Apple's Game of Services: Winter is coming

Apple's Game of Services: Winter is coming

Summary: Cupertino's got a giant war chest, but does it really want to be in the business of search engines, volume email services, social networks, productivity and enterprise software, and all the other things that are needed to complete the mobile picture?

TOPICS: Cloud, Apple, Mobility

I don't know about you folks, but I'm a huge fan of Game of Thrones, the HBO TV series based on George RR Martin's A Song of Ice and Fire series of epic fantasy novels, which I've also read and enjoyed.

If you haven't seen the TV series or read the books, here's the basic premise in a nutshell: The characters interact in a fantasy world with thousands of years of history, with medieval-era technology and seasons that can last for years.

Paralleling our own medieval history, the world of "Westeros" (which is actually the name of one of the two super-continents in which many of the events take place) is feudalistic. There are major "Houses" that control large territories and city-states that have lesser allied families and vassals sworn to them.

Each of these Houses compete with each other, are frequently forced to cooperate due to the nature of trade, and sometimes due to their desires to control territory and resources are at all-out war with each other.

The political intrigue between the dramatis personae and shuffling of power between the Houses is what makes up the main plot elements of the books and the TV show.

(Image: CBS Interactive/ZDNet)

During the time of the first several novels, one of the longest "summers" on record — sixteen years — is starting to come to an end. Winter, where the nights are long, temperatures plummet, and resources become scarce, is now approaching from the northern part of the continent. Along with zombies. Ice zombies!

After reading the books and watching the show, I see a lot of parallels between Game of Thrones and that of our own computer and mobile technology industry.

Like the Lords of Westeros, the mobile technology industry has four major "Houses": Microsoft, Apple, Google, and Amazon. One could argue that Apple is currently the strongest of the Houses, much like Lannister is in Game of Thrones.

Apple, like Lannister, is making the most amount of money from mobile, and can throw its weight around purely by the nature of its wealth. It has 39.2 percent of the mobile market locked up. In the context of our mobile industry, Apple is making the most amount of money from the mobile industry due to the high margins on its devices, and also has the lion's share of developer interest as well as an oath of fealty by its own loyal end users.

Google is a bigger House than Apple in the sense that it has about 52 percent of the mobile market, and has almost the same amount of developers that Apple has. But its developer ecosystem isn't nearly as profitable as Apple's. Its power base is also fractured among at least three or four other Houses — Samsung, Motorola, HTC, and LG, to name just a few.

Although it could be argued that Samsung is just as powerful a House as Google itself due to its manufacturing capacity, the critical component chain that it controls and its overall device share in Android's ecosystem.

Microsoft currently has the smallest mobile industry share if you examine it strictly from an OS platform perspective. Windows Phone and Windows-based tablets are playing catch-up in an industry that has matured over what I would call a protracted and very profitable "summer" for both Apple and Google, as it pertains to iOS and Android's success, respectively.

In our War of Mobility, Microsoft is not unlike the House Targaryen that Lannister and its lesser allies Baratheon and Stark unseated from the Iron Throne in the War of the Usurper just prior to the events of Game of Thrones.

While the other Houses are distracted in battle over such mundane things as software and design patents on the main continent, Microsoft is re-grouping its forces elsewhere.

Just like Danerys Targaryen, Redmond is flying under the radar, building a formidable army of partners and raising "dragons" — a powerful cloud (Azure) and a converged application development strategy in the form of the next generation of Windows client and server products.

Finally, there is the mysterious House Amazon. Its mobile device platform is the same as Google's, so in a sense, Amazon is one of the allied Houses of Google. But Amazon has its own Appstore for Android, and Google makes no money from Amazon's development of the Kindle Fire, not even in OS licensing, since it bases its products on a open-source implementation of Android and doesn't use any of Google's apps.

Amazon hasn't entered the smartphone arena (yet), sticking strictly to small tablets, and we don't know exactly how much money Amazon has made from device sales of Kindle Fires, or how many they have produced.

