How did Apple fail to tap the business and scientific markets?

Question

Currently reading an excellent book called Blue Magic: The People, Power and Politics Behind the IBM Personal Computer, which is just what it says on the tin; highly recommended to anyone who wants to know the corporate politics behind the scenes.

It makes a curious casual remark on a related topic. End of chapter 19, p112 in the hardback edition:

But in at least one other opinion bearing on the IBM versus Apple matter, Warren Winger, chairman of a chain of computer retail outlets in Texas and Illinois, told the New York Times that IBM's strategy for its PC was obviously geared to exploit the business and scientific markets that had inexplicably not been tapped by Apple. "It appears that IBM has a better understanding of why the Apple II was successful than had Apple," Winger said.

Now I'm really curious: what did he mean by that? What did Apple fail to do that they could have done to tap the business and scientific markets? (As I understand it, the key ingredients for Apple in business were the disk drive, VisiCalc and 80-column display, all of which were in place by then?) What did Winger and IBM understand that Apple did not?

Answer 1

The Apple II was a hobbyist's computer that unexpectedly found a business niche. Apple recognised that niche in its design of 1980's Apple III. Specifically, it thought that the following were necessary changes to produce a business computer relative to the contemporaneous II+:

• a full-ASCII keyboard, with lowercase and uppercase entry;
• an 80-column display;
• a much larger quantity of RAM (up to 256kb rather than 48kb);
• a properly-rounded operating system with: expansion cards identified by name rather than location, a hierarchical filing system, support for large fixed disks, and a built-in real-time clock for time stamps; and
• enough backwards compatibility with the II to be able to run VisiCalc and other leading business software.

So I'd actually argue the opposite: that intellectually Apple understood business-user needs.

It's the delivery that failed; initial batches of the III were extremely prone to failure, and they dragged the III brand down with them. The story is that Jobs himself insisted the machine operate without a fan, and hardware instability resulted.

The comment in the book could be an obtuse reference to the fan — silence is a very consumer-centric decision and by killing the machine, eliminated Apple's business play.

Development of the III also caused Apple temporarily to cease work on the II, believing that the market would transition; the Apple IIe wasn't introduced until 1983 so at the time of the IBM PC's introduction Apple's best-selling machine — still the II+ — suffered by:

• offering an uppercase-only keyboard;
• supporting only 48kb of RAM for the overwhelming majority of applications;
• providing only a very basic disk operating system, without folders or hard disk support; and
• providing 40-column output only, with the various third-party 80-column adaptors having no well-supported standard.

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Subnote: since the quote is about whether IBM recognised "why the Apple II was successful" better than Apple did, I've discounted questions of distribution and branding from the quoted chairman's reasoning. Things inherent to IBM being a business-oriented company with deep roots and Apple being a youthful upstart with relatively ad hoc distribution would have affected the Apple II just as much as the III.

I therefore do not think that the difference in brand appeal or sales channels — as relevant as they may be to the PC's success — could possibly substantiate the claim given. They cannot be what the chairman is referring to, so they do not answer the question.

Answer 2

I personally don't believe that Winger understood anything that wasn't well understood by both Apple and IBM at the time.

I would say that this passage is pointing out the confusion that Apple's approach to "computing in the workplace" bore little resemblance to IBM's well-established approach to "computing in the workplace." The commentary is attempting to dissect what is happening in two distinct markets by falsely viewing them as a single market.

You first have to remember that computing for business and scientific work was nothing new in 1980. The computing business had been around for a couple of decades already, and IBM had grown to own the largest share of that established market. In contrast, Apple was a startup in the new business of microcomputers for personal use. This was not the same market as IBM. You could certainly argue that microcomputers were already showing the promise that they'd revolutionize legacy computing by 1980, but that was much more a prognostication than an accepted fact. The typical corporate IT purchasing manager certainly had no reason to risk their job over speculation about the future of micros.

So, when IBM finally entered the microcomputer for personal use business to compete with Apple, they weren't entering it as a startup. They already had legions of loyal customers who owned IBM products for business and scientific computing. The task for IBM was to simply guide those existing customers toward microcomputer adoption. Apple had no such opportunity to market in this way because they had no such existing customer base to whom they could direct this marketing. Had Apple made an attempt to do that earlier, they would have met with much resistance from the "typical" computing user thinking something along the lines of "If this is the future of computing, then why isn't IBM selling it to me"?

