If you rent your fleet of vehicles, you are already familiar with the logic of Netflix, where access takes precedence over ownership.
It seems that Apple is moving in the same direction.
apple as a service
Most companies (perhaps including yours) strive to offer at least some services on a subscription basis. Apple is no exception, growing an $86 billion services business since roughly 2015. Now, it looks like the company may have a hardware-driven plan to extend that.
Apple has reportedly started working on a broader ‘Apple as a Service’ offering in which users can buy its products for a monthly fee. (Apple has already quietly begun offering equipment leases to businesses through a trusted partner.)
While nothing has been announced, reports suggest the option could be introduced later this year or in 2023. There are challenges, but the benefits in terms of incremental revenue, particularly in a business environment characterized by increasing risk, make sense. for any company, not just trillion-dollar consumer electronics firms.
“Moving to a consumption-based licensing structure can be risky from an operational and financial standpoint,” said Dave Egloff, vice president of analysts at Gartner. “But buyers and suppliers are increasingly preferring subscriptions.”
Credit Kudos: rent for the rest of us
McKinsey once stated that 82% of companies would rather subscribe to software than purchase a perpetual license. Why not extend this to hardware as well? After all, many business users lease vehicles. Why not lease the Mac? Will you buy an Apple Car, share it, or both?
The concept of Apple as a service is not new. The iPhone upgrade program means that the company already offers some of its products on a subscription basis. Join that scheme, pass a credit check, and you can get a new iPhone every year for a monthly fee.
Of course, credit checking is a limitation for consumers and represents an operational risk for businesses transitioning to “as-a-service” models. The need to assess creditworthiness means that many potential iPhone customers no longer participate in the plan because traditional systems consider them high risk.
Apple has collected a lot of information about the operation (and limitations) of those controls in recent years, thanks to Apple Card. More recently, the company invested in Credit Kudos, a UK credit-checking startup. It is reported to be a strategic acquisition to support Apple Pay and is rumored to be moving into the BNPL market.
However, the purchase could also reflect Apple’s desire to further transition its business to subscription revenue. This is because the charm of the system is that it can extend credit to sectors of the population that would otherwise be overlooked. That’s an important consideration for mass-market brands seeking growth and hardware-based subscription revenue, particularly in emerging markets.
It’s plausible to think that it may be part of what Apple CEO Tim Cook was alluding to when he said that Apple Pay/Card has “a big track” ahead of it. After all, if you can give credit for payments, you can give credit for subscriptions.
Why the rush?
Among other risks, the current business environment sees the decline of globalism, conflict, looming food shortages, environmental catastrophe and pandemic. There are other sound economic reasons why access-based ownership models make sense.
Here are three:
- Making the hardware available at a monthly cost makes it accessible to a broader group of customers, particularly when revenues face the likelihood of a second recession in a decade.
- Access-based models can lower the total cost of ownership as maintenance can be included within the rate, reducing the impact on the bill.
- The need to protect what remains of the environment is driving product manufacturers to move towards closed-loop manufacturing systems, where effective recycling is key.
That last argument reflects another deep thrust at the company.
Saving the planet, one lease at a time
Closed-loop manufacturing is potentially critical for future hardware manufacturing. We know that Apple is working to develop its own closed-loop manufacturing system, for which the recycling of products at the end of their useful life is essential. Those rare earths, metals, and other precious materials used in your tech products need to be reused, not just abandoned in a landfill.
In announcing plans to use a new, state-of-the-art aluminum recycling process to make the iPhone SE, Lisa Jackson, Apple’s vice president of environment, policy and social initiatives, recently told us that the company seeks to use “only recyclable and renewable materials in our products to conserve the earth’s finite resources.”
So can Apple’s as-a-service models save the planet? Certainly not alone, but his many moves to transition his business into a post-pandemic reality, characterized by the urgent need for climate action, sound an alarm suggesting that every company must seek and find resilient new business models for a global economy. post-consumer, if you want I want to survive
Good luck with that.
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