Apple, Inc.'s Deal With IBM Is a Game Changer

Apple never used to target the enterprise market directly. While the Mac maker has been appealing to businesses more in recent times, the deal with IBM will jump-start its ambitions in a big way.

Jul 16, 2014 at 6:00PM

Oh, how things can change over the course of three decades. After co-founding Apple (NASDAQ:AAPL), Steve Jobs made no attempts to hide his disdain for IBM (NYSE:IBM)

Since then, Apple came back from the dead to become the most powerful -- and most valuable -- consumer electronics company on the planet, while Big Blue sold off its PC operations to Lenovo, and shifted its attention away from the consumer market toward enterprise and big data analytics. The two companies no longer directly compete as they did in Jobs' days, and have just announced a major partnership that leverages their complementary strengths.

Make no mistake... this deal is a game changer.


Tim Cook feels differently about IBM. Source: IBM.

A look at the partnership
The new partnership will encompass various aspects. IBM will help develop more than 100 industry-specific native apps for enterprise deployment, and optimize its cloud services for iOS devices. That includes industries such as retail, health care, banking, travel, and telecommunications, among others. Apple will also introduce a new service tier for AppleCare specifically for the enterprise.

Most notably, IBM will sell iPhones and iPads along with its industry-specific offerings to its wide range of enterprise clients all over the world. IBM has tens of thousands of enterprise clients that it will now be pitching iDevices to.

Aapl Plus Ibm

Source: IBM.

In an interview with CNBC, both Tim Cook and IBM CEO Ginni Rometty elaborated on the deal's potential. Rometty said that the partnership will drive growth for both companies, and that Apple and IBM have long discussed remaking businesses and reimagining the enterprise for a mobile world. Meanwhile, IBM can help address what she considers the No. 1 inhibitor to widespread adoption: security.

On the last conference call, Tim Cook noted that 91% of enterprise tablet activations are iPads. Cook was also optimistic about Microsoft's decision to bring Office for iPad, because that also strengthens the iPad's productivity capabilities. Still, Cook notes that overall mobile penetration within the enterprise remains relatively low, which indicates that Apple still has a huge opportunity here.


iOS 8 in the enterprise. Source: Apple.

Apple never used to target the enterprise directly, in part because the user (the employee) and the person making the purchasing decision (IT managers) were not the same. Apple has always preferred to directly target the user, which is why it typically goes after the mainstream consumer market.

The BYOD movement helped change that in a big way and, all of a sudden, the enterprise market has become an important opportunity for the Mac maker. Apple has been adding enterprise features to iOS since 2008, a trend that will continue with iOS 8. But Apple's strategy with software releases is major version updates each year with a handful of new features.

Partnering with an enterprise behemoth like IBM will dramatically jump-start Apple's enterprise feature roadmap, and accelerate enterprise adoption. Nice score, Apple.

Does the iWatch have enterprise potential?
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Evan Niu, CFA owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple, International Business Machines, 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.

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