Apple and the cloud: A magnificent missed opportunity

Apple and the cloud: A magnificent missed opportunity

Summary: More than three years ago, in his last year as Apple's CEO, Steve Jobs laid out a vision for Apple to move aggressively into cloud services. What went wrong?

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TOPICS: Cloud, Apple
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One of the saddest documents you’ll ever see is prosaically titled DEFENDANT’S EXHIBIT NO. 489.245. (I’ve shared it in a public folder at OneDrive, so you can click that link and read the whole thing at your leisure.)

The document, a printout from an internal email sent to a list of top Apple executives, emerged last month as part of the landmark patent infringement suit brought by Apple against Samsung.

The email was part of a thread that begins with a painfully ironic DO NOT FORWARD warning from Apple Senior Vice President Phil Schiller. It includes the forwarded text of a blunt agenda from Steve Jobs covering Apple’s plans for its 2011 fiscal year.

apple-2011-strategy

The dateline alone is poignant. Written in October 2010, the email represents Steve Jobs’ final opportunity to provide his guidance on Apple’s future. Jobs resigned 10 months after this email was sent and died of cancer two months after that.

But the even sadder part is how thoroughly Apple has so far failed to deliver on one of the key goals Jobs laid out in this, his final strategy document. Jobs wanted 2011 to be the “Year of the Cloud.” With the digital hub moving from the PC to the cloud, he said, Apple was “in danger of hanging on to [the] old paradigm too long.”

apple-2011-year-of-the-cloud

That summary by Steve Jobs is puzzling. On the one hand, as Apple’s Disruptor-in-Chief, he knew full well how important it is to disrupt your own business before you let someone else do it. He also recognized that both Google and Microsoft had a significant lead in cloud technology, even if they hadn’t figured out how to translate that technology into income or profits.

But on the other hand, Jobs also remained firmly wedded to Apple’s walled garden. His directive in this memo, which was never intended to be seen by us mere mortals, is extraordinarily blunt: “tie all of our products together, so we further lock customers into our ecosystem.”

So, three and a half years later, how far have Apple's cloud efforts progressed? Compared to the leaders in the cloud ecosystem, not very far at all.

Apple’s iCloud is, first and foremost, a backup target for iOS devices, a job it does reasonably well. But on every other modern yardstick for cloud computing it falls short. My colleague Jason Perlow (disclosure: he now works for Microsoft) has done an excellent job of summing up the cloud landscape in a pair of posts:

Both posts are must-reads. Here’s my current take on Apple’s cloud status:

  • Email  Apple has been bumbling along for a decade with @mac.com and @me.com and now @icloud.com addresses, but there’s no evidence they’ve gained any traction. Google and Microsoft have pretty much divided and conquered this space, with Yahoo and AOL hanging around among old-timers.
  • Productivity apps  Apple has some very capable iOS and OS X apps in its iWork suite: Pages, Numbers, and Keynote. All of them can be used to create, save, and edit files in iCloud. But there are no equivalent apps for non-Apple-branded devices, and the cloud-based versions of those three programs are still in beta. It is the embodiment of Jobs' "lock customers into our ecosystem" strategy. And it is a non-starter when competing with Google Apps and Office 365.
  • File storage  The explosion of general-purpose online storage options available today, including Dropbox, Google Drive, Microsoft OneDrive, and so many more, is remarkable. Most of them have synchronization clients for iOS and OS X. Apple has nothing in this space.
  • Messaging  iMessage and its companion app, OS X Messages, allow users of Apple-branded devices to chat with other people if they're using Apple-branded devices. FaceTime has the same Apple-only limitations, despite Jobs' promise when the service was launched in 2010 that it would be released as an open standard.
  • Photos  iCloud syncs photos and videos from iPhones to the cloud and then to other devices. It's possible to share those photos via the web, although the process is cumbersome. Windows PCs have limited support; Android devices are unsupported.
  • Music/video/books  On the music side, Apple’s iTunes ecosystem is more than a decade old and still dominant. Music downloads are dropping dramatically, which might explain, in part, why Apple is planning to purchase Beats Audio, with its streaming music service and its lucrative premium headphones business. iTunes does a respectable business in video sales and rentals using the surprisingly successful Apple TV set-top box (an actual Apple-branded TV exists only in Gene Munster’s dreams). Apple is under court-ordered restrictions in the books market, where Amazon dominates.

