Bob O'Donnell

About the Author Bob O'Donnell

Bob O’Donnell is the founder and chief analyst of TECHnalysis Research, LLC a technology consulting and market research firm that provides strategic consulting and market research services to the technology industry and professional financial community. You can follow him on Twitter @bobodtech.

Apple Inc. (AAPL) Has Been Receiving Pressure to Focus More on Services

The keynote event at the annual Apple Inc. (NASDAQ:AAPL) Worldwide Developers Conference (WWDC) is usually about apps. This year, however, things were a bit different.

Oh sure, Apple touted 2 million apps in the iOS App Store, over 6,000 available for tvOS, and highlighted the work of a few small developers, but the key takeaway from this year’s event was all about services: Siri, Messages, Maps, and Music.

For those who closely watch Apple, this probably isn’t too surprising as the company has been receiving pressure to focus more on services in light of its hardware declines, and it has been more vocal about its efforts to expand services.

What became very interesting to me as I watched the keynote and then thought about all the new capabilities the company introduced, however, is that, in many ways, Apple is subsuming the capabilities of standalone apps into its services.

The most compelling demos at the event all involved integrating capabilities that used to require launching a separate app directly into an expanded Apple service. Want to call an Uber or a Lyft and see where it is? You can do so via Messages and Maps. Want to view rich website links and even make purchase transactions or send money via Square or other online payment methods? All that can happen without leaving Messages as well.

This decreased focus on individual apps and increased focus on services isn’t necessarily a bad thing. In fact, it’s arguably the general direction that software development – particularly on mobile devices – is going. In China, for example, you can get access to these kinds of services and much more in WeChat. These developments do, however, imply a fairly major shift in the role that developers can and will have with Apple and the end users. They also imply a major rethink in terms of what an “app” actually is.

In essence, the new app model in this services-focused approach is a “service extension,” which strikes me as being much more similar to the “skills” you can add to an Amazon Echo than a traditional app.

The problem is that this model almost completely cuts out the importance and end-user awareness that app developers have. Does anyone think of the “skills” they add to an Echo in the same way they do an app? Oh yeah, and what about monetization for that service extension developer?

Given the overall app fatigue that many people face, as well as the flattening hardware sales, it’s getting tough enough for people to survive as app developers. Add in this additional layer of abstraction and the distance between developers and end users will likely increase at about the same rate that dollars from them decrease – pretty fast.

For Apple, the situation is a challenging one. On the one hand, it’s expected that it will continue to drive forward the overall experience of using its devices. The company needs to provide capabilities that its end users want, and it’s becoming increasingly clear that a more seamless, less app-focused approach is the way to go. On the other hand, by subsuming not only the functionality of individual apps, but also the manner in which developers can extend the experience of using their devices, it’s created a bigger business challenge for many developers.

To Apple’s credit, the company opened up Siri, Messages and Maps to outside developers for the first time with the announcements at this year’s WWDC. Given the company’s notoriously tight grip on core system elements and its desire to control the entire Apple device experience, this is a significant development. But given the overall market trends towards services, you could make the argument that it essentially had to in order to give its developers a fighting chance.

The ongoing shift from software to services is something that extends well beyond Apple, of course. Microsoft, Google, Amazon and Facebook all face different types of challenges as we move into a world where we are much less dependent on individual devices and specific OS platforms. But as the company which arguably made “apps” what they are, Apple and its developers will likely face some of the most challenging transitions.

Some of these services-focused changes may take several years to play out, but they’re clearly leading the tech industry down some new paths.

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