With a growing roster of high-profile partners such as IBM and Cisco and a renewed focus on enterprise
computing, Apple is taking aim at enterprise incumbents such as Dell, HP and Lenovo.

The iPad Pro boosts the legitimacy of Apple as an enterprise computing vendor, enabling it to compete for new deployments and
protecting its iPad enterprise install base. However, enterprise Windows PC vendors, especially Microsoft’s two
newest Surface Pro partners Dell and HP, with greater expertise and broader support portfolios are well-equipped to deflect Apple’s attempts to infiltrate their install bases.

The unveiling of the iPad Pro on Sept. 9, 2015, marks Apple’s official intent to focus its computing strategy on earning new enterprise business as well as highlight how much the enterprise market has changed since the advent of cloud and mobility. As applications and services, rather than device specifications and operating systems, drive enterprise computing requirements, the computing device becomes a vehicle for the delivery of information. As device specifications across devices plateau, removing these differentiators creates opportunities for Apple’s iOS-powered devices to gain traction with IT decision makers and users.

Fills a gap in Apple portfolio

The iPad Pro helps Apple fill a gap in its enterprise portfolio, but a small roster of services and support compared to Windows OEMs will slow Apple’s advancement in the enterpriseWhile TBR believes Apple has some of the necessary hardware components to establish itself as a legitimate enterprise competitor to Dell, HP and Lenovo, its consumer-centric software and service and support strategies fail to meet enterprise ITrequirements.

For example, AppleCare for Enterprise, which is part of Apple’s partnership with IBM and includes multiple levels of 24/7 phone support, priority repairs and technical account managers, shows Apple is aware of the class of services required by enterprise IT staff and decision makers. However, a heavy reliance on Apple retail outlets and staff for service and support (e.g., SMBs using Apple devices must follow the same support procedures as consumers, meaning SMB IT staff have to make an appointment to be seen at an Apple store) illustrates how Apple’s foray into enterprise services leaves much to be desired.

The availability of the iPad Pro is a logical next step for Apple’s revamped enterprise strategy, following the announcements of its partnerships with Cisco (2015) and IBM (July 2014) as well as updates from executives during its earnings call in April and at its Worldwide Developer Conference in June. As it works to strengthen its enterprise computing brand and evolve its service and support organizations to meet enterprise requirements, TBR expects Apple will pursue opportunities to expand its enterprise reach and seek partnerships with applications teams at SAP, Salesforce and HIPAA-compliant medical software developers; infrastructure providers such as Verizon and AT&T; and consulting firms such as Accenture, PwC and Deloitte.

A focus on the enterprise signals how Apple intends to protect itself against a slowdown in
consumer revenue growth

However, we believe the announcement of the iPad Pro also highlights urgency at Apple to find ways to offset an inevitable slowdown in revenue growth as its consumer-facing businesses, especially Mac PCs, are primed for a slowdown. Mac PC revenue has grown on average 10 percent year-to-year each quarter since 2Q14, compared to a decline of 3.2 percent for Windows OEMs over the same time span, according to TBR’s Devices and Platforms Benchmark; however, even as Apple’s Mac PC business outperforms a weaker Windows PC market, we believe Apple CEO Tim Cook is keenly aware the continued climb of Apple’s PC business has a short shelf life. A renewed focus on the enterprise and leading with the iPad Pro creates an additional revenue stream for Apple’s enterprise business, shielding the PC business from the effects of the expected slowdown in revenue growth.

By 2H16 TBR expects Apple’s year-to-year PC revenue growth to be cut in half, landing between 3 percent and 5 percent yearto-year during the 4Q16 holiday quarter. Consumer purchases account for the majority of Apple’s Mac PC revenue; TBR estimates consumers have accounted for nearly 70 percent of Apple’s PC revenue on average each quarter since 2Q13. As a result, engaging business customers via IBM and/or Cisco, and positioning the iPad Pro as an optimal device for the applications and infrastructures being developed and deployed by its two newest partners, is a savvy move that will pave new roads into the enterprise for Apple.

