Apple's OS Edge Is a Threat to Microsoft

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Toward an Apple-Flavored Office

The contrast between Microsoft's and Apple's product development strategies couldn't be starker. Where Microsoft is increasingly hamstrung by OS rigidities, Apple moves flexibly and swiftly. While Microsoft struggles to bring a kernel-based "Windows 7" to market in 2010, Steve Jobs has declared Mac OS X the right platform for the next decade of new products. Engineering improvements in one Apple product quickly find use at low cost in another. While Apple's "multi-touch" screen innovation made its debut with the iPhone, it appeared on the MacBook within 60 days. With this sort of flexibility, Apple is ever-free to target existing markets or invent whole new ones.

Given these advantages, how might an Apple assault on the corporate market play out?

• Despite Apple's relative scarcity on corporate desktops, Mac laptops are already well accepted within the enterprise, with a market share of more than 20% and growing. For business travelers, the new MacBook Air, some three pounds lighter than comparable Windows-based laptops, already offers one huge advantage. And now, with the ability to jump back and forth between Mac and Windows applications, more corporate users are bound to embrace Mac laptops.

• While Mac desktops offer a growing number of superior features over Windows desktops, it's still not enough to persuade corporate IT departments to make a switch. So for now, Apple will merely strive to hold the line on its current share of the business desktop market and apply greater marketing pressure elsewhere.

• Apple's recently introduced Leopard servers compete in a market of unhappy Vista server buyers where Microsoft's market share is only 40%. Leopard has a decent chance to expand from its small beachhead.

• Surprisingly, it's the 4.8-ounce iPhone that will sweep Apple decisively back into the enterprise. Even without any enterprise applications, the iPhone has seduced business users with the prospect of easy listening (iTunes), easy surfing (Safari), and easy compatability with a Mac computer. And with the impending business push, the device will soon provide corporate e-mail access and perform serious computing tasks such as setting calendars, checking inventory, figuring prices, and taking orders on the spot.

More Mobile, More Apple

As corporations become increasingly mobile, the pressure will build to make them Apple-centric from top to bottom. Rising sales of Apple laptops and iPhones will make the Mac OS only that much more mainstream and acceptable to corporate IT departments. By 2010, the number of iPhones in use could approach 100 million. It's possible that the iPhone's share of the U.S. smartphone market (28% in the fourth quarter) will soon approach the 70% share iPod now holds in the MP3 market.

The final piece to this puzzle would be the rebirth of the Apple applications development ecosystem. The new Software Development Kit (SDK) for the iPhone not only allows independent developers to create new applications for that device but also brings them back to the Macintosh platform. That means any program written for the iPhone can be easily adapted into a Mac computer version as well. The response has been huge: More than 100,000 developers downloaded the SDK in the first week of its availability. And iPhone's popularity for mobile business applications can only grow. (Put Vista on a cell phone? I don't think so.)

So, the battle ahead seems clear: It's Apple's seamlessly integrated software strategy, minimally sized and maximally efficient, competing against Microsoft's strategy of multiple incompatible, bloated, and fragmented operating systems. It's Apple's growing customer acceptance vs. Microsoft's rising customer pain. By failing to modernize its operating system in a timely way, Microsoft has left its flank wide open for an all-out assault from a once-vanquished rival.

Gary Morgenthaler is a partner at Morgenthaler Ventures in Menlo Park, Calif.