It’s Official: Apple Is Turning into IBM

According to Bloomberg, Apple plans to announce “subscription bundles” with its new line of iPhones slated to launch in October of this year. If true, it’s yet another sign that Apple is becoming the dullest of all tech businesses: a cash-cow-milking service provider.

The great American philosopher Eric Hoffer wrote that “every great cause begins as a movement, becomes a business, and eventually degenerates into a racket.” If he’d been a tech journalist he might have written: “Every great tech company begins as an innovator, becomes a de-facto standard, and eventually degenerates into a service provider.”

IBM, for example, was insanely innovative, becoming the first company to make digital computing practical outside of a laboratory. By the 1970s and into the 1980s and the PC era, IBM completely dominated the computer industry. It was the company of whom it was said “you’ll never be fired for buying IBM,” — in other words, the de-facto standard.

Today, almost two thirds of IBM’s revenue comes from “services” and only eight percent from hardware sales. IBM still generates a lot of patents, but when it comes to having an impact on high tech, IBM has become practically a footnote.

A similar process happened with Microsoft. It was spectacularly innovative in the 1980s, so much so that it was seen even then as the successor to IBM. However, after Windows and Office became de-facto standards, Microsoft stopped innovating, and with its move to the subscription model for its software,

Microsoft has become, like IBM, a service provider. Consider: when Congress recently investigated whether high tech firms were dangerous monopolies, Microsoft wasn’t even invited to the party. That’s gotta hurt.

Which brings us to Apple. Remember when people lined up to buy the new Apple devices? When Apple was the most innovative company in the world? But then it became the de-facto standard for smartphone and the innovation ground to a halt. For the past decade, Apple’s new releases have hovered somewhere between a shrug and a “meh.”

Apple’s new “subscription bundles” will simply serve to lock current Apple users into only buying Apple products in the future, at which point Apple can stop pretending to be innovative and instead release mediocre, overpriced products. Apple will still generate plenty of revenue, but it will become as boring and predictable as Microsoft or IBM.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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