Apple Is a Software Company

on February 10, 2015
Reading Time: 3 minutes

Tim Cook made the following comment yesterday at a Goldman Sachs event:

You know, it’s been… we haven’t been a hardware company for… since I’ve been with Apple. And I’m not a historian, so I can’t tell you about the beginning of time, but I don’t really think Apple was ever a hardware company, even at the beginning of time.

I think people that know Apple well and are users of our products, I don’t believe any of them would call us a hardware company. When they buy a Mac in the early days, and today, they’re buying an experience, and that experience is the integration of hardware, software, and services.

His comments reminded me of an article I wrote for TIME in 2011. I titled it, Apple is a Software Company. This is the original link, but given I was just getting started writing publicly at this junction not many people followed my writing. So I decided to re-share that post as it still holds strong and is relevant today.

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From the outside looking in, this article’s title may sound crazy. As crazy as it sounds, I believe it’s true. I’ll go into greater depth about why but, before I do, I want to acknowledge the role of hardware for a software company.

Without question, software needs hardware. Therefore, any software company has to prioritize hardware. Most companies in the market, however, are either a hardware or a software company. Rarely are they both.

Apple happens to make both hardware and software, but I would argue that, internally, they think like a software company. If that’s the case, then why do they make hardware? I believe there are two reasons.

First of all, they believe their software is the cream of the crop. Cream of the crop software belongs on cream of the crop hardware. Apple creates and designs their own hardware because they don’t believe anyone else in the world can create hardware worthy of their software.

The hardware, to Apple, is simply the aesthetically pleasing package that allows consumers to experience their software and services. The design of the hardware is absolutely an important part of the overall Apple experience.

We are visually-driven human beings. Therefore, we are attracted to things that are attractive. Apple understands this and has set a high bar for how they want their products to be experienced. It’s necessary for them to create the entire experience from beginning to end.

Elegantly designed hardware without software, however, is simply an elegantly designed paperweight. Software is what makes hardware useful. It’s for this reason I’m convinced Apple thinks more like a software company than a hardware company.

Five of the top ten technology companies in the world are pure software companies. Apple, of course, is the top technology company in the world, followed by Microsoft, IBM, Google and Oracle. This again underscores my point software is what makes hardware useful.

When Apple looks forward and envisions how to make products that add value to people’s lives, I believe they start with a vision of software and services, then work backwards to create amazing hardware to bring their software vision to life.

Apple is unique in this regard because they are what we call vertically integrated, meaning they own or control the critical parts of the value chain in order to bring their products to market.

Apple makes a lot of money on hardware. That’s a fact. They are in the minority in that regard, but it’s because they make their own software that they can affectively differentiate their products, allowing them to make more money on hardware than competitors. The point they are a software company is underscored by the latest announcement of the new iPhone 4S.

There are plenty of good reasons they didn’t completely change the new iPhone’s industrial design and they’ll probably no longer change the industrial design of the iPhone or iPad every single year: reasons like manufacturing, engineering, and economies of scale.

I would argue, though, iOS 5 is truly the more exciting Apple development in relation to the mobile industry. As I said at the beginning, software is what makes these devices come alive. The design is simply the shell that lets us access that usefulness in a tangible way.

Apple designs elegant and attractive shells that appeal to our visual and tactile senses. Their software, however, is what makes these elegant and attractive devices so hard to live without.