Daniel Eran Dilger
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How Closed Is the iPhone?

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Daniel Eran Dilger
“Six Reasons Why Apple May Never Open the iPhone” outlined the rationale behind the strategy driving Apple’s software plans for its new mobile. At the same time, it’s important to take a reasonable appraisal of the iPhone’s supposedly closed nature. While Apple is unlikely to open up the iPhone in the same sense as the Mac anytime soon, it is already an open platform in ways that matter.

[Six Reasons Why Apple May Never Open the iPhone]

Damned If You Do, Damned If You Don’t.
Six Reasons Why Apple May Never Open the iPhone
While it’s always easy to criticize Apple’s position, it’s not as simple to plot out an alternative course that would actually work better, or work at all.Recall that pundits fell all over themselves over the last two decades insisting that Apple do a variety of things they assured us would solve all of the company’s problems, including ideas to:

  • License its OS to other hardware makers.
  • Copy Microsoft’s Windows strategies.
  • Compete directly against Microsoft in IT markets.
  • Split into hardware and software companies.
  • Buy Be, Inc. for its BeOS.
  • Adopt the Linux kernel.
  • License Windows from Microsoft.

While it was easy for the advice columnists of industry rags–who don’t run multibillion dollar hardware companies–to insist at various times that Apple should have done all those things, it was all wishful conjecture. In contrast, Palm actually did all of those things and none of them worked out for that company, which was facing circumstances similar to Apple.

[The Egregious Incompetence of Palm]

The Egregious Incompetence of Palm
Closed as in Managed, Not as in Locked Down.Apple is keeping mobile OS X devices closed to manage the experience of users, not so much to kill or prevent third party development. The company just officially clarified that, indicating that its policy on third party development was indeed largely related to the difficulty of maintaining APIs for developers, as I described on Monday.

[Apple not opposed to native iPhone app development – AppleInsider]

Since 2001, Apple has kept the iPod closed in the sense that it has made no efforts to sponsor third party software development. It did not prevent any third party development however, and made no efforts to stop users from either porting Linux or developing the alternative RockBox firmware for it.

Apple didn’t want an array of shareware applications holding up future development and bringing scorn upon the company for changing how things worked in new models. That policy allowed Apple to remain competitive and nimbly improve iPods across new generations of hardware in various directions with the Photo, Mini, Nano, video, and now the Touch.

At the same time, Apple also expanded its own iPod software development in partnerships with Nike+, various games developers, and an ecosystem of integrators, resulting in a platform that is actually openly active despite being officially regarded as closed. The iPod is really best described as a managed platform.

Now compare Microsoft’s Zune and its Xbox line. While Microsoft welcomes games developers to its platform, it’s only welcoming in ways that suit the company. It refuses to allow Linux developers to roll their own firmware, erecting signed boot barriers to thwart any unauthorized software. While Apple has no problem with RockBox on the iPod, Microsoft has worked to stop the XBMC “Xbox Media Center” project, an effort of identical intent.

Inside the iPhone: Third Party Software
With the iPhone, while Apple has only ever officially supported a web platform for third party developers, it has similarly done little to stop anyone from assembling and distributing their own software for it. So far, it has only been AT&T that has worked to stop certain efforts, and those relate to commercial distribution of hacked versions of Apple’s own firmware.

[Inside the iPhone: Third Party Software]

Software Wrapped in Hardware.
Apple’s core competency is in offering a managed experience. Its products are known to “just work,” a reputation that has spanned two decades. While Apple has only enthusiastically jumped into application software over the last decade, the secret to Apple’s slick hardware integration has always been software.

The difference between Apple and Microsoft is that Apple sells its software wrapped in hardware. Microsoft only licenses software, and its few and failing hardware products have always really just been software licenses tied to loss leader hardware. That results in Apple being confident that only a small minority of users will want to put Linux on their Mac or RockBox on their iPod, and that in neither case will it pose any threat to the company, because it’s happy to offer those users hardware at a profit.

