Gartner to Jobs: License Mac OS X to Dell

In a bid for column inches and a share of blogchatter, Gartner analysts have tossed the following bomb:

The future success of Apple, Dell and Intel lies with a licensing deal between Steve Jobs' company and the PC maker according to analyst Gartner.

Increasing component costs and pressure to cut its prices mean Apple's best bet for long-term success is to quit the hardware business and license the Mac to Dell, analyst firm Gartner claimed on Tuesday.

Gartner claims that with the right partners, distribution channels and a more affordable price, computers running the Mac OS could eventually account for 20 percent of the total PC market.

Game on, Gartner.

Props to the world's largest IT analysis firm for trying on something controversial, but I can't really agree with their suggestion, which seems to be predicated on a few assumptions:

  • Dell can significantly outperform Apple's own current operations
  • Dell can meaningfully augment Apple's current distribution and sales
  • Both of these things will be necessary once Intel stops subsidizing Apple

The first assumption seems to be a bit of a layup: Dell's a manufacturing and logistics monster. The Wal-Mart of the computer business. They run the leanest supply chain in their industry and, as a consequence, sport some of the lowest costs per unit sold in the PC business. Thing is, since the arrival of Tim Cook, Apple's no slouch at this either. Their operations may not be as lean as Dell's, but they outperform everyone else in their peer group. What's more, Dell's reign of terror over their supply chain doesn't just benefit Dell; over time, their suppliers bring the same components and subassemblies, built with the discipline they've learned from Dell, to the whole PC market. In other words, everybody eventually benefits from the Dell effect. Pretty soon, what was once an advantage exclusive to Dell is the standard operating procedure for the industry as a whole.

The second assumption is even shakier than the first: that Dell's direct and enterprise sales focus, as opposed to Apple's consumer and retail focus, would open up huge new markets for Mac OS X. This is something of an article of faith for me, so perhaps I'm merely demonstrating my own intellectual inflexibility, but I think this is a pipedream. Much as I would love enterprises to adopt Mac OS X en masse, I can't see it happening. There are large companies out there still running Windows 2000; the demand element to this equation is, by definition, conservative relative to the consumer and small business market (rightfully so: they have decades of investment in complex legacy systems to protect). Moreover, the supply side element (Apple) isn't about to get into the unglamourous, distracting business of creating an enterprise-friendly product line. We won't be seeing Apple's CEO share the stage with SAP to announce…anything…any time soon. So Dell's vaunted market strengths would bring an audience that doesn't want Apple to a supplier that's uninterested in serving it. Bra-vo.

Oh, and if Apple's a significant player in the mythical converged, digital home, who says they even need the enterprise market to grow their marketshare to 20% or beyond?

On the last assumption, that Intel's supplying Apple with kit at cut-rate prices (and thus goosing Apple's margins), even Gartner admits it's just speculation. Now, it's probably well-educated speculation (Intel's in a war with AMD for partners), but it also imputes an awful lot of value to the tin that Apple sells, as opposed to the software atop it. If, in fact, Apple's core (but not only) strength is in designing and developing elegant, highly-functional sofware anyone can use, why would they not be able to preserve their margins through software innovation, without worrying (much) about Intel's need to increase component costs? And if Apple demonstrated the same prowess with other services (I'm looking at you, .Mac) as they do today with the iTunes Store, there's a further value-add that exists beyond the hardware costs alone.

As Apple fanboys (like yours truly) are fond of observing, a Mac (any Apple product, really) is more than the sum of its parts. Preserving that magic would require strict control of a licensee's designs; so strict, in fact, there'd be no room for differentiating features between a Dell running Mac OS X, or an Apple. I doubt either company would want that kind of relationship


[Important disclaimer: Gartner Inc is the corporate parent of my employer. Obviously, my opinions as expressed in this post represent neither Gartner nor the people for whom I work.]

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