Inside the Apple-IBM deal: How will it work, and what to expect

The Apple-IBM deal set aside decades of rivalry to forge a new path into tapping the enterprise market. But some key industries will miss out. Here's why.
Written by Zack Whittaker, Contributor
Image: IBM/US Open

NEW YORK — In December 1983, Apple co-founder Steve Jobs flipped his middle finger at the IBM sign outside the computer giant's headquarters in New York City. 

A little over 30 years later, his long-time confidant and eventual successor Tim Cook would reverse that rivalry by partnering with its long-time enemy.

It took Apple watchers by surprise — it was the last thing many long-time fans, critics, and experts even considered. But at a time when Apple's iPad was beginning to slowly dip in market share after an all-time tablet high, in conjunction with IBM's desire to stay hip and with the in-crowd, the partnership seemed at least on the face of it to be one of setting aside differences to drive crucial profits for both companies.

But questions remained over how viable the deal could be in the long-run, in part because Apple still does not have a huge reach in the enterprise market, unlike its competitors.

To recap the deal:

Apple and IBM will begin collaborations on more than 100 exclusive industry-specific apps built for primarily iPads, but also iPhones. IBM gets the "cool"-factor, while also bringing its analytics and data platforms, technologies, and services to Apple users in business, finance, healthcare, telecommunications, and others.

The first of those apps will be available later this year, with more slated to be out into the new year.

There will also be service, support and mobile device management cogs in the deal's machine. With IBM, Apple gets a nudge into the enterprise — which it needs to gain a higher penetration rate in the Fortune 500 — that it couldn't achieve on its own. And, IBM gets a key partner in Apple and some help for its developing mobile efforts. 

This deal makes sense seeing as IBM hasn't built a PC or mobile device in about a decade, and Apple continues to rely on its users bringing iPhones and iPads into the enterprise through the bring-your-own-device route. 

But how will both companies make it work?

Here's what ZDNet has learned.

The two companies want more of a slice of the mobility pie. IBM isn't a mobile player like Apple, but it has thousands of consultants who know mobility inside and out. Apple meanwhile lacks the enterprise expertise. 

The two companies have a half each, but together make up the full circle of expertise. The coalition will target a number of verticals, including healthcare, financial services, telcos, transportation, and others.

The deal will be lucrative. In late October, Jefferies analysts Sundeep Bajikar and Mark Lipacis said in a note to investors that the Apple-IBM partnership could bring in 42 million new users for Apple. That could amount to billions in iPhone and iPad sales, giving Apple a needed boost to iPad sales in particular — especially in the enterprise.

Here's how it will work.

IBM now has the supply, activation, and mobile device management (MDM) play, allowing it — for the first time — to resell and activate iPhones and iPads. Because Apple doesn't have an enterprise sales team, businesses will go to IBM for their iPhone and iPad needs. IBM will sell the devices and have them configured out of the box, preloaded with the apps, software, and policies that the enterprise needs. 

IBM will also offer the app development for the custom-built apps, using its existing big data, analytics, and software stacks.

IBM's MobileFirst strategy focuses on delivering faster and simpler transactions between companies and their customers. That means custom-built apps for iPhones and iPads that use the device's existing technologies, like the M8 coprocessor and iBeacons, to solve pain points on the ground for end users.

Say, for example, you're in an airport. A check-in desk employee can scan in a customer's boarding pass and immediately tell the customer not only which terminal they need to go to, but also by what time and even the directions to their gate. That's a common problem for a lot of passengers, even if it sounds like a basic one. 

One app, one pain point, one solution, and potentially a lot of happy end-customers. And IBM will be at the front of that, as the dependable enterprise player that its customers can trust. 

But one of the key wider pain points for most customers is that they have to work with a bunch of vendors — from phone and device manufacturers, email providers and MDM provisioners. For most enterprises, there are no end-to-end support mechanisms in place. Enterprises are working with too many people, and it's too much work and often too much money.

And anyone working in the enterprise will know full well that the most functional of apps are rarely designed with user experience in mind. Apps are built by engineers, not designers, making apps unintuitive and clunky to use.

That's where Apple comes into play. With its user experience and design values, IBM develops the apps, while Apple builds the user interface using existing tools and technologies — such as the Swift development language, released earlier this year — to build on top of IBM's software and analytics services.

Apple plays a wider part on the device and design aspect, while IBM lifts much of the weight as the front-facing enterprise sales head.

Then comes the after-sales care. More details on Thursday were released outlining the split between Apple and IBM support mechanisms. 

Apple will take on the support for its devices and its software, à la how AppleCare currently functions, but IBM will take on the responsibility of handling issues and development with the custom-built apps. Essentially, IBM's own support team will come with an Apple logo stamped on it. IBM will have personnel go on-site to fix app issues as it has the most experience with the apps it developed, and the analytics and software stacks it has.

There's one major vertical missing — at least for the time being: The government market.

Why? It's a matter of design. Apple takes the utilitarian approach of the "greatest good for the greatest number." And the government market more often than not doesn't want to compromise on what it needs. Apple won't budge, either.

iOS is already certified for government use. It's FIPS 140-2 compliant, allowing it to be used for low-level security classifications. It's also received STIG certification for Dept. of Defense use.

While Apple's generally doing more with the government in bolstering its security, it's hard to find a happy compromise between what the government needs and Apple's user experience principles.

Simply put: The government wants something Apple won't develop. Even though government markets are lucrative to enter into — BlackBerry knows full well as it clings on to its final major vertical — Apple doesn't believe in design fragmentation. It's paying attention, but it's not likely to drop something it finds crucial and important for the sake of one client.

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