In short, Apple is in no danger of becoming a “devices and services” company anytime soon. What it offers is fine for anyone fully committed to Apple’s hardware. But as soon as you stray into Android or Windows devices, things get ... complicated.

Fortunately for Apple and its shareholders, the installed base of Apple hardware, especially iPads and iPhones, is too big for any cloud player to ignore. That position, as gatekeeper to the wealthiest segment of the PC and mobile hardware market, gives Apple an enviable position as power broker.

And in the current climate, that’s a potentially tremendous edge for Microsoft over Google. Office for iPad was an unqualified hit last month, and Microsoft has been aggressively developing its other products, including OneDrive, for iOS. Despite friction through the years, Apple and Microsoft have maintained a working partnership.

Meanwhile, Google, largely on the strength of its Android OS, remains public enemy #1 for Apple. The spate of lawsuits by Apple against Samsung and other Android handset makers are really part of a proxy war against Google. And indeed, if you look just a few lines earlier on the first page of this strategy document, you'll see the heading "2011: Holy War with Google."

Under those circumstances, especially with the Mac-PC wars mostly in the rearview mirror, it’s easy to see Apple developing tighter ties with Microsoft’s cloud.

Topics: Cloud, Apple

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129 comments
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  • I look forward to your thoughtful comments

    There are lots of interesting things to talk about in terms of cloud strategies by Apple and its rivals. Please resist the temptation to veer off into personal attacks, OK?
    Ed Bott
    • One small inconvenient question.

      Have you any idea how much money Apple makes from the cloud?

      1) Email . . . but there’s no evidence they’ve gained any traction. You mean you haven't looked.

      If you don't know how many accounts Apple have, how can you justify your other comments.

      2) Productivity apps . . . And it is a non-starter when competing with Google Apps and Office 365.

      Your opinion. I use it all the time.

      To me Office is a non starter. It's slow. Its cumbersome. And it's absurdly expensive.

      To me Google Apps are a non starter. I don't want my documents scanned and the content used to feed Google's advertising business.

      3) . . . Most of them have clients for iOS and OS X. Apple has nothing in this space.

      Files are so PC. This is a post PC world. Apple is providing cloud storage for documents, fine granularity synced object stores, for media, for backups. Who cares about files?

      4) . . . Messaging iMessage and its companion app, OS X Messages, allow users of Apple-branded devices to chat with other people if they're using Apple-branded devices

      No. iMessaging acts as a continuous extension of texting, with an advantage when it is between iMessaging users.

      5) . . . It's possible to share those photos via the web, although the process is cumbersome.

      It isn't a photo sharing facility. It's a cloud based photo capturing facility for which it works fine.

      Android devices are unsupported. Tough?

      6) . . . Music Music downloads are dropping dramatically, which might explain, in part, why Apple is planning to purchase Beats Audio, with its streaming music service

      Apple has a streaming service. All Apple supplied content can be streamed. And none Apple supplied content can be streamed with iTunes Match. They also have collated content streams called iTunes Radio. If Beats turns out to be more than just another silly rumour, then I'm sure that it will add further content streaming to Apple's existing range of facilities.


      So back to your title. "Apple and the cloud: A magnificent missed opportunity"

      Have you any idea how much money Apple makes from the cloud? You tell me who makes more.
      Henry 3 Dogg
      • Just a thought on your "small" .....

        1. I work in an ERP development world. Sorry but most emails are Gmail, Outlook, Yahoo, Corporate, etc .... Little to no Apple ...
        2. iWorks is a has been. I work cross platform - why would I limit myself to a crippled "cloud"? There's a reason I use Gdrive and Dropbox ... Onedrive gaining ground too
        3. Huh? Files are documents, pegs, mp*, etc....
        4. The "texting" portion of iMessage works for all. The benefits in iMessage are locked in the Apple world.
        5. Share is a limited function in iOS, sadly. MS and Android do so much more.
        6. iTunes ... Sigh. One piece of software I would like to dump.

        Sorry, but Apple cut their throat by not developing iCloud. Then again, those of us in Me we're cut by Apple too. :(
        rhonin
        • And?

          1) So your view of the EPR development world is a proxy for the rest of humanity enough to state that "there’s no evidence they’ve gained any traction"?

