Apple and IBM entered into a partnership last year and announced first wave of Mobile first iOS solutions by IBM during december 2014 where they launched ten enterprise specific apps  in verticals like banking, retail, insurance, financial services, telecommunications and for governments and airlines in Travel Industry including clients like Citi, Air Canada, Sprint and Banorte.The announcement also included the plans of Apple and IBM to increase the number of apps to 100 by end of 2015 across several verticals and to carry forward the existing partnership three new apps were announced  at Mobile world congress 2015 including Passenger Care (for airline customer service agents), Advisor Alerts (financial professionals) & Dynamic Buy (providing real-time data to retailers on product performance).But the key question remains whether it will boost slowing iPad sales?

Apple IBM Deal Expansion

During the end of 2014 we have seen  the worldwide tablet market showing slow growth contrary to what was estimated couple of years ago. Moreover the sales of Apple’s iPad has shown negative annual  growth rate as summarized in the chart below.

Although Apple’s iPad shipments and sales have been waning over the last year or so, iPads traction and growth in consumer segment is almost dipping off with the rise of phablets (especially iPhone 6 Plus now) and longer replacement cycles of tablets. Below are some of key observations which can be considered to arrive if we can see increase in iPad sales post the IBM deal.

Its more than just distribution: Apple-IBM deal is about Apple partnering with IBM to not only be a distributor or reseller of Apple hardware but also co-develop enterprise-grade software and services highly optimized for iOS platform. IBM will thus focus on making iOS devices enterprise-grade by reverse engineering what iOS doesn’t have (and has never had) out of the box; for example security, device management etc. iOS was primarily a consumer operating system so it doesn’t have many of the things that enterprise CIOs typically require.

Leveraging IBM’s deep experience in Enterprise: IBM will prioritize Apple offerings above others when promoting its software & services as the de-facto standard. Apple thus being able to leverage IBM’s greater penetration in enterprise segment.

Use cases in Different Verticals: We believe that Banking, Financial services and Insurance (BFSI), Travel, Manufacturing and Retail will lead as far as vertical specific apps are concerned. As per Apple they have planned 100 enterprise specific apps by the end of the year. Going forward the demand will be more among the organizations which are buying tablets as a solution rather than a device. And lot of use cases for tablets are still not explored along with improving and redefining the user experience of existing set of apps in various verticals.

But then couple of factors as mentioned under can act as inhibitors:

Competition: However, at the same time it remains to be seen what Microsoft does in terms of improving the overall user-experience of the platform with Windows 10 upgrade which might challenge iOS to some extent as well. Also players such as Google & Samsung have over the past two years spending millions of dollars to elevate and push Android and Galaxy offerings to commercial grade-level respectively in the enterprise (e.g. with KNOX effort) and have gained some traction in some enterprises.

Apple’s Product mix : Apple’s product mix is still significantly skewed towards iPad mini form-factor (mostly consumer and almost 55-60% of the total shipments).Hence, Apple would need a bigger form-factor and enterprise grade software, features and management support (like Surface) to stimulate iPads in enterprise in a bigger way.

Already higher BYOD trend: Enterprise sales channel is still not a huge contributor to the overall sales for iPads and BYOD trend for iPads is already higher in some verticals like Education, Healthcare, and Hospitality etc.

Hence considering both set of assumptions above I believe Apple-IBM partnership is still in a very early stage to have made much difference and any uplift so far would be lost in the noise around its blockbuster last quarter. However going forward there may be a modest uplift over time as the app numbers increase across various verticals and touch its target of 100 by end of 2015 but the real uplift can be seen if and when Apple launches its bigger screen tablet.

Below is a chart based on our observation of adoption/penetration/momentum of computing devices (platforms) in various verticals prior to IBM deal and we will keep on monitoring how this distribution changes over the next year or so.

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