Although it has long fancied itself a consumer company, tech giant Apple (NASDAQ:AAPL) has doggedly pursued grabbing a greater share of a long-elusive sector -- the enterprise IT market. Apple has always maintained a corporate sales team, but the tech giant has recently placed a more concerted emphasis on making inroads into this massive and diffuse market that researcher Gartner believes drove $3.8 trillion in spending last year.
Case in point: Apple let bygones be bygones and signed a historic partnership with enterprise incumbent champ IBM last year. More recently, Apple and networking power Cisco Systems also entered into a similar partnership.
The launch of the iPad Pro also explicitly targets enterprise users. And Apple's efforts appear to be bearing fruit, according to an impressive figure Apple CEO Tim Cook recently disclosed.
Apple's $25 billion enterprise business
At the annual conference hosted by online storage upstart Box, appropriately named BoxWorks, Apple CEO Tim Cook revealed that his company generated $25 billion in enterprise sales during the past 12 months. For context, this number represents roughly 14% of Apple's total sales during the period.
It's also worth noting that, in a week where he also met the premier of China and the prime minister of India, Cook prioritized making a public appearance at this high-profile Bay Area IT conference. That's no accident for someone with such a busy schedule.
Speaking with Box CEO Aaron Levie, Cook also signaled his intention to continue to expand the number of partnerships Apple enjoys with key enterprise IT companies in order to leverage its expertise in areas outside Apple's long-standing core competencies. In response to Levie's asking about Apple's enterprise plans, Cook said, "We don't have deep knowledge of all the verticals that the enterprise deals with, and so in order to do great things and give people great tools, we need to partner with other people.... This is all about giving a suite of apps to the enterprise, so we can change the way that people work."
On its surface, this seems like a completely logical strategy for Apple, especially given the $25 billion figure above. It's clear that Apple has been toiling for some time now without garnering much publicity to create a foundation upon which it can actually begin to compete for market share in the enterprise.
Same strategy, different beast
I've long held a skeptical view of Apple's sincerity in addressing the possible opportunities that enterprise presents. However, the efforts Cook described, and the $25 billion run-rate figure, certainly demonstrate a commitment on the order I think few expected at present from Apple.
IT managers control the lion's share of enterprise buying decisions, and their incentives understandably, yet critically, differ from those of consumers in a few ways. Often, history plays a role, as investments in new platforms like iOS might conflict with systems that companies have spent millions or even billions to establish. Fixed or sunk costs loom large here.
It also isn't immediately clear how Apple approaches or deals with the kinds of price discounts often required by bulk buyers like major corporations or governments. Considerations like these are by no mean insurmountable, especially for a company that doggedly pursues its goals, like Apple.
More realistically, this simply implies it will take longer for Apple to win over customers in the enterprise. However, as a company that faces increased questions about its medium- and long-term growth outlooks, this presents yet another possible avenue for Apple to expand its profit footprint before potential game changers, like its Project Titan, come to market years from now.
Andrew Tonner owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends Cisco Systems and Gartner. 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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