          2) Crippled in what way? Drop box is crippled in the sense that anything you put on it is, in effect, open to anyone who wants it.

          3) Files are documents. So why, if I store documents on the cloud all the time, does Ed Bott state "File Storage - Apple has nothing in this space"

          4) Exactly. Which makes it a great strategic move.

          5) I have no problem sharing photos from iOS. iCloud can provide shared photo streams. I have no problem sharing web from a Mac. I run web servers on Apache from Macs.

          But Ed Botts statement that "It's possible to share those photos via the web, although the process is cumbersome" is absurd. iCloud photo streams.

          6) You are very welcome to dump whatever you wish.

          But how does that excuse Ed Bott from ignoring, or sounding off without knowing, that Apple already provide multiple streaming mechanisms.
          Henry 3 Dogg
      • Fanatics about!

        Your post seem to indicate you are a fanatic, which implies your believes are faith and not fact based. Can you answer your own question, can you tell us how much money Apple makes from the cloud?
        NoITAnalystsHere
        • Certainly

          Yes, I can answer it. But the point is that if Ed Bott can't, then what is be doing declaring it a failure?


          so... from Horace Dediu's demolition of Fred Wilsons statement that Apple has nothing on the cloud

          $3 billion/yr for end-user services plus

          $4.7 billion/yr for licensing and other income which includes

          more than $1 billion/yr paid by Google for traffic through Apple devices and

          $13 billion/yr in app transactions of which

          $9 billion/yr was paid to developers and

          $3.9 billion/yr was retained as operating budget and profit for the App Store. In addition,

          $2.7 billion/yr in music download sales and

          more than $1 billion/yr in Apple TV (aka Apple’s Kindle) and video sales and

          $1 billion/yr in eBooks sold

          In summary, iTunes, Software and Services has been growing between 30% and 40% for four years and is on its way to $30 billion/yr in transactions and sales for 2014.

          http://www.asymco.com/2014/05/09/measuring-not-getting-the-cloud/

          He finished with the statement that

          This is what can be deduced from a reading of Apple’s financial statements of operations. If there are comparable details for companies which do get the cloud, I’ll be happy to tally the comparison so we can calibrate this failure

          I note that Fred Wilson hasn't come back to him yet.
          Henry 3 Dogg
          • Second set

            Bit hard to see the answer, you're saying they make $16.4 billion profit from the cloud?

            Apple claim that net sales (not profit and how much they make) for iTunes, Software and services for the 2013 financial year was $ 16.051 billion which is just under 10% of revenue. This come from http://files.shareholder.com/downloads/AAPL/3165222904x0x701402/a406ad58-6bde-4190-96a1-4cc2d0d67986/AAPL_FY13_10K_10.30.13.pdf

            Amazon's revenue $ 74.451 billion, and Google $ 50,547 billion from advertising on the could.
            NoITAnalystsHere
    • baloney

      "Apple’s iCloud is, first and foremost, a backup target for iOS devices, a job it does reasonably well. But on every other modern yardstick for cloud computing it falls short."

      Every? Every one except the one that matters. And the one that matters is what iOS device users need.

      So you take a distributed file server oriented approach to iCloud and guess what ... iCloud it isn't intended to be one.

      iCloud is a set of facilities to allow iOS device users to achieve the things that they need to achieve. Which of your other modern yardsticks were devised to measure that?

      in particular, Apple do not base their model on continuous network access. They base it on lazy asynchronous synchronisation. A far more realistic model for a mobile device in the current world.

      And if what you really need to do is post files to a remote disk, yes, iCloud can do that. They just don't discuss it on page 1 of the literature because it isn't the default usage model.
      Henry 3 Dogg
    • Apple/MS Merger?

      Any change that in 10 years Apple and Microsoft are a single company? Don't laugh. Each is strong where the other is weak. Apple has great hardware and consumer ecosystems but struggles in the cloud and in enterprise. Microsoft is strong in the cloud and enterprise but weak in hardware and consumer ecosystems. With Google such a big threat to both, might Angela Ahrendts (assuming she succeeds Tim Cook) and Satya Nadalla decide to bury the hatchet once and for all and join forces?
      KPOM1
      • Nope! Sorry, but, MS doesn't need to join forces with Apple,

        and it's Apple which will be looking to join forces with a cloud services provider, and perhaps, they could purchase or merge with Amazon.

