Apple must concentrate on Microsoft customers rather than its own user base if it is to build on recent successes, a top Harvard professor says.
Harvard Business School professor and Apple specialist David Yoffie said: "For future success the company needs to look out to the Windows world – as it is doing with the iPod and iTunes".
There are a number of reasons why Yoffie thinks Apple would be unwise to continue to develop solely for its existing install base. One reason is the cost of development of the Mac operating system: Mac OS X cost about a billion dollars to produce – an install base of 10 million is not going to recoup those development costs.
OS X for Windows? According to Yoffie, the future of the Mac operating system may be dependant on development for the Windows platform: "Apple should look again at Mac OS licensing and try and generate a large enough volume so that the economics of their operating systems business will make sense in the future.
"So many of Microsoft's customers are unhappy with pricing, and there is a new willingness to entertain new concepts, new ideas, and new products, that didn't exist before."
He added: "There is a window for a desktop alternative to Microsoft in many markets around the world, and if Apple should decide to aggressively pursue that market it could be an interesting opportunity for them.
Yoffie also indicates that that Apple's strategy of being the BMW of the computer world is not future-proof. He points out that where BMW, can sell at an enormous premium relative to the core market, Apple has a hard time selling at a huge premium relative to the core PC market. "This is why Apple has barely generated any real profits out of its core Mac business in the last three years," he says.
"Apple could concede that it has lost the operating system war, and instead leverage the brand, industrial design skills, and application base," he suggests.
Yoffie admits it is unlikely Apple CEO Steve Jobs would ever do such a thing, but he advises Jobs to stop being blinkered to developing for the Windows world.
One example highlighted by Yoffie is the development of iTunes and the iPod – initially only for the Mac as a way of attracting customers to the platform. "If Steve had really been thinking in terms of the breakout strategy, he would have started out on Windows and come to Macintosh later like everybody else in the world. But that's not the way he thinks."
He concedes that there is an opportunity for long-term success with the iTunes Music Store, but not if Apple doesn't open itself up and make sure that its Advanced Audio Coding (AAC) format becomes the dominant standard. "It could end up becoming the niche product again that makes it a little bit less attractive for users," he predicts.
Similarly he says the iPod could bring success to Apple, as long as it is able to compete with companies like Dell, who are bringing lower-priced products to market, and as long as it does not remain a proprietary solution.
Yoffie highlights the fact that Apple is allowing HP to resell iPod. "It's their first baby step into trying to really get into the mass market and becoming more of what I would describe as a horizontal hardware and software provider rather than a vertical, turnkey hardware integrated software provider. It's a fundamental change in strategy, if they were to pursue it aggressively.
"On the other hand, if they pursue their iPod licensing strategy like they pursued their operating system licensing strategy, which means selective licenses to small number of players, then they will still run the risk that they will continually get downward pressure on price by competitors like Dell, and greater availability of options by customers using Microsoft software."