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Wednesday, 14 April 2010

Apple and Closed Systems: Is Yesterday's Disadvantage Today's Advantage?

When I began teaching software law in the 1980s, it seemed that there was a disproportionate number of cases involving Apple Computers (usually as the plaintiff). In comparison with Microsoft, Apple was viewed as espousing a proprietary, closed system. As such, it was not surprising that Apple was an active litigant in those days, in stark contrast to the emerging software behemoth from the Pacific Northwest. Not surprisingly, Apple helped forge the countenance of software legal protection in that period.

The problem for Apple, however, was while it may have been great in the courtroom, it did less well in the marketplace. The Mac did not gain widespread customer traction and the company faced serious challenges to its long-term viability. The common wisdom at that time was that a major factor in Apple's decline was precisely its closed system, proprietary outlook, in comparison, for example, to Microsoft, which invited third-party developers to create as many applications as possible for the Microsoft operating system. When one joins this with the emergence of the open source movement at the end of the 1980s, the accepted mantra was that open systems were in, closed systems were out.

Fast forward to today. Coming home from work today, I listened to a New York Times podcast. The focus of the podcast was on the seemingly endless upward trajectory of Apple and its products. The emphasis was on the so-called Apple eco-system, especially the ITunes model for contents and the functionality of the Apple operating system across the entire array of Apple products (namely the iPod, iPhone and iPad). What characterizes this eco-system is the fact that it is closed--indeed, the iTunes was described as particularly so--in comparison e.g., with the Google Android open source initiative.

The suggestion was that the current winner is in fact Apple, thanks in no small part to its closed system approach, rather than Google, with its open source orientation. In other words, the same closed system orientation that is popularly attributed as a major factor in Apple's decline in the 1980's is now being trumpeted as a major reason for its current success. Not everyone accepts this characterization, it should be noted, and the podcast did mention the contrary position that the closed system orientation would ultimately be the source for Apple's decline. This, however, seems to be a minority view.

If this be correct, this reversal of the relative competitive advantage of open v closed systems is a fascinating development. This is especially so, given the almost sacrosanct place that open systems and collaboration holds in the hardware and, particularly, the software space. In that connection, I also wonder what role the strength of the Apple mark and brand plays in connection with the claimed advantages of its closed-system approach across its multiple platforms and products.

12 comments:

Gentoo said...

"If this be correct, this reversal of the relative competitive advantage of open v closed systems is a fascinating development"

Where to start...

You might have pointed to articles suggesting that Microsoft now "gets" open source software, e.g., http://blogs.zdnet.com/microsoft/?p=1142

(personally I wouldn't hold my breath)

You could have pointed to the growth in the sales of and numbers of smart phones running open source operating systems e.g., http://www.maclife.com/article/news/android_market_share_grows_iphone_shrinks


Less obviously, you might care to look at internet browser share.

http://marketshare.hitslink.com/browser-market-share.aspx?qprid=0


a story of open source growth against market dominance of closed systems, even in the face of illegality.

Even Safari is open with the source code based on Konqueror.

I could go on about this forever, and probably have but it does seem slightly surprising that you could write this article based on on listening to a podcast.

I wonder if I can guess the brand of your portable computer?

Anonymous said...

@Gentoo:
I think you're confusing open/closed source with open/closed systems.

I don't think one can really deny - at this point - that Apple is being extremely successful with a model that is infinitely more closed than Microsoft's model. Just imagine Microsoft deciding from now on what programs you are allowed to use on your system; the world would be outraged, and for MS it would probably be legal suicide. However, this is exactly what Apple is doing and getting away with.

What use is having the source code of Safari if you're not able to distribute your bug fixes and improvements?

Reason tells me that Apple's model will ultimately fail, but unfortunately reason usually doesn't decide these things.

Anonymous said...

I'm so glad you wrote this, I thought I was crazy. My recollection of the commonly-stated reason for Apple's near demise is the same as yours, but everyone seems to have forgotten that. A curious turn of events indeed.

Neil Wilkof said...

Gentoo,

Thanks for the comments. My portable computer is an HP model. I am curious if that was your guess.

Anonymous said...

May it be that the development of computers is somehow similar to the one of automobiles?

For the first cars, drivers had to be mechanic freaks that could repare nearly everything from scratch. Nowadays nearly nobody dares to look at their engines to check what is going on.