Now, it is not as if Apple was blind to the opportunities for micros in business and scientific computing, just as IBM was obviously not blind to it. They were already maturing their product line to address these exact markets with the Apple /// and the Lisa. These were to be higher end products that could be marketed to traditional computing users on their capabilities. They weren't just a low-end microprocessor in a personal package; but rather sophisticated systems with state-of-the-art OS software geared toward workplace uses and not toward playing "Karateka".

Apple had every intention of leading the revolution in corporate and scientific computing and "stealing" IBM's legacy customers away from them. It didn't work out that way because IBM severely upset their Apple cart by executing rather brilliantly with a personal computer bearing their own trusted and established brand.

Answer 3

I would say that the Apple II did tap the business and scientific markets!

From the business side, VisiCalc on Apple II was a major driving force in many businesses. One could make the case that it was responsible for the majority of the sudden explosion of bond trading in the late 1970s. The ability to easily calculate spreads across hundreds of issues was an enormous leap.

I was in the sciences, and there were Apple II's everywhere. VisiCalc was a major factor here too. Various I/O boards also added to this, although that was also true for the S-100 machines.

I don't think it's proper to say the Apple II failed, I think it's much more proper to say that the PC simply displaced it. Its larger memory, higher speed, generally greater storage and better displays meant it could simply handle more tasks than the Apple. That it found more uses as a result should not be surprising.

Answer 4

The Apple II was a computer targetting nerds (probably even before that term existed in its current meaning). It implied taking things apart, tinker with it and, generally "needs inside knowledge" - A corporate image entirely different to Apple today.

IBM was known as "we'll not explain or require you to understand how it works, you simply pay us (a bit more) that it works."

It's quite clear to me why commercial ("no one ever has been fired for buying IBM") and scientifical buyers (at least outside EE) preferred buying IBM. Apple had a completely non-compatible corporate image to attract buyers on the commercial and scientific markets.

Answer 5

The times we are talking about, late 70's to early 80's, were crazy with new uses for technology. Nobody understood it fully. Looking back today, it is easy to see that computers were valuable to business. It is easy to spot the uses and advantages. In fact, as time passed, they became indispensable to successful business endeavors.

I was young then, but I lived through this special time. When I was 8 years old, I wrote my first program. It was a simple 'hello world' with some geometry calculations added in. Then I wrote programs on the first IBM PC. I wrote programs on the Apple II. My dad was a computer science professor and had introduced me to the punchcards, the air conditioned tombs with loud printers and whirling tape, and the precious scrolls of knowledge that were the new program listings.

I used to read the college textbooks when I was 12. My dad gave me a great gift, a wonderful advantage in life. I wrote code in BASIC, assembler, FORTRAN, Pascal, C, and others. I watched the news. I went with my dad on his side consulting calls to businesses. I knew what was happening at the college. I felt the pulse of the industry from its birth. There were no computers ... until there were. There was no internet ... until there was. I feel privileged to have been a part of it and I continue to be amazed to this day.

The trends were never in Apple's favor, honestly, but I'm typing this on a Macbook, I have an iPad in my bag, and even my music collection is on Apple. The Apple of Steve Jobs made the best software and hardware in the world for personal use, created with love and intended for the most discerning and innovative people in the world. But it isn't works of art that big business seeks, it is efficient tools that do the job and have service techs available in case of issues.

There are several factors that play into this situation that probably aren't obvious from a distant point of view:

- Steve Jobs was a hippie. He was completely unconventional. He had peculiar bathing and grooming habits. He had strange schedules and unusual plans. I'm not bashing him. I think he was a visionary. I am quite unconventional myself and I count him as a role model. But ... he was so different from the typical 'businessman' that it was anything but natural for the average business to accept him seriously. It was also completely within his character to avoid fraternizing with big business.

- Steve Jobs was a visionary. His vision was of a personal computer for the creative souls of the world. He saw himself serving artists, teachers, inventors, writers, and any number of other creative people. Sure, there was business software, tax software, etc. available, but it was not the first priority. It was not part of the mission statement of Apple.

