Apple Is a Software Company

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.

Published by

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

108 thoughts on “Apple Is a Software Company”

  1. Ah, no. What Cook said was that Apple is a solutions company and not merely a hardware company. What Cook did not say is that Apple is a software company.

      1. And yet your title … Samsung can do hardware and Google can do software and services. What makes Apple unique is solutions: It fits the best of software features available in any given season into the best hardware components available, to create the best computer for the rest of us. To do what ninety percent is us do with computers ninety percent of the time. Year after year for thirty years.

        1. Yes, note, since this was written in 2011, my goal was to contrast the narrative that Apple was just a hardware company. For context, this was an extremely heavy debate I was having with Wall St. at the time. So I wrote the article in this way, as a reflection of how I was attempting to educate them that Apple is not just a hardware company.

          1. Got it. Old battles. Just to say: Software may be eating the earth. But it’s not eating Apple. Just the opposite. Apple has learned to bridle and rein software to its purpose, which is … relevance? pertinence? the art of the apropos?

            [Just to post this somewhere: I am writing on my new iMac5K. Gawd, what a gorgeous visual experience.]

      2. What would happen if Apple would have decided to change it’s model , licensing it’s software for flagship phones from other companies(for a high price, say $200-$300 per device) ?

        Would they lost many customers ? or would they gain some ?

        1. Other oem mfgs don’t have the hardware to run iOS. A licensed iOS would be a bastard child that would be unusable in lesser hardware. So the looser would be those other OEM’s that would try to rien in iOS, can’t be done. What solution would apple get from this down sharing? Nadda.

          1. Apple would also lose, because it would be left holding the bag when it came to supporting the poorer and less well-integrated hardware; the brand and goodwill that Apple has carefully built up would be under threat.

        2. Apple tried this in the 90’s with Mac OS. It was one of the factors that led to apple’s near death experience back then. They aren’t going to do it again.

  2. “We are visually-driven human beings. Therefore, we are attracted to things that are attractive.”

    Any theories as to why–after all this time–so few companies have really figured this out?

    It always astonishes me when I walk through an Office Max, or even a Hi-Fi store, and see all these plastic boxes with obnoxious stickers all over them. And I am equally amazed that consumers take these products home and never remove the stickers.

    I realize this is a tangent to the central idea of Apple as a software company, but to be fair, Apple is a pretty damn good hardware company, too.

      1. Scarcity of talent? Or scarcity of taste?

        Where there is a will there is a way.

        I just can’t figure out why there’s no will.

      1. I remember a similar interview with Cook a couple years ago. He had the iPhone on the table, turned off, and asked the interviewer what he saw. Essentially he said it was a hunk of metal and glass. It was the software that made it what it was, or something to that affect.

        Joe

  3. I get what you’re saying Ben but how does an 18-karat gold watch and what looks to be like very expensive stainless steel bands fit into Apple not being a hardware company? If it’s the software and ecosystem that allow Apple to command a premium price why isn’t Apple Watch a $99 or $199 “smart” band that just has sensors to collect data for HealthKit?

    1. “why isn’t Apple Watch a $99 or $199 “smart” band that just has sensors to collect data for HealthKit?”

      Short answer: Because it’s hard to get people to pay high prices