When Apple (NASDAQ:AAPL) originally created the mobile operating system that would become iOS, it attempted a dramatic reenvisioning of a decades-old convention of how users manage their digital belongings: the file management system.
In fact, way back in 2005 (relevant section begins at 37:40) Steve Jobs described his view that file systems are needlessly complex to the average user. People should just trust their apps to handle files, and Jobs went as far as to predict that average consumers won't need them one day. That was the thinking behind why iOS obscures the file system and just has apps pass files among themselves without allowing users to directly manage files.
This is also one of the most widely criticized aspects of iCloud, Apple's cloud storage system. Finding files stored in the iCloud is not intuitive on a desktop, which has hurt its adoption compared to rival services. In mobile, Apple was able to pull off this transition surprisingly well because it was largely a clean slate to reset user behavior. But as mobile and desktop converge, you get anchored back to the past.
With the announcement of iCloud Drive at WWDC 2014, Apple just admitted defeat in its crusade against the traditional file system. There must be a reason Apple has backtracked, and presumably it's not because usage of iCloud for file storage was skyrocketing.
iCloud Drive adopts the familiar file system that Apple has spent years trying to move away from. It's the same old usage model that all of Apple's rivals have embraced. Box, Dropbox, Google Drive, Microsoft (NASDAQ:MSFT) OneDrive, Amazon Cloud Drive, and many other cloud storage providers all stuck with the status quo.
Cloud storage is proving to be one of many important aspects of modern platform competition. After all, that's why Apple tried to acquire Dropbox in 2009, only to be turned down. Cross-platform provider Box is preparing to go public, potentially within a matter of weeks. Box's revenue has quintupled since 2011 to $124 million last year.
Microsoft CEO Satya Nadella's heavy emphasis on cloud services has put renewed focus on OneDrive, and OneDrive's deep integration with Office as the software suite broadens its mobile horizons will also spur adoption. Indeed, to utilize the full potential of Office for iPad, you need an Office 365 subscription, and Microsoft prefers to store those Word docs in OneDrive.
Cross-platform vendors like Box and Dropbox rely on subscription fees directly for revenue, but platform operators like Apple and Microsoft play a different game altogether. Platform operators use cloud services to bolster the stickiness of their ecosystems. For Apple, that leads to more hardware sales. For Microsoft, that leads to more Windows and Office 365 sales.
While iCloud's current inferiority in cloud storage likely wouldn't hurt device sales directly, it arguably represents one of Apple's weaker links in its broader strategy of offering end-to-end solutions. The subscription revenue for additional storage tiers won't hurt either.
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Evan Niu, CFA, owns shares of Apple. Evan has the following options: long January 2015 $460 calls on Apple and short January 2015 $480 calls on Apple. The Motley Fool recommends Amazon.com, Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.