But as one learns in Game of Thrones, the complex plots and mechanisms that lie below the surface are far more revealing and much more interesting.

Apple is indeed wealthy and powerful. But just as the Houses in Game of Thrones are reliant upon each other for trade, Apple is dependent on Microsoft, Google, and Amazon for the overall success of its platform with the applications and services that are preferred by its own end users.

Apple doesn't have a search engine. Google, Microsoft, and Yahoo have those (and you might have missed it during the demos at WWDC, but Bing is now the default search engine in iOS 7).

Apple has a mail and calendaring service, iCloud, but compared to both and Gmail, and even Yahoo's own Mail service, Apple's cloud mail and calendar offerings are a joke.

Google's applications for iOS rival those of their own offerings on Android, and many have said that the iOS implementations actually look and work better. As a Gmail user, I vastly prefer using Google's Gmail app on iOS than Apple's own Mail application. If it had its own Calendar app to replace the one in iOS, I'd probably use that as well.

We'll see if the eventual release of iOS 7 makes me change my position on this at all.

Yahoo's newly redesigned Flickr app for iOS essentially makes Apple's iOS Photostream and built-in Photos app a vestigial organ.

Apple social networks? There are no such things. Twitter, Facebook, and Google Plus for iOS rule that platform. Plus Instagram and all the others.

Apple Maps versus Google Maps. No contest, especially now that Google is buying Waze. Apple's Siri versus Google Now in terms of overall usability and usefulness of results: Also no contest.

And how many iOS users absolutely depend on Google Voice for unified messaging? Or use Skype? I'm raising my own hand here. I'm sure another few million also just went up.

Apple has productivity applications in the form of iWork, and I admit they aren't bad, because I own and have used all of them on iOS.

But now that I have Office 365 Mobile for iPhone, I can use the very same tools and productivity cloud that I have on my Mac, Windows 8, Windows RT, and Windows Phone systems, without concern for botching up formatting when I share these documents with others, should I need to edit them on the road.

SkyDrive as the unifying cloud storage back end behind this is incredibly powerful, and having access to Lync 2013 for corporate VoIP and video call-conferencing, which is integrated into my work Exchange email and contacts platform, is killer.

And SharePoint Online, which runs on both iOS and Windows Phone, is invaluable for having access to my corporate intranet.

And lest we forget Amazon has a far more compelling ebook ecosystem than Apple currently does with iBooks, plus Kindle has the advantage of being multi-platform, in that it runs on all of the device platforms, not just its own or even just Apple's.

Its multi-platform music cloud and video-streaming platforms, while not as popular as Apple's, are extremely profitable, and Amazon also runs the cloud infrastructure that powers Netflix, which is arguably the most popular video-streaming service on the internet, period.

We should probably also not ignore that the balance of the e-commerce that flows through Apple's iOS (and, well, just about everyone's devices) also ends up at Amazon. Wanna buy that accessory cable for your iPhone? Yeah, there's an app for that, but where are you gonna spend your Prime loyalty points?

What's the main takeaway here?

Apple is indeed a powerful and wealthy company. But it is dependent on a number of third parties that it openly competes with in device market share for the essential services that its own end users expect on the platform.

To quote Nilay Patel over at The Verge, in his article criticising Apple's Phil Schiller's "Can't innovate anymore my ass" bravado at the most recent WWDC, "Until the company can master data and services — a critical component of how things work in 2013 — all that's left for Apple is how things look and feel."

The Houses have all positioned themselves. The question remains for Apple: Is it going to try to grab more territory using that big Lannister-sized war chest and continue its warlike behavior in the courts, or will it come to the realization that it needs the other Houses for commerce and to supply it with essential services?

One could say that there's really a symbiotic relationship here, because Apple's share in the mobile market funnels services users to those respective companies as well. So in all honesty, they can't swear off Apple no more than Apple can realistically swear off them, either.

