macs and PCs. He is an Apple Certified Support Professional, a service provider for OnForce, and a member of the Apple Consultants Network. Apple clearly states that membership of the ACN does not imply not offer any direct business relationship with the company.
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