In a sense, the early cars were open systems while a mass market prefers closed systems that everybody can use.

Time will tell, as usual, who was right.

Jeff said...

Who was it who said the most efficient form of government is benevolent dictatorship?

The problem with dictatorship is that you don't get to choose the dictator.

It's fine for Apple to be going through a pink patch with one of the greatest thinkers the business world has seen, but the chances that they can keep this up year after year (and certainly once Jobs is gone) seems low.

Give open systems time. I suspect they'll win in the end, but Apple will certainly make some serious cash in the meantime.

TJ said...

"The Mac platform, for example, is obviously proprietary; Apple owns and controls it. Many contrast this to the PC world, but the only thing open in the PC world is Linux. Microsoft's Windows platform is proprietary, as are AMD and Intel's processors."

Extracted from an interesting article available here...

http://tinyurl.com/y3b9a85

Steph said...

"I don't think one can really deny - at this point - that Apple is being extremely successful with a model that is infinitely more closed than Microsoft's model. Just imagine Microsoft deciding from now on what programs you are allowed to use on your system (...)" Save for the fact that you can run MS/Linux OSes (and gazillions of programs for same) perfectly well on Apple hardware these days, since it has embraced the 'Wintel' architecture.

Apple's success is a triumph of industrial design-cum-marketing-cum-business model reengineering (iPod and iTunes led and still sustain most of the charge), I do not believe so much of it is owed to their computing division/closed-vs-open approach (unless of course you base most of the "closed-system-is-successful" argument on the software-only, Winbox-just-as-friendly iTunes media distribution app).

Jordan Hatcher said...

I think that when thinking about Apple's approaches when comparing to Microsoft, it's really important to separate out the areas that are being compared.

The key difference for me is hardware, not software, when looking at the computing/OS market -- which is the relevant market during the time period of Apple's decline until the 2000's. Microsoft allowed Windows to be installed in any PC: Apple controlled the "clone" market through licensing, which ended in 1997. Enforcement against non-Apple hardware running Apple's OS continues today, see Psystar.

Apple will never be as big as Microsoft in the OS market because of this because it can't take advantage of the greater volume of having other "channels" sell their OS, but Apple knows it.

This kind of thinking -- around tightly controlling the "ecosystem" of your product -- does extend to what Apple does today. But it's important to not underestimate the "openness" of areas such as the AppStore, which do allow for a really broad range of developers -- anyone that can code an app and sign up to the program.

As a side note, Apple is a user of open source in OSX -- it runs parts of FreeBSD and NetBSD.

Anonymous said...

I would not attribute Apple's success to its closed systems, rather it's more due to branding and even more so by people buying Apple as a backlash against Microsoft and their products.

Apple has been around for some time, Google/Android on the other hand, not so long. It's therefore not a shock that Apple is the bigger player in the market at the moment.

However, what we are now seeing, somewhat surprisingly, is a backlash against Apple - for example because of them implementing advertising etc, in iPhone update 4.0, controlling what is available on iPhone, iPad, etc.

In my opinion, the difference is all in the brand. Unfortunately that nice Apple white gets dirty very easily.

Anonymous said...

Fascinating article. I have had personal insight into this closed system approach from Apple and (as a consumer) I found it infuriating, so I would tend to agree with the minority view that this approach (particularly when it is absolutely pursued as in the example below) will eventually lead to the demise of Apple.

I own an Apple iphone and a while ago bought the Bose sound dock to accompany it. Great piece of kit and worked very well at BBQs, parties etc. However, Apple recently released a software update for the iphone that means that my iphone will no longer charge whilst in the sound dock (a message appears telling me that the kit is not compatible with the iphone). With the extremely poor battery life of the iphone this means you get an hour, or two at a push, before your phone is flat and there are no more tunes at your party. Frankly outrageous and very, very annoying as a consumer. Cannot see the benefit to Apple either (they are not exactly known for high quality sound systems) so it would seem that the only reason is an almost child like pursuit of the closed system approach.

Anonymous said...

"But it's important to not underestimate the "openness" of areas such as the AppStore, which do allow for a really broad range of developers -- anyone that can code an app and sign up to the program."

How is this open? You have to sign up and stick to Apple's rules. You need Apples approval for every update you release. Apple can pull your application whenever they want and they have done this in the past. Apple decides what's good for their customers.

"Open source" is only a means to an end. Apple has firmly blocked all roads to that end.

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