Cupertino's got a giant war chest, but does it really want to be in the business of search engines, volume email services, social networks, productivity and enterprise software, and all the other things that are needed to complete the mobile picture?

I don't really think that Apple wants to be in these businesses, truthfully, nor does it have the essential expertise to pull it all off, no matter how much money they might throw at a given problem.

But the flip side of this is that the more Apple is dependent on everyone else, the more mindshare (and service revenue) it actually loses, and risks losing platform users to those Houses as well. So it is going to have to make some services investments, regardless. Where it plans to invest is anyone's guess.

What I can say is that Apple's five years or so of summer is definitely coming to an end. And winter is coming.

Does Apple need to vastly expand its services portfolio to keep pace with the other Houses? Or will it always be dependent on them in some fashion? Talk back and let me know.

Topics: Cloud, Apple, Mobility


Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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  • Agree with Jason completely on this one ...

    ... like all royal houses the families have risen to power by murdering and illegal means, with little regard for their subjects or the law. Their used to be a vestige of decency and civilisation but now its all war, war, war.

    Hopefully Perlow will find us another parallel story which shows how commoners rid themselves of the royals.

    Then maybe he can write something about technology instead of food, cinema or fiction.

    I fear though that the next instalment will involve the Borgias or the inevitability of the BORG :-(
    • Useful revivals?

      There is one royal tactic which I think could be usefully employed by the US and UK Governments ...
      ... The Crown used to raise money for wars by imposing taxes.
      So how about a straight tax on global corporations who have hidden their earnings.
      We'll start with Schmidt and Google.
      I'm sure a stay in The Tower of London will rekindle his conscience :-)
      An occasional trip to the nearby National Gallery to see this picture will help too.
      • Cool...

        It would destroy MS and their ill gotten gains...
        • You must be the twin brother of CaviarPoop.

      • Each country controls their own tax laws

        Politicians who pretend that clever tax dodges are "sinful" or "unethical" are just posing. Those politicians are quite familiar with treating their citizens as fools. I don't fall for this type of ruse as often as I used to.
  • Jason Perlow dislikes Apple. News flash!!!

    Not really. So 1% of iOS users depend on Google Voice and tha will cause Apple to collapse. Gmail? Unimpressed as it has turned into a spam machine of late. Having a second rate social network will somehow save Google from Facebook. The profit less Amazon is also about to destroy Apple though it will starve once Winter hits.

    Overall, poor analysis though it does have some good insights the conclusions are shallow.
    • fanbois are zombies

      JP does a great analysis of the current state of the four big competitors but how this plays out will be anyone's guess.

      bottom line though is the customer has choice.
  • Common ops

    I think many analysts have been coming to your same conclusion for some years now. Apples market share have been diminishing in many global markets for as much as 11 consecutive quarters. Even at these unheard of levels of brand exposure and customer loyalty something at the core of apples business is rotten. To keep future margins high apple need to move into services this will be extremely difficult as apple are historically poor at this. Apple also are a notoriously weak partner when coming to strategic partnerships, the really do work better alone. With out creating or partnering services all that is left is handsets, music and apps. As we can see this business is weak and will move to Google almost completely in the next 5 years. The future? Google with >50% of the entire mobile space....devices, software, services, search, advertising.

  • Microsoft currently has the smallest

    mobile industry share if you examine it strictly from a OS platform perspective.

    Yet from the graphic you'd think it were the opposite. So, the graphic is not to depict share or subscriptions and is not in alphabetical order. I guess it is just based on someone's personal preference???

    Anyway, I also like the Game of Throne series but don't let it influence my real-world thinking. If I did Dragons and Dire Wolves would have to represent Open Source and Linux :)
    • Left out Ice Zombies....

