24 September 2009

Pinot's Point

Software, Apple's real-value offer

By Jim Pinto

Mobile-phones are becoming the primary Internet connection, replacing TV and desktop computers. It is clear that what is needed is NOT just the commodity connection product, but the software environment that provides special values.

From this standpoint, Apple is not an iPod (music-player) company, nor a smart phone company (iPhone). It is not even a computer company—MAC hardware is relatively mundane.

In the midst of all these commodity products and markets, Apple is morphing into a serious software giant. The iPhone OS 3.0 software update for the iPhone and iPod Touch is probably the most important technology event of the past few years.

Sure, the latest iPhones are good phones; but they are like most other phones—capable and easy-to-use multi-tools for the connected age. They not only make phone calls, they check your e-mail, browse the Internet, and take a decent picture. And they have games and GPS. Most of the competitors do, too. Heck, if all you need is a good phone, buy the new Palm Pre, which was designed by an ex-Apple worker.

The real iPhone breakthrough is the software it unlocks for developers of third-party applications. It becomes not just a cell phone, but a computing platform. The AppStore is now packed with more than 50,000 iPhone applications. There are apps for working out, for around the house, for going out, and for making money.

For a couple bucks, iBeer uses the iPhone’s accelerometer to slosh around a beer, brew, drink, shake, and burp. Or you can pour beer from your iPhone to another. It is like ridiculous cellphone ring-tones, which still sell in the millions. Many iPhone applications are “free” downloads—software developers make money by selling subscriptions for add-ons and premium content.

The software is the “scarcity”—no one else has the capability yet. By the time they catch up, Apple will be locked in as “the standard.” It remains to be seen how the other cell phone companies will react. Early leaders (Motorola, Eriksson, and Nokia) are falling behind by just offering hardware and proprietary software. Apple’s marketing genius comes from offering a complete development environment for third-party developers.

Is your company affected by the recession? Are people simply not buying your products because of a budgetary crunch? This may be because you’re selling “commodities”—abundantly available stuff. The secret is to sell “scarcity,” something in great demand, which your customers must buy.

Related links:

• Bigger than new iPhone - Apple’s most important product this year - software:
  http://www.forbes.com/2009/06/18/apple-iphone-os-technology-personal-3g.html?partner=alerts
• Your iPhone gets better with every new App:
  http://www.apple.com/iphone/apps-for-iphone/
• On iBeer:
  http://zeptotools.wordpress.com/2009/03/24/on-ibeer/
• iPhone Software Applications:
  http://www.iphonetower.com/applications/

Behind the byline

Jim Pinto is an industry analyst and founder of Action Instruments. You can e-mail him at jim@jimpinto.com or view his writings at www.JimPinto.com. Read the Table of Contents of his book, Pinto’s Points, at www.jimpinto.com/writings/points.html.