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Deep Dive into Apple's New Volume Purchase Program for Businesses

Apple's new volume purchase program (VPP) for businesses makes it easier for companies to acquire apps, but there are still many potential improvements, according to one expert.

Jim Sieglis a technology architect with the Fairfax County (Va.) school district. He also co-maintains the iPad Enterprise/School Deployment list with me. In Apple educational circles, he's best-known for creating the definitive flowchart explaining how the Volume Purchase Program (VPP) enabling schools to buy apps works.

So Jim was the obvious person to turn to with questions about how the Volume Purchase Program for  Businesses that Apple announced late last week will work.

This should be of interest both for enterprise developers wondering if this will be another, better way (Apple's new B2B App Store) to reach customers, as well as companies and organizations wanting to rationalize the process, especially the financial side, of acquiring apps.

The following is an edited transcript of a Q&A with Jim conducted last Friday, July 15 right after Apple's announcement.

How similar are the two volume purchasing programs?

Siegl: I’d say there is a 50-60% overlap. There are some big differences. Some could be considered improvements. Some are just differences.

One of the biggest wins about VPP for businesses is that it's simpler. The biggest complaint about VPP (for schools) is that it’s complicated. If you look at my chart below, it's like the steps to the foxtrot!

The reason for the complexity is because VPP for schools was pieced together to accomplish two things that were not easily shoehorned into the existing iTunes store:

1) It had to accommodate K-12 schools and colleges, which are mostly non-profits and therefore aren't charged sales tax.

Siegl: VPP is "simpler" way for businesses to acquire apps.

2) Many colleges and most K-12 schools have policies that prevent or strongly discourage using a credit card for purchases, which is how consumers buy at Apple's App Store. Schools really want to be able to purchase using invoices and purchase orders. Businesses use purchase orders, too, of course, but it's not as strong of a requirement.

So explain in detail how a school uses VPP to buy apps - and how that will differ with VPP for Businesses?

Siegl: Let's start with my flowchart.

Long story short: a Program Facilitator (usually a teacher, department administrator, or someone in IT in charge of the iPads and iPhones) will request to buy a voucher worth a certain dollar amount to the school or district's Authorized Purchaser. The latter is usually someone in Finance or Procurement. Once that purchase order is approved and sent to Apple, Apple will send back a voucher - essentially a VPP App Store gift card - to the Program Facilitator.

The Facilitator will then buy redemption codes for the requested apps. Those codes - similar to a license key for software - are then distributed to the students, teachers or administrators so they can go and buy and download them onto their individual iPads or iPhones.

The new VPP for Businesses is a lot simpler because it eliminates the need for Authorized Purchasers and Program Facilitators. That lets businesses potentially skip steps 1-4 above. See below:

Source: Jim Siegl

That's because VPP for Businesses eliminates purchase orders and gift cards in favor of credit cards, debit cards and PayPal.

Now anyone in a business armed with a corporate credit card can directly purchase apps or buy redemption codes on behalf of other employees.

These include apps distributed in a mass way today via the App Store, or custom-built apps from third-party developers. The latter augments the existing iOS enterprise developer program, which already let ISVs and in-house developers test and distribute apps, but lacked the transaction features of VPP.

So would you call Apple's VPP a true enterprise app store, like what the mobile device management vendors (including Sybase) have been talking up?

Siegl: My opinion is that what the MDM vendors call an enterprise app store is more focused on distributing in-house apps and facilitating the distribution of App Store redemption codes.

The VPP is a different kind of an enterprise app store, or maybe a first example of enterprise support within the traditional app store model.

It adds to the four options companies already had for buying apps:

1) Employee creates his/her own iTunes account for work and puts purchases on a corporate credit card;

2) Employees use their personal iTunes account and file for reimbursement on all purchases, like they do with travel and entertainment;

3) Companies use corporate credit cards to buy Apple gift cards which they distribute to employees;

4) A corporate administrator with a corporate credit card will buy an app and send it to an employee as a "gift".

VPP adds a fifth option. It balances out Apple's offering.

But there are some limitations?

Siegl: I see some. Some are minor, some are more serious:

1) This program is only for the U.S. iTunes store today. That may make it tricky for multinational corporations that want to standardize on a particular app, including for workers outside of the United States.

2) VPP doesn't make it easier to distribute in-house apps built by your company's developers. That's because the minimum price Apple has set is $9.99 per app.

3) VPP also isn't a natural fit for ISVs who want to distribute an app for free as part of an enterprise site license or software bundle. That, again, is due to the minimum $9.99 app price.

One workaround would be for the ISV (in example 3) or enterprise (in example 2) to set a price of $9.99 for its mobile app, and then use the VPP to buy $9.99 redemption codes that it would separately distribute to the enterprise customer or, in the case of no. 2, to its enterprise workers.

4) The $9.99 minimum also makes it difficult for ISVs using a 'freemium' model in which they give away trial or unlimited use apps for free, in the hopes of upselling customers later via an in-app purchase. Apple's not a fan of in-app purchases because it doesn't get a cut.

5) The $9.99 minimum also makes it difficult for hosted service providers who want to offer free apps as entryways to paid cloud services.

6) VPP also isn't great for enterprises buying custom apps who also want to get the source code, since the App Store doesn't allow that today.

Anything else raise your eyebrows?

Siegl: There is this language from Apple in page 4 of the VPP for Business guide: "To verify that custom B2B apps meet the review guidelines, Apple will need to log in and operate the application. Work with your developer or business partner to determine how to meet this requirement with appropriate handling of proprietary or sensitive business data. You may want to provide generic test accounts or sanitized sample data to protect confidentiality for the purposes of app review."

It sounds similar to the review process for other App Store apps today. The issue is that if you are a bank, or a hospital, or an educational institution, these industries have some pretty specific regulations about securing sample data.

The existing process of paying an ISV to write an app and distributing it in-house under the iOS enterprise developer program may be a better fit in these cases, but it is always good to have additional options.

Finally, the focus of VPP appears to be as a bulk purchase program, not a volume discount program. So far, there's been no information about whether ISVs will be able to offer discounts on large purchases. VPP for Education allows this. I would've expected this to be an option for VPP for Business, too.

The VPP for education was also a little shaky when it came out last August. Apple revised its process within 6 months, in February this year. That definitely made some improvements. I would expect a similar evolution with the business program, too.

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