The iPad Pro confirms the enterprise tablet has arrived, but Apple’s narrow portfolio of enterprise-ready iPad-centric software and management tools will hurt its value proposition TBR believes the iPad Pro has validated the enterprise tablet market as much as it announced Apple’s renewed interest in enterprise computing. However, Microsoft’s efforts as a first-party manufacturer have rekindled interest in this form factor, creating opportunity for Microsoft, and now Dell and HP, to win back customers lost in the tablet space prior to the release of the first-generation Surface Pro in June 2012. Additionally, opportunities also exist for Windows OEMs to exert greater influence on the enterprise tablet market and set standards for hardware, software and support for Apple.

Windows support differentiates it from Apple

However, Microsoft’s announcement the day before Apple’s event that Dell and HP will be reselling and supporting Surface Pro PCs is an astute move by Microsoft, as it targets the area where Apple is weakest, enterprise service and support. Even with many Apple devices, particularly the iPhone, deeply integrated and actively used in many enterprises, the added complexity of managing dual operating systems (Windows and iOS), a new hardware platform and retail-centric support procedures limits the appeal of Apple in the large enterprises it is targeting with the iPad Pro.

Windows OEMs’ experience and capabilities in providing service and support are important differentiators against Apple. Additionally, Surface Pro’s and Windows PCs’ more familiar integration with Exchange and Windows security and management policies make them better fits for the workplace. Apple could close the gap quickly, evidenced by the closer collaboration with Microsoft of Office for iPad and other enterprise software vendors such as Adobe. However, even with improved software support and a deeper roster of partnerships, it is clear Apple’s initial foray into enterprise computing is a retrofit of its consumer-facing iPad business. Apple as an enterprise vendor will retain little of the hold its devices enjoy in consumer markets, creating ample opportunities for Windows OEMs to protect their install bases as well as leverage the Surface Pro to earn new customers.

Apple intends to use the iPad Pro to power business-class applications and transform the affinity that enterprise workers and IT managers have for Apple devices and compete against high-end commercial Windows PCs, especially Microsoft’s Surface Pro, but it will need to develop a greater number of applications across multiple verticals. While Apple announced on its April and July earnings calls that it is filling its rosters of business-centric applications developers, the 100 iPad-specific applications that exist are dwarfed by the number of Windows-ready applications as well as the mortal lock Windows has on enterprise computing.

Apple overcomes some of these challenges by leveraging iOS, which is more widely deployed and familiar to developers and users, compared to OSX-powered Mac PCs. A more familiar operating system for IT managers and applications developers removes obstacles into the enterprise for Apple and enables it to approach enterprises from positions of strength and familiarity.

The iPad Pro will enable Apple to make headway in the enterprise, but Windows OEMs are well-equipped to slow its advance

Apple endeavors to redefine the enterprise computing experience with the iPad Pro and exert influence on the enterprise similar to what it enjoys in the consumer mobile device market with the iPhone. The enterprise market is an under penetrated customer base for Apple, and pursuing it enables Apple to use the strength and cachet of its brand to immediately establish traction for the iPad Pro with large enterprises. As consumer PC revenue growth tapers off into 2H16 and total iPad revenue continues to contract, enterprise customers will help reduce Apple’s reliance on the iPhone for revenue and create opportunities to capitalize on a largely untapped market for Apple. However, retrofitting consumer-oriented service and support programs for the enterprise will hamper Apple’s attempts to earn enterprise customers and unseat incumbents such as Dell and HP.

Apple’s inadequate enterprise grade service and support portfolio, compared to those of Windows OEMs, dims the appeal of its devices as a replacement for Windows-powered notebook PCs and tablets deployed in the enterprise. While Apple will become more engaged with enterprises through its partnerships with IBM and Cisco, Windows OEMs will leverage their traditional education and creative professional install bases.

Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to address client-specific issues further or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com.

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