Apple iPhone: It's all about the apps

If there is a single message from Apple's Monday announcements, it is a simple one: Software sells hardware.

If there is a single message from Apple's Monday announcements, it is a simple one: Software sells hardware. Second message? Apple's iPhone has a lot of software available and the Palm Pre, Android, BlackBerry, et al, don't come close.

Apple analyst Charles Wolf, of Needham & Co., called Apple's apps lead "insurmountable" in a research note issued Tuesday morning.

"What's increasingly clear is that Apple is betting that its insurmountable lead in mobile software applications will eventually translate into a growing share in the smartphone market, if it is not already doing so," Wolf wrote.

My pal, the Wolfman, is right as usual, except I'd say Apple is already using its apps strength as a competitive weapon. I expect this to increase in the future.

What does this mean for Apple and people using smartphones in business?

1. While I don't have a breakdown, most iPhone applications are entertainment-oriented. There are a large number of business apps, but if you are primarily competing for business customers, you don't have to match Apple's 50,000 total apps. Just the 20,000 or so that have business uses. Not much comfort, huh?

2. Research in Motion still has the business market sewn up. BlackBerry remains the defacto choice for enterprise customers who need to send or respond to e-mail or connect to an Exchange server at the office. This won't change, but it won't grow much in the U.S., either.

3. With its slide-out keyboard, Palm's new Pre is a better BlackBerry competitor than iPhone-killer. There are also many fewer apps required to compete for business customers, sadly that doesn't seem to be where Pre is selling. Pre needs to develop an excellent reputation for Exchange compatibility and match BlackBerry on all key applications.

4. The great unknown is Google Android, an operating system that is probably more interesting for who makes it than what it does. That's not to sell Android short, it's a great OS, but Google hasn't found success outside its core advertising business, why should Android be different?

5. Despite what appears to be a reasonable number of users, all of whom seem to work at Microsoft, Windows Mobile remains, essentially, out of the running. It shouldn't be that way and Microsoft can't be counted out, but you can't really count Redmond in, either. My theory is that cellphone carriers and manufacturers are too leery of Microsoft to offer more than lukewarm support.

While Apple's new iPhone hardware, the 3GS, isn't revolutionary, it is an important incremental step forward in processing power. More important is the iPhone 3.0 operating system, which will power great new applications, such as real turn-by-turn GPS navigation and the innovative MobileMe "find my phone" application.While you don't need to match the 50,000 applications available for the iPhone to be competitive, by Apple's count the top contender, Google's Android OS, has less than 5,000 apps.

Curiously, Windows Mobile, which claims more than 20,000 applications was not included in the slide Apple showed that compared its applications available to those of competitors.

Sometimes the best way to compete is to "hit the enemy where they ain't," which in this case means going after Apple in the business market, where the iPhone is relatively weak while making incremental improvements in consumer app availability.

Battling BlackBerry means convincing big customers to make the switch and giving them a reason to do so. The Palm Pre has a better near-term chance of competing here than in a daily battle against Apple for consumer sales.

David Coursey has already ordered a 3GS to replace his first-gen iPhone. He tweets as dcoursey and can be reached via the contact form at www.coursey.com/contact.

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David Coursey

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