      That's all those infected (botnet) Microsoft PCs and servers that keep trying to brute force attack my network.
      • ice zombies = Android

        No doubt about it
        malware laden, PI stealing platform that means "Winter's here" for Google
        • Anybody can have PI...

          as long as you can accept an approximation to the number.
        • sorry dude, but way more REAL malware for windows than bad apps on android.

          As for as I know there is only one real malware virus for Android, the rest are apps that people have to install and ignore the permissions requests data before they can do anything.

          Windows malware is real malware that infects a machine, spreads, opens botnets and often doesn't require any effort on the users part at all. (like codered and nimda)
          • Not these days

            Most malware for every platform are things users install, including Windows. There are fewer actual viruses. Trojan horses are the common vector of malware and will probably continue to be the most common. Install an "infected" app from an Android/iOS/Windows app store. What is interesting is that the "openness" of Android and its app stores create the most potential problems, with Apple and Microsoft providing some evaluation on apps coming into their stores.
    • Geez Trolls

      You're sounding a little threatened with this post. Four logos shown and you try to read something deep and sinister into it? Get a life young fellow because the logos are just that, logos and if you came from another culture maybe you'd read it in a different sequence.
      • I was going for something like this:

        Frankly, the order I put them in is the order the logos appeared in my filesystem after I downloaded them. LOL.
        • Thanks for sending a raven

          with news to clear that up.
  • Quite a stretch Jason

    I too like Game of Thrones. However I have to say that Jason's analogy is quite a stretch. Apple is in the market to see hardware. The benefit of Apple hardware is that the operating system and the hardware were made to work together. Tim Cook will say Apple is a software company, but one that makes it's money selling the attached hardware. This ability to make hardware for the specific software, has for the most part led to Apple devices to not be as buggy as Wintel Desktops, and Android phones. Nothing is perfect, but having just switched to a Mac as my personal computer, I have to say it is like a breath of fresh air. Apple makes it's money selling hardware, and will continue to do so. As far as Apple goes into services, it is just to benefit the hardware sales. If a person likes to use a competitor program rather then Apple's own application, Apple does not care. They still sold you the hardware and want you to be happy and come back for more. Apple applications such as Mail are just a means for the user to be productive on their device. If the user does not want to use the Apple application for what ever reason, choose another. Apple is not interested in your personal behavior with it's device. Apple is interested that you feel that the device worked correctly for what you intended it for. This is why Tim Cook keeps referring to the user satisfaction scores. Apple is not interested in taking on the competitors just for the heck of it. Apple wants the services it provides to be pleasant, so you come back for more. Apple changed the default Map application as Google would not provide services Apple felt it needed to provide, such as turn by turn direction. Apple is not in the market for taking on search, but wants Seri to function well for it's users. Safari on the iPhone can still use Google, or Yahoo for that matter. Social networking is free to flourish on any Apple device. However when it comes to playing games, there is a new market in social networking between other iOS game players. Apple provides a service for this market solely to make a pleasant user experience. Apple just expanded it's productivity suite iWork. I am sure iWork does not compare in function to Microsoft office, but Microsoft did not want to offer an application for the iPad. For my needs the Pages application works fine, and now through the internet I can work on a paper while at work with my office desktop. It was Microsoft who choose to reserve an application from users. So Apple expanded their own services to fill that void. The intent is that the user has a pleasant experience with Apple devices, and chooses to purchase another when the time comes. Now back to the Analogy with the Game of Thrones. Winter has come to the Wintel Duopoly, but as a commoner in the computer world, I feel better for it. Apple needs to keep making pleasant hardware that is easy to use, stable, and does not fall apart right after the warranty expires. If it can keep doing this, Apple will be fine.
    • Ditto On Stretched

      I mean except for the incest, ursupation, inability of the patriarch to see the talented child, and sadistic scion on the throne, Apple is so exactly like the Lannisters.

      Services/cloud are a problem for Apple to solve, indeed, but I'm not convinced it's a dragon being transported by a blond, occasionally feral Microsoft.

      Still, points for keeping it interesting and pop culture current.