Tuesday, May 29, 2012

Apple's Software Edge

Apple's ability to meet revenue and EPS expectations with its iOS products was put into question last month as the stock fluctuated up and down in a dramatic fashion. All worries were pacified when Apple revealed a huge earnings beat; that settled the skeptics by proving Apple isn't slowing down. It will be years before the iPhone and iPad lose market share, and their ascendancy will only continue to increase. Google, Microsoft, and Amazon will never have the ability to overthrow Apple as long as Apple continues to have a colossal dominance in software. When people compare Android and Microsoft products to iOS devices, the argument always compares screen size, battery length, and form factor, but the most crucial element is software. Hardware is only as good as its available software. Unfortunately for Google's Android, Apple's beats its only serious competitor in all categories: hardware, style, form factor, and software offerings.
Apple's software advantage can single-handedly be attributed to the fact that application developers prefer the iOS platform over others. In a recent survey, app developers preferred iOs to Google's Android , despite the fact that Apple charges more commission. That in itself speaks volumes; developers are willing to sacrifice more per app because they prefer iOS. It seems that neither Google, nor Microsoft can motivate developers to first develop their applications for Android. There are many reasons why developers prefer iOS: better development platform, iOS users spend more money on apps, and faster adoption rate of latest operating system updates. Some reasons why iOS is preferred are complications that Google has no direct control over. These issues are caused by: Google's business plan of being open-source, the fact that there such copious amounts of Android variations that developers cannot guarantee the quality of their apps and the question of how Google can make their users spend more money on apps.
As a result of app developers prioritizing for the iOS, Apple products have had a string of high-profile, exclusive apps: Angry Birds, Words with Friends (which took over year to port over to Android) sometime before being ported over to Android. The most recently notable app is Instagram, which has been recently acquired by Facebook. Instagram was exclusive to the iPhone for 1.5 years before being released on Android. To illustrate the popularity of such an exclusive and in-demand app: Instagram had 30 million users utilizing their app out of 180 million total iPhone users, an incredibly high user-rate of applications. Apple does nothing to keep these apps exclusive, except charge developers more than Amazon and Google. Exclusivity adds to the value and allure of iOS products; what is the point of purchasing state-of-the-art hardware if the most desirable apps everyone is using are not available?
Where Apple's dominance shines is in its games. Hundreds of new and creative casual games are being created and in turn, a new generation of gamers is being cultivated. The expansion of these iOS games has been directly destroying the Nintendo and Sony portable game systems. In fact, Nintendo has directly blamed the success of the iPhone for its poor hand-held sales. iOS is now a very intimidating gaming platform; IGN.com, the most popular gaming site on the internet, considers the iPhone the equivalent of other gaming consoles: the iPhone is listed in the same category as the PS3, Xbox360, Vita, and 3DS. iOS is now on the same level as Microsoft, Nintendo, and Sony when it comes to the respect of gaming websites. Apple is not just taking out Google, RIMM, and Microsoft, but also experienced gaming giants Nintendo and Sony.
The only way to truly slow down Apple is through software. While Microsoft, Google, and Nintendo are aware of the problem, they can't do anything about it. Apple's software authority can't be eclipsed overnight; the creation of comparable software won't come close to catching up to Apple. Until a company can revolutionize software, Apple will continue to lead this race.