Vitamin Y: An alliance analysis of IBM/Apple

Businessman Holding Mismatch JigsawContext: On July 15, Apple and IBM announced a "global partnership to transform enterprise mobility." It spanned several different areas of collaboration: "industry-specific enterprise solutions" for iPhone and iPad, IBM cloud services "optimized for iOS, including device management, security, analytics and mobile integration," and "new packaged offerings from IBM for device activation, supply and management." The alliance promises to capitalize on "the distinct strengths of each company: IBM’s big data and analytics capabilities, with the power of more than 100,000 IBM industry and domain consultants and software developers behind it, fused with Apple’s legendary consumer experience, hardware and software integration and developer platform."

The alliance calls for IBM to sell Apple devices to customers, wrapping them into mobility solutions that also include IBM analytics and cloud offerings under the "IBM MobileFirst for iOS Solutions" banner. The announcement states that these industry-specific solutions will be introduced for retail, healthcare, banking, travel and transportation, telecommunications and insurance, and will be introduced starting in 4Q14, with the rollout continuing into 2015. IBM will wrap iPhones and iPads into a "MobileFirst Platform" delivering "the services required for an end-to-end enterprise capability, from analytics, workflow and cloud storage, to fleet-scale device management, security and integration." The two companies will collaborate on maintenance, with "AppleCare for Enterprise" available remotely 24/7, and IBM delivering on-site support.

Three KeYs:

  1. The alliance addresses clear needs for each firm — and potentially, for the market. IBM has recognized mobility as an important opportunity, and will enhance its market visibility by working with Apple. For its part, Apple lacks depth and credibility in the corporate world, and will benefit from IBM’s relationships and account management expertise. Apple’s strong control over app distribution must have helped persuade IBM that it would be an effective mobile device partner, and IBM’s integration capabilities will help position iOS as a building block in corporate hardware strategies. The connection between Apple and IBM also addresses a third issue: it isn’t possible to buy a corporate mobility solution from the leading device brands (Apple, Samsung), which has led to confusion in the market. An IBM/Apple alliance provides some direction for buyers looking to connect mobile units with corporate applications, and provides a blueprint for the growing group corporate developers looking to build "interaction" capabilities into a device market that is currently divided between ‘creation’ and ‘consumption’ (see Figure below).
  2. IBM’s approach to alliances often includes an element of ‘defense’ — and that’s true here, too. Although Apple is certainly a credible player in the mobile device market, it has been losing share to Android-based competitors, and research is finding increasing numbers of buyers who are prepared to move past Apple-centric smartphone and tablet strategies into a mixed-OS environment. So why would IBM choose to work with Apple? In many cases, IBM strategy appears to align new market opportunities with agreements that impede competitors in other markets. For example, IBM backed Linux heavily, which had the effect of highlighting the distinction between the OS and middleware (like IBM’s WebSphere) — and of placing an obstacle in the way of Microsoft’s expanding beyond its dominant position in client devices into the data centre. Here, we seen an agreement with Apple, and perhaps as importantly, with "not-Google" — that is, not a firm that is trying to springboard into the data centre with its cloud presence.
  3. Beyond the formal agreement, alliances have a human element — and this may spell trouble for IBM/Apple over the long run. While the structure of an alliance is defined in a document, its execution is defined by collaboration between on-the-ground staff, and governed by managers involved in the issue escalation process. In this case, both IBM and Apple have widespread reputations for at least some degree of high-handedness. There is a story in the industry (never confirmed) that in the 1990s, the midrange group within IBM Canada — at odds with IBM’s own personal systems division — reached out to Apple about an alliance, but that the potential agreement was derailed by the parties’ mismatched perceptions of relative importance. It is certainly possible that a similar scenario could play out in this case, with IBMers believing that Apple is more a design firm than a source of engineering expertise, and Apple believing that IBM’s processes are too hidebound for the ever-evolving device market. There are well-meaning processionals in both companies — but it only takes a handful of awkwardly-positioned naysayers to sap the energy from a partnership of this sort.

Bottom line:

There has been quite a lot of digital ink spilled in pursuit of defining a winner in this deal — Apple! IBM! Both Apple and IBM! There has been relatively little dedicated to acknowledging that there’s little downside for either firm here. IBM has no presence in the device market, and Apple has virtually no presence in C-level discussions of corporate IT strategy. If the deal works, it helps both firms address a weakness; if it doesn’t, each can go on more or less as before. This is often dangerous in an alliance: situations where success is important to broader market imperatives rest on firmer footings than those that fill a non-core need with a potentially-attractive solution.

Beyond that, though, there’s a mismatch in market approaches that will make this deal problematic for Apple. Apple wins by selling "insanely great" products to the world at large. IBM wins by managing large corporations through long-term, complex technology initiatives. IBM can integrate iOS products into its strategy, and in the fullness of time, this will likely result in some interesting sales for Apple. However, Apple can’t integrate IBM into any market activity that it has underway, or is likely to launch — and IBM’s selling motion isn’t congruent with Apple’s go-to-market approach. In the end, while the announcement has generated some excitement, it seems likely to conclude (to quote T.S. Eliot’s famous expression) "not with a bang but a whimper."

Elusive middle