Why The iPhone Won't Make Apple A Player In Business IT

It will likely pressure smartphone rivals and corporate IT to provide better mobile computing. But it's unlikely to change the company's status as a runner-up in businesses.

Of all the marketing tricks Apple CEO Steve Jobs has pulled off in three decades peddling computers, last week's was the best. He made a wake-up call from a phone that doesn't exist.

Jobs touted Apple's prototype iPhone, due in June, as a music and video player, smartphone, and Internet device rolled into one. The message for people running business IT, and for the smartphone industry, didn't come from Jobs, however. It was embedded in the euphoric reaction from would-be users. The message? People crave a much better mobile computing experience. IT departments will be on the hook to provide it.

The hell of it is, the upcoming iPhone isn't likely to be the ticket, at least for businesses, even as it raises expectations. The iPhone's drawbacks include a relatively slow data network, a closed OS X platform that will limit available applications, exclusivity to the Cingular network, and, at $500, a shockingly high price tag. One of the iPhone's main strengths--a design that emphasizes music and video--may work against it on the job. "Providing a device like the iPhone to business users is like giving them a PlayStation," says Justin Hectus, director of information at Keesal, Young & Logan, who outfits the law firm with Treos.

Yet it's also true that consumer technologies like the iPhone drive innovation that IT pros must respond to. For instance, the iPhone's large, 3.5-inch screen will pressure other smartphone vendors to follow, given the growing business demand to put more full-featured applications on mobile devices.

Whether IT departments embrace the iPhone or not, some employees will walk in the door with them. If they're senior execs or stars of the sales team, IT will be called on to support the gadgets. "There's a vibe around Apple," says Credit Suisse analyst Robert Semple. "People want to be associated with it." Cingular, the largest U.S. cellular provider, certainly wanted to, having spent two years quietly working with Apple on its phone.

Done right, the iPhone could give Apple (which dropped the "Computer" from its name last week) better footing in business technology environments. After all, the company sells laptops, desktop computers, servers, storage, and software for the enterprise, and its brand has never been stronger. But there's no indication Apple will seize that opportunity. Apple's dust-up with Cisco Systems over the iPhone moniker (Cisco owns the U.S. rights to the name and filed suit against Apple) brought evidence of that. According to Cisco general counsel Mark Chandler, the two companies failed to reach an agreement that would have given Apple permission to use "iPhone" in exchange for technical collaboration. Apple apparently wants to do things Apple's way.

To be clear, Apple hasn't forgotten devotees who use its products at work. At Macworld last week, products were demonstrated that make Mac computers a bit more practical for business use, including a new version of Microsoft Office for Macs and virtualization software that lets Windows run on Macs.

But Apple barely mentioned its next operating system upgrade, Mac OS 10.5, known as Leopard, that's due this spring. The company said it will incorporate Boot Camp, which can partition a Mac to run Windows XP and Windows apps, when it releases Leopard--but that was it. No mention of possible quad-core Macs, either, which many anticipate now that Macs use Intel chips.

Apple takes care of its key education and creative industry customers, but overall it doesn't make business sales a priority. Mac's a bit player in mainstream business computing, with 2% of the desktop and 9% of the laptop markets, even including its education stronghold, IDC estimates. Apple's new Xserve, equipped with two Intel Xeon dual-core processors and running Mac OS X, shipped in November. While popular with researchers, the servers account for only a minute share of the Unix server market.

Mac tools like an updated Office suite from Microsoft and virtualization software from VMware make Apple a more viable business option. Still, "they aren't going to target the business market," Semple says. "They're going to let businesses use them if they want to." Apple didn't make executives available for this article.

What function might the iPhone do so spectacularly well that businesses can't pass it up? The dominant U.S. smartphone--Research In Motion's BlackBerry, with more than 50% market share--seized its place with wireless push e-mail. It wasn't so long ago that execs plunked down more than $400 for the honor of being hounded wherever they go. (BlackBerry prices now start around $200.)