However, Microsoft is very threatened by the prospect of its hardware devices being wiped clean and replaced with free software, because it fears it will cut into Xbox Live and Zune Marketplace sales, where the company plans to make most of its revenues. It loses money on the hardware, particularly after all the warranty maintenance it has to pay.

[Leopard vs Vista 4: Naked Sales]

Apple’s Shaken Software Sales Confidence.
If Apple is so confident in its software, why doesn’t it sell it head to head with Microsoft, either in PC licensing, IT sales, or in kicking open the door to rival Microsoft’s Windows Mobile, which embraces development? The answer lies in the irrational, upside down world of software sales that Microsoft has constructed and maintains in place.

It’s easy to insist that Apple could open up the iPhone and bring about world peace, but that’s a lot like insisting that Apple could have successfully licensed its Mac OS, or could have used Linux or Be, or split in half, or any of the other things that may have looked wise until they failed elsewhere.I think Apple feared developing a mobile platform that wouldn’t gain critical support. Remember that Apple not only offered the world Rhapsody gold and got nothing but blank stares, but also couldn’t sell NeXT’s WebObjects even after reducing the price from $50,000 to eventually essentially making it free.

WebObjects is the dynamic web application server engine that delivers the online Apple Store and the iTunes Store. Prior to being acquired by Apple, NeXT’s WebObjects was used to power Dell’s first commercially successful web store and by MCI to develop the back end of its Friends and Family campaign, a feat other providers scrambled in vain to copy but couldn’t because the technology was so unique.

Cocoa and the Death of Yellow Box and Rhapsody
[Cocoa and the Death of Yellow Box and Rhapsody]

I See Screens of Blue; What a Windows-ful World.
Apple’s software was ignored for years because everyone wanted to throw money at Microsoft for stuff that didn’t work. How many times have you had the iTunes store crash during a transaction or even while browsing around? How many times has it gone offline for unscheduled maintenance?

Now go search Microsoft’s Knowledge Base. It SIMPLY DOES NOT WORK. The only way to reliably find answers in Microsoft’s support pages has always been to search Google for it. Yet Microsoft sells everyone the same Active Server Pages that DOES NOT WORK at Microsoft. At the same time, nobody is very interested in WebObjects, the engine behind Apple’s revolution in high volume music transactions and its very profitable online Apple Store operation.

How many times have you crashed in a database web app and gotten an error message with .asp? That’s Microsoft at work. Remember when ATM’s didn’t crash? That’s back when they were mostly all running OS/2. Since many banks have migrated to Windows in the last few years, it’s now common to see bluescreens on ATMs. Why did they do that? It’s hard to understand. It is absolutely fantastically absurd that major businesses would trust Microsoft with their mission critical applications when Microsoft can’t even successfully maintain its own website.

Back in the days when AT&T and IBM wielded their monopoly power, at least things worked. Microsoft has killed innovation and replaced it with a cruel joke of arrogant incompetence, and yet retains more cheerleaders than IBM or AT&T ever had. This makes no sense. It’s a bit like the US, which congratulates itself about being a free country while shaking down tourists and taking their shampoo. Relatively little is said about this particularly irrational paradox between fantasy and reality either.

Competing Against Stacked Odds.
So you have a upside down reality where Apple is not able to sell its excellent NeXT technology despite a proven legacy in high-end enterprise segments well back into the early 90s. In large measure, that’s because of a 24/7 false information system full of Windows Enthusiasts paid to talk about how dangerous the alternatives to Microsoft are, regardless of their actual qualifications to speak about the enterprise market.

Now look at the Mac. Apple has fair support from developers, and things are improving as Mac sales are swinging up, but the desktop is still very Windows-centric. Getting games developers to support the Mac is a challenge, and the fact that Microsoft is buying interests in game developers and making them Windows and Xbox-only doesn’t help.