        Microsoft already has its own hardware division, which is growing pretty fast, and already has a big presence in gaming, with its XBox franchise and on-line gaming ecosystem. Windows Phone and Nokia are also a fast rising entity, which will rival the size of iPhones in the not too distant future, so, no need to join forces in that category. Microsoft already owns the Surface tablets, which are much more capable than any comparable devices from Apple, so, no need to join forces there either. Microsoft already has a much bigger consumer and business ecosystem than Apple, with their Windows ecosystem, and with their Bing and e-mail services, and other cloud services, and Apple is conspicuously missing in that category, so, no need to join forces there either.

        While Apple is huge when it comes to revenue and profits, it's actually very small in comparison to Microsoft and Google, when one considers that Apple has no real diversification to protect its future.

        In actuality, Apple may become a good acquisition target in the not too distant future, when the iStuff stops being the huge revenue sources for the company. Apple could become more relevant by acquiring something of real value, like Amazon. It "beats" me why Apple is going after Beats.
        adornoe@...
  • OneDrive

    Bonus points awarded for the use of Microsoft's OneDrive platform in this article -- a practical way of reinforcing the conclusions of the article.
    timacheson
    • Definitely.

      One point I didn't agree with was the success of iCloud as a backup service for iOS devices. It's only successful if you have a small capacity device or one that is mostly empty. For those of us who have the largest capacities which are nearly full at all times, iCloud is a major failure. There is simply not enough space to do a backup without paying Apple for more space. Personally, I feel that when you pay hundreds extra for a device with maxed out storage, Apple should automatically increase your free iCloud storage to match as part of the purchase. In other words, they should always provide enough storage to back up the device(s) you purchased. As it is, they are essentially taking the iCloud backup feature away from anyone who buys their most expensive devices. How is that right?
      BillDem
      • Definitely not.

        It seems that as ever, it isn't necessary to know anything about Apple devices, in order to criticise them.

        I have a 64 GByte iPhone. It's got a fairly typical mix of stuff on it. It's about 70% full.

        A backup takes less that 2 GByte.

        That's because an iCloud backup only backs up stuff that cannot be restored from elsewhere.
        Henry 3 Dogg
        • That's the biggest problem

          Google drive is my one stop shop for my Android backup and restore.
          iCloud is the starting point for backup and restore of my iOS devices.

          Something is wrong with that picture.......
          rhonin
          • No it isn't a problem

            No. I can recover all of the content from Apple's cloud. a one stop location.

            Its just that all of the stuff that is on the cloud anyway, doesn't get redundantly duplicated in the free or paid storage allocation.

            Think of it as a massive deduplicating optimisation.

            And next time you assume that Apple are doing it wrong, consider the possibility that you just don't understand what they're doing.
            Henry 3 Dogg
    • Google Drive could accomplish the same thing, but the point...

      ...remains the same. Both OneDrive (which is what I primarily use for cloud-based storage, in part because my primary e-mail account is Outlook.com/Hotmail and I also use a Windows Phone) and Google Drive (which I use when I use my chromebook) are superior options for cloud storage over iCloud. Heck, I can access OneDrive from all of my smartphones on different operating systems (iOS, Android, WP8, and BB10, though I've had trouble accessing files via the OneDrive app on my Blackberry Z10 recently). Both Microsoft and Google also offer relatively easy to reach incentives to obtain considerably more cloud storage space - using Bing as your search engine in Microsoft's case, and buying a chromebook in Google's case.
      CHIP72
      • because...?

        " Both OneDrive... and Google Drive ...are superior options for cloud storage over iCloud"

        Were you going to tell us why, or is it just a religious conviction?
        Henry 3 Dogg
        • Uh, because...

          ...I can access either OneDrive or Google Drive via multiple operating systems, rather than just Microsoft or Google devices?
          CHIP72
  • Apple's closed ecosystem

    "we further lock users into our ecosystem"
    timacheson
    • Lock in means lose out

      Unless you only have family and friends who have Apple devices, the restriction of their services (facetime etc) to Apple only means people tend to use other services like Skype or Hangouts.
      The other elements of icloud are just syncing, not access everywhere online storage.
      In short, there's not real need to use any of their services.
      Boothy_p