Will Apple lose its power to drive market trends?

Posted by Rob Enderle, Pricipal Analyst, Enderle Group

Analyst Opinion – Yesterday I was walked through how OpenCL, a relatively new programming approach that leverages the CPU and GPU, could not have happened without Apple and it reminded just how many trends the company sets. Last week I wrote about the Dell Adamo, which has its roots in an Apple idea. And, of course, it is not hard to see how the iPhone is clearly the cell phone every other cell phone vendor seems to be chasing these days. But others are catching up in many ways and I am wondering whether Apple is losing its edge.

It struck me that Apple has largely seized market leadership from Microsoft and Intel in many, though clearly not yet all, areas and that this leadership role will result in some interesting changes.  But I am beginning to doubt this leadership will continue once Steve Jobs decides to leave the company.

OpenCL base

To put you on the same page I am, the story that got me thinking about Apple's power in the market was how OpenCL, a framework for writing programs that execute across CPUs and GPUs, came to be. I met with ATI this week and they walked me through the creation of OpenCL which will be a major part of Apple's Snow Leopard operating system and play a major role in the Windows 7 timeframe.

Before OpenCL we had separate efforts from Nvidia and AMD's ATI group. Each of these efforts, while impressive in terms of potential, wasn't making any headway with mainstream applications, because they were incompatible with each other and few (outside of research groups that needed cheap super-computers) wanted to create applications that only ran on Nvidia or ATI graphics cards.  

Apple saw the concept as compelling and realized it could be a huge driver for future platforms like Snow Leopard, but there was no way they were going to support two non-standard technologies. So they created the initial OpenCL specification with the inherent promise that if either Nvidia or ATI complied with it, they would get Apple's business.  This drove the resulting consortium to a very fast resolution and we now have a common technology that is embraced by both vendors and will work on both Nvidia and ATI graphics products that would not have existed if it was not for Apple.  

Hardware and software leadership

Last week I raved about the new Adamo laptop from Dell who took the concept that Apple had created and drove it further than Apple has been willing to go. But it was Apple's focus on design and their higher margins that resulted in this push.  But the OEMs realized that it was not just how the hardware looked that resulted in Apple getting both good growth and higher margins.
 
In addition, Apple did not let parts vendors brand their PCs with their product names. There is no Intel Inside sticker on a Mac and Apple retains the right to switch anything they want in and out and Apple's customer base only cares about the Apple logo on the box. This helps Apple differentiate itself and helps increase the perceived value of their offering without increasing their cost dramatically - which allows Apple to have rich margins. You may recall that the Dell Adamo is also sticker free.
 
The MacOS is the final advantage: Apple owns the user experience unlike any other PC vendor. What put them at a disadvantage initially, in terms of reach, turned into an advantage this decade, because more people wanted a better experience than they were getting. The OEMs hoped they could use Linux to create an experience similar to what Apple did.
 
Unfortunately, the initial attempts to use Linux largely failed in market, because the vendors don't have the skill set necessary to turn Linux into an Apple-like alternative. Linux comes across as being cheap and is incompatible with Windows. As a result, it has to undersell Windows and, with relatively high return rates, is reported to carry lower margins currently on the desktop than Windows products do, which is why you see it in a decline.
 
However there is the hope that Android, Google's new platform due on the PC in mid 2010, will address this need and that is driving a number of vendors to have meetings with Google to flesh out the result.   The key, however, will not be replacing Microsoft with Google, but whether the vendors can create a more positive differentiation with one product or the other. While the direction is clear, I am not sure if folks have thought through what the right path needs to be. And just like Microsoft likes to retain control, Google has similar tendencies, which should make the outcome interesting. But it is unlikely that it will be the magic bullet these OEMs wanted or needed.
   
Apple is at the core of the change.  As a result Apple's efforts, the products we will see from a variety of vendors will be vastly more amazing than they otherwise would have been.

 
Wrapping up:  Is Apple's impressive impact over?

It amazes me how long the major vendors have taken to understand Apple's approach. But they are learning. That's good because I worry about Apple post Steve Jobs and that they may shortly lose their leadership skills without him. The last two product releases, while filled with interesting products like the new iPod Shuffle, did not seem to pull much excitement and without that it will be hard to drive the changes the market still needs to make.
   
In addition, Windows 7 is coming and it looks like it has the potential to be a Windows 95-like offering.   With Jobs, there is little doubt Apple could weather the launch. Without him, Apple is back to the way they were in 1995 and we could see a repeat of that year in this one. But, whatever happens, for a time, Steve Jobs and Apple drove the PC market which was and will be better for it.

Thanks Steve, but I kind of wish you would have an apprentice who could continue your efforts, because I like the changes I'm seeing and would like to see even more of them.    

Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies.

The opinions expressed in this commentary are solely those of the writer.