The writing is clearly on the wall. The iPhone will grow into a significant enterprise end-point role, and OS X Macs will quickly advance beyond the now 20 percent share (estimated) of the total non-enterprise fat client compute device market. This is all but done.
Problem is that Apple (NASDAQ:AAPL) is winning in the old war -- the PC vs the Mac, and the smartphone vs. the mobile Internet device [MID] battles. The larger, more long-term opportunity has moved upward and outward into the realm of the services cloud. Becoming the funnel through which to acquire, access and pay for the cloud-spewing services is the new war. Client hardware isn't going to matter that much very soon, and will likely become free.
Just as Google (NASDAQ:GOOG) Docs gains an offline capability, more of what will make people and workers productive will be what they get as pure services from cloud-based hosts. The next war is the cloud war, and the battles will be fought around software as a service, desktop as a service, integration as a service, infrastructure as a service, platform as a service, development as a service, content management as a service, and so on.
The new money will be made through a combination of access subscriptions, direct payments for digital and media objects downloads, advertising, revenue sharing from online retail transactions, and B2B lead generation motifs.
Apple is in a good position to grab a portion of these revenues, but only a portion. Google is in a better position. And the Microsoft (NASDAQ:MSFT)-Yahoo (NASDAQ:YHOO) conglomeration may be in the very best position, but nothing is set in stone.
Microsoft seems to gets this. Because it does not have a client hardware business (mice and keyboards not withstanding) it can race to the next big thing on software, better than, say, Dell (NASDAQ:DELL). Microsoft has all but given up on the the fat PC business for its future growth. Fat PC clients are a maintenance business now for Redmond.
As long as the packets make it down to the end point and get rendered, Microsoft can find new ways to grow, which are all about the cloud, integrated services, single sign on, virtualized CALs, and advertising. They call it software plus services, but it's all about the services and the dollars.
Microsoft may lose the installed Office business cash cow, but it can gain far more variety of services ... with ultimately a larger addressable market. Microsoft has figured out, thanks to Google, that the Internet business is bigger than the PC business. And these services may well represent a 50-year business trend line, instead of the fat client 20-year business that is now topping out.
Apple surely gets this too, and it's already engaged accordingly. So let me make some predictions. Apple will only have a handful more of meaningful product generations on client-side hardware. Yep, that's right, the iPhone and the Air are the beginning of the end, just because there's not too much more innovation needed down there in the hardware space. Please just add more flash memory capacity and build in the multi-protocol broadband network connectivity to the chip, and we can wrap it all up.
There's only about two to three more years left in the client hardware innovation business before the end-points go pure commodity, even with Apple's intellectual property. The hardware becomes a basic catcher's mitt for the packets, a single chipset that grabs the several important signals and processes them into a basic Web UI and supports the runtime, virtualized most likely. I, for one, don't want to see native iPhone apps; just use the browser and great UI.
But the software layer on top of the hardware, now that's a different story. And it's not a Windows domination segue guarantee, no sir. Too much baggage to support. Microsoft needs a standalone lightweight client story, and neither Vista nor CE is it. Microsoft needs to practically start from scratch on the client software of the future.
And so Apple needs to exploit this "window" of opportunity, and to take iTunes to a much larger role: The new lightweight operating system for the modern cloud services and commerce end-point. This new layer can very quickly emerge from iTunes-as-cash register for music version -- and grow into the everything else under the sun as a service (and cash register) layer.
And that's why Safari on Windows is a massively important campaign for Apple. For Apple to be a player in the cloud-based future, it must parley its iTunes hegemony into a Safari critical mass -- and that has to come at the expense of Internet Explorer and (sorry to say) Firefox.
Next, Apple will then need to munge together Safari and iTunes into a uber client layer for cloud computing-generated services reception and payments -- on mobile, PC, MID, anything that can catch the packets and support an iTunes browser. This is the funnel play, and Apple probably can do it better than anyone.
And so then comes the big question. Will Apple use this new software client model to make the services tie-in closed, open, or how open? Will Apple try and do on the Safari/iTunes client model what Microsoft has so far failed to with Windows? Will Google keep Apple open enough on all of this?
Microsoft, with the massive Yahoo audience it may soon own, will try and hold on to the client software chokepoint -- even as Apple makes a mad dash for it. This is the new war, and it has little to do with the difference between a Mac and a PC. It's about both and how they access the clouds.
I suspect an Apple-Google partnership could outfox the Microsoft-Yahoo hairball, and that the Safari-iTunes-Android trifecta looks pretty interesting as the new client platform. What do you think?