Apple's Leopard: Closer to the Enterprise but Still Too Far

Apple's attempt to build its enterprise business faces many obstacles - most created by the company itself.
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I often wonder why experienced companies focus so much time and resources on Enterprise sales. I know why inexperienced companies do this but a lot of firms, and I would include Apple in the mix, probably don’t have to. The reason firms like to sell to enterprises is the commission check to the sales rep can be legendary in size. I’ve seen reps do one of these sales in a year and make enough to take the rest of the year off. I’ve also seen enterprise sales reps consistently make more cash (though not options) than the CEO they work for. But, having looked at the numbers, I know that much of this business is not profitable for the selling company.

That is a serious problem because, unless the selling company is incredibly large and diverse like, say, IBM, HP, or EMC, it’s very difficult to sustain an enterprise sales effort. The margins are very tight, the expectations (read: costs) are relatively high, and, if you screw up, the results can often be material within a month or quarter. Lots of risk coupled with very little profit, not exactly your Harvard Business School best test case.

Be that as it may, companies like Netscape, Sony, and Google who should (or should have) known better, continue to chase that market, and Apple is positioning to once again go after this elusive goal. But, going after the enterprise has little to do with the product; it has everything to do with the approach and having enough patience and/or money.

Apple’s Historic Problems

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Apple faces three critical weaknesses when it comes to Enterprise sales, though they just may have fixed the fourth. (And some argue passionately there is a fifth, prejudice against Macs, but I won’t go there.)

The first is they don’t partner or share well. Enterprise buyers want their vendors close, and when they aren’t, customer satisfaction and vendor displacement events occur very frequently. They demand road maps and want some say in future products, and if it is a government account, actually want some say in your employee mix, security, and quality metrics. Particularly if they are government account, they demand most favored nations clauses in contracts which assure them the best price and even want to constantly check your books as a result. Finally they demand an impressive amount of support, something Apple is apparently not even equipped to supply. Apple is far from the most sharing company and typically won’t even acknowledge most of these demands.

The second is enterprises have policies that make it very difficult to sole source anything. They want competitive bids because without them they can’t show auditors they actually did get the best price and that nothing underhanded was done for the vendor to get the business. Originating from the belief that there is active bribery (not as uncommon as you would think) in the vendor bidding process, a sole source agreement is an immediate audit flag and enterprises want vendors who can bid against each other. Apple, after the first bid, is the only vendor who supports the MacOS, nearly assuring a sole source arrangement after the first year (which can be bid competitively).

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