- The business of creativity was something Steve Jobs saw coming, but it took a while getting here. Even today, you can see the results of this strong sense of mission: the people who use apple products are much more likely to be creatives. Artists, developers, teachers, content producers, entrepreneurs, etc. make up a remarkably high percentage of Mac and 'iStuff' users. As the demand for creative workers has risen over the last 30 years, the lucky (or visionary - depending on how we look at it) side effect for Apple was that the creative people are the rich ones now, not the 'starving artists' of the 70s.

- The installed base of 'business' computers in the 1970s was made up of a of mainframes, some 'mini' computers, typewriters, calculators, and other technology from the previous generation. In addition, It took a long time before the marvelous devices that were the first personal computers were actually competitive with the less glamorous business class hardware. Even though they were amazing to home users, they were thoroughly unimpressive to big business for quite a while. I would venture a guess that most businesses would have preferred to keep the mainframes and terminals to this day, with regular technology updates as time passed, of course.

- The businesses that were first to adopt were the ones who either had a tremendous need or had high operating budgets. These were businesses that had very high standards and were less likely to adopt 'personal' computers that needed finicky operating procedures, had questionable longevity, and had no reliable software (not in BASIC, but in COBOL, which is still the most widely used language in the world by sheer lines of code). They needed high uptime, skilled support personnel, and solid backup methods. A game file getting erased on a personal computer is annoying; a database of million dollar transactions being lost is a train wreck.

- Big Blue has always hired the best salespeople and engineers in the world. IBM regularly displays exhilarating examples of design and engineering prowess, much of it from the esoteric realm of basic research ... where all true creativity lives. Their sales and marketing teams are so consistently skilled that you can confidently set your corporate budgets by their projections. IBM is serious engineering, serious design, and serious business. This is their mission. Just as Apple was built from the ground up to serve creatives, IBM was designed to serve big business.

- So the Business and Scientific users mentioned are those who would want a computer, who could afford a computer, and who would actually use a computer ... those people are going to go with what they know. The business people know IBM ... for many 'business' people, the PC wasn't real until IBM made one. It was a toy until it was for real. A computer cost as much as a new car back then. It was a serious decision.

And then there are the geeks among us, the scientists, engineers, and tinkerers of the world, including me, who preferred the open architecture and the variety. For business, downtime is a frustrating expense. For a creative technophile and tinkerer, it is an opportunity to take the computer apart once again, to reformat the hard drive for the millionth time, to upgrade the CPU with the latest gadget. It is a joy I have pursued for over thirty years and I wouldn't change a thing.

If everything isn't super compatible, I'll make do. If the drivers aren't quite ready yet, I'll find an old one. If the OS is full of backward compatible hacks, segmented memory management gimmicks, and interrupt cascades, I'll figure it out. It's all great fun! It is a great puzzle. It is my old pickup up on blocks in the backyard. I get to drive it sometimes, to play the latest RPG or shooter game ... in between repairs.

For a person who likes to fix things ... a computer and OS that is broken a lot can be a gift. That is what the Windows PC is today and has been for a long time. For those times when I need a solid business system that will just keep working, with low cost of ownership and minimal hassles, it is a linux box. And for those times when I need to get things done, when I just want it to work, flawlessly and beautifully, I have my MacBook and iPhone.

Answer 6

One thing that I heard is that IBM dealers got a discount on all products they sold based on the number of units they sold. The discount on a mini computer due to "selling" a PC could be more then the cost of the PC. Hence there were very large discounts for small companies that bought PCs from some of the dealers.

Another factor is that a PC with a mainframe terminal card in it did not cost much more then a mainframe terminal. Apple clearly did not have the same access into mainframe users, and there was not a IBM mainframe terminal card for Apple computers. (The Mac did not even have expansion slots.)

And then Lotus 123 came......

Answer 7

Apparently one of the sticking points of Apple achieving a foothold in an IBM workplace is that Apple did not compete with IBM to completely match the professional business/scientific hardware capabilities that IBM offered.

One of the particular nitpicks had to do with parity memory. IBM offered support for it on the PC/AT and Apple did not, and so the eggheads in a business dominated by IBM could say, "We are not going to trust our critical calculations to the unchecked memory system of Apple products."

Apple did not offer support for memory parity until the development of the Macintosh IIci and Macintosh IIfx, and by this point IBM was very firmly established in the business and scientific market.