Apple is waking up to services on the quest to becoming the ultimate tech empire
For years I’ve been arguing and arguing that services are going to define user experience of computing devices in the mobile and cloud world, and my growing concern for Apple has been that it was not a services, but a products company, and the company lacked core competencies and organisational structure to deliver that best user experience in services going forward. However, in the past year it has become obvious that not only Apple has been aware of this weakness, but it has been working for a long time to shift priorities and grow expertise in order to address this issue.
Services has been a growing piece of the pie of Apple’s earnings for many quarters now, and indeed, App Store has always been a beast — but it’s not that surprising considering that Apple has always been a platform leveraging third party ecosystem, and App Store is the instrumental piece of this strategy. Apple’s efforts with Maps and Siri, however, have been concerning, as the company struggled with these for years.
Late last week, Apple announced that it’s rebuilding Apple Maps from scratch. This came as a huge surprise to me. Maps seemed like the greatest example of Apple’s weakness in services, where every disadvantage of Apple’s lack of competence and structure came together — the company has always avoided collecting data, has struggled with doing frequent updates to its software, and vastly underestimated the efforts needed when launching Apple Maps — to be honest, I expected Apple was more likely to partner again with Google and license their mapping data, than to build its own data set, essentially signalling defeat in this area and focusing on the company’s comfort zone of producing devices.
But the opposite happened. Apple came to realisation — four years ago! — that the increasing amount of future products and services the company would bet on would need to rely on the mapping data, and that obviously includes future AR form factors and transportation initiatives. AR glasses are rather useless without detailed knowledge of the environment around you, whereas nobody will ride in self-driving cars that doesn’t know where they are going. Building the mapping database of the entire world is something very few companies can do, let alone companies whose business model relies on selling hardware rather that collecting and monetising data — but Apple embraced the challenge, and I applaud them for this ambition.
Google’s ecosystem has been going from strength to strength recently because of the integration of first party hardware, Android, and first class Google services, and Apple clearly doesn’t want to be disrupted from that angle. Apple is taking services and data very seriously now. While future AR glasses and transportation efforts appear to be the key investment when it comes to rebuilding Maps, the product itself is important — Apple’s goal is to make Maps so good that people would start buying iPhones because of Maps, not in spite of them. This approach is similar to the role of other services such as Apple News or iMessage.
With Apple increasingly finds that it needs to move outside of its comfort zone and own data to dominate the mobile and cloud world, I wonder if at some point Apple similarly realises that in order to lead the ambient and voice computing paradigm, the company would need to build a search engine in order to collect general search and knowledge data?
Without this data, another Apple’s core service — Siri — is clearly struggling. Ask Siri a question, and chances are it will return nonsense answer or will revert to Google search. Ask the same question to Google Assistant, and it will probably provide a meaningful answer. The difference is that Google has the data and knowledge, and Siri does not. Thinking of Apple building its own search engine might seem crazy, but then again, who would have thought that Apple would seriously go and try to map the entire world itself? Also, don’t forget that Apple’s recent bombshell hire John Giannandrea did lead not only AI, but Search in Google as well.
Regardless, Apple clearly understands the crucial importance of Siri, and Siri Shortcuts, introduced earlier this year at WWDC for iOS 12, is a proof of that. Assigning key phrases to complex tasks and using machine learning to predict users’ behavior is an important part of using smart devices in the future, and Apple clearly wants to be a part of it in light of growing competition from Amazon and Google — otherwise customers at some point would start flocking to competition that would provide better user experience. Apple clearly does not want this — they would much rather prefer to sell more HomePods, Apple Watches and AirPods, with all of which Siri is instrumental to customer satisfaction.
Apple’s growing appreciation of the crucial role of services goes way beyond data and core technologies such as Maps and voice computing. The other aspect is media services, which would also serve as a further differentiation for Apple’s ecosystem. Similarly to how iTunes was instrumental to iPod’s dominance in the 2000s, Apple sees News, Music, and soon Video as the building blocks for future sales of iPhones, iPads and Apple TVs. Apple’s efforts with video programming in particular is fascinating, as it is another example of Apple’s treading way outside of its comfort zone — building a streaming music service or a collection of aggregated news publications is one thing, but investing billions and growing an entire new division within the company that would focus on working with Hollywood producers and celebrities to create a whole slew of exclusive original content is an entirely new challenge and requires completely different set of competencies. And yet, Apple is not afraid of it, and has been on a remarkable hiring spree for the last few years.
It even feels that Apple has finally woken up to the need of treating its first party software as a service (instead of a product) as well. While in the past the updates to Apple own apps were sporadic and one always had to guess if Apple was going to discontinue some of their apps or not, now Apple has become more reliable and predictable. iWork has been getting frequent updates lately, Apple has pledged its renewed focus and dedication to educational apps such as Classroom and Schoolwork, pro apps such as Final Cut Pro X and Logic Pro X are moving forward quite quickly as well, and many stock apps are now both updated on iOS and moving to macOS thanks to the “Marzipan” initiative.
Apple’s promise has always been a tight integration of hardware, software and services — this is what Tim Cook has been repeating regularly. In reality, some of Apple’s services in particular have been lagging behind for years and it felt that the company’s heart just wasn’t there, and it lacked core skills to treat services right. Now, this has started to change. We’ll see if Apple’s new Maps are indeed at least on par with Google’s, and if Apple Video ends up offering a selection of first class content — but the company’s ambition and willingness to learn has never been greater, and Apple has never been more serious about owning and controlling the entire stack. The Cupertino giant is reinventing itself, and the management should get all the credit for it. From industry leading custom silicon and unrivalled hardware, through most innovative software, to leading services fuelled by owned data of more than a billion of customers around the world — if Apple succeeds, it would truly become an empire of tech of an unprecedented scale.
