Is Apple Finally Taking Over Enterprise?

Apple has been seeing growing adoption of its phones, tablets, and increasingly, notebooks in enterprise environments. What does this mean for the enterprise incumbent, Microsoft?

Jul 7, 2014 at 10:00PM

Apple (NASDAQ:AAPL) has built up its empire as a consumer company. Over the past several years, however, the company has gradually been making inroads into the huge enterprise market as well. This started with phones and tablets at first, and now a new report commissioned by VMware (NYSE:VMW) claims that Macs are also gaining on Windows PCs in enterprise environments. Let's take a look at what Apple is up to in enterprise, and what this might mean for competitors such as Microsoft (NASDAQ:MSFT).

The numbers
On the first-quarter conference call, Apple CEO Tim Cook shared a slew of impressive statistics regarding Apple's recent performance in enterprise. The iPhone, which is often Apple's entry point into enterprise, is used in 97% of Fortune 500 companies. Numbers for the iPad were even higher at 98%, and Cook added that 90% of tablet activations in corporations are iPads. Also, among business application activations, 90% were on Apple's iOS operating system.

Through a survey of IT administrators, VMware has found increasing enterprise support for Macs as well. According to VMware's report, 66% of businesses are already using Macs in the workplace today. One notable example is Cisco, at which 25% of company-provided notebooks are MacBooks, according to the Wall Street Journal. Mac penetration in enterprise might get an additional boost this year, as many companies are finally investing in hardware updates thanks to Microsoft's ending support for Windows XP.

The supporting trends
It took several emerging trends to slowly challenge Microsoft's long-standing and dominant position throughout enterprise IT. One of these trends is BYOD, or bring-your-own-device, in which companies provide support for employees to use their own personal devices to access corporate data and applications. BYOD has been around for several years, and Gartner estimates that by 2017, half of all employers will actually require employees to provide their own device for work purposes. Given Apple's popularity in the consumer market, BYOD makes for an easy entry into the enterprise world as well.

A second supporting trend has been the increasing availability of enterprise-grade web and mobile applications that provide functionality that was previously only available in traditional, on-premise software. Forrester Research estimates that software-as-a-service is growing 20% year over year, and growth rates for mobile applications are not far behind. Furthermore, according to Good Technology, which provides mobile security software, custom mobile applications built internally by enterprises are the fastest growing category of mobile applications, with 52% quarter-over-quarter growth.

Finally, for those applications that do not yet have adequate cloud or mobile versions, there is virtualization. Companies such as VMware provide the ability for a single application or for a whole desktop environment to be delivered from a server and run in a virtual machine on different devices, driving down the need for dedicated PCs that run Windows. VMware has been investing heavily into its end-user virtualization business and believes that this will be one of the major drivers for its continued growth in the coming years.

What this means for Microsoft
With Apple's performance in enterprise so far, and the continued investments it's making there, Microsoft might at first look to be in for a rough time. The giant from Redmond is not sitting still, either, as its new mantra of "cloud first, mobile first" suggests. In the last several months, Microsoft made several moves that would have previously seemed unimaginable, such as releasing Office for the iPad and reportedly waiving Windows licenses for certain phones. It is also quickly becoming a major player in the enterprise cloud space.

Given the rapid rate of technological change, it was perhaps inevitable that Microsoft's stranglehold on enterprise would eventually loosen. However, considering the size and the growth of the enterprise market, as well as Microsoft's attempts to adapt, Apple's growing success in enterprise will not necessarily mean decreased revenue for Microsoft.

In conclusion
Apple has been making inroads into enterprise environments, and it is starting to see a lot of penetration there for its phones, tablets, and, increasingly, notebooks. Several trends, such as BYOD, the growth of web and mobile applications, and virtualization are helping this to happen and to continue down the line. While this is certainly good news for Apple, it does not necessarily spell doom for the enterprise incumbent, Microsoft, which is itself adapting with new cloud and mobile strategies.

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Srdjan Bejakovic has no position in any stocks mentioned. The Motley Fool recommends Apple and VMware. The Motley Fool owns shares of Apple, Microsoft, and VMware. 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.

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