Building support for a new mobile platform with Apple’s limited resources could only be a potentially embarrassing failure. As is the case with WebObjects, I think Apple will have to show the world its utility by applying it first.And also like WebObjects, it may be that no amount of proof would ever convince the IT world that Microsoft is charging them for software that just isn’t very good, or that alternatives could save them the outrageous software licensing fees they pay.

Faced with the potential prospect of throwing an iPhone developer party where nobody shows up apart from some enthusiastic hackers and shareware authors, Apple decided instead to go it alone, working exclusively with a tight group of developers that it could trust.

Apple will likely continue to announce new partnerships with outside services companies like Google, integration with car companies and other hardware manufacturers, and innovative new lifestyle partnerships like Nike and Starbucks. It won’t however sit at home waiting by the phone for third parties to call it back about the great iPhone party invitations it mailed out weeks earlier.

Apple's Open Calendar Server vs Microsoft Exchange
[Apple’s Open Calendar Server vs Microsoft Exchange]

Mobile Platform Not Another Desktop.
Also note that the mobile application market is very different than the desktop apps market. That confounded the plans of Microsoft and Palm, who both behaved as if they were inventing the next PC as they rolled out their identical software development strategies.

Look at what software is available for both the Windows Mobile and Palm platforms: a few useful utilities that could often just as well be web apps, a few mobile games that struggle to sell for $20, and really zero market for anything substantial. There’s really no potential at all for profitable $100 – $500 software titles on mobile devices as there is on the PC desktop. Mobiles are a shareware market.

Who makes high quality, shareware priced software? Who else but Apple? Who makes anything like iLife or iWork? Nobody can afford to! Adobe sells applications in the $300 and up range. Its consumer applications sell for around $99 each. Apple bundles several good apps into an $80 box, which makes them around $15 programs. No significantly sized company can develop serious software with substantial annual updates and afford to sell it for $15, apart from Apple. That’s because Apple is using those titles to sell Macs.

[Five Ways Apple Will Change TV: 2]

A Messed Up Market.
On the PC, Microsoft locked up the applications market by homogenizing the world with Office. Nobody can deliver a full Office at a lower price. Individual companies can deliver a killer standalone app that can’t compete against a bundled suite, or alternatively struggle to establish an entire suite to compete against Office, but both options are a high risk, massive undertaking that swims against a heavy current.

In neither case could you charge anything close to Microsoft, so even if you could match it in sales, you’d never catch up. Microsoft maintains its monopoly by thwarting competition, not by being so good that people drop alternatives and choose Microsoft. The result is that the rest of the industry – Novell, Sun, Google and now IBM, are all behind OpenOffice, an Office knockoff that is basically free. That’s not a functional market.

Meanwhile, Apple is delivering iWork, which is good and value priced, but also brand new and demands refinement. I think it will really develop over the next year. I hope Apple releases an ’09 version and keeps advancing it rapidly, even if its only making a paltry $80 a copy compared to Microsoft’s $300 and up Office.

How Microsoft Got Its Office Monopoly
[How Microsoft Got Its Office Monopoly]

Opening the Gates of iPhone Software.
So the point that I was destined to eventually get to is that Apple has figured out how to roll its own software by basically subsidizing it through hardware sales. There’s no way Apple could profitably sell an $80 iWork for Windows or for Linux.

Now, imagine an iWork-like mobile productivity pack for $25 for the iPhone, a similarly priced Utilities pack with VNC remote desktop and an ssh client. A couple dozen $5 games. A series of partner packages, BES integration from RIM, and maybe an iPhone Quicken from Intuit (whose board chair Bill Campbell originally ran Claris and also sits on Apple’s board).

Suddenly Apple’s closed iPhone looks a lot more appealing than an “open phone” with as much support as WebObjects and Rhapsody ever saw. On top of Apple’s “managed” efforts, there’s also the hacker community, which has already developed a handful of tools and even a simple enough installer for non-technical users. That makes the iPhone unofficially open, even if its not part of Apple’s managed plans.

Continues: How Open will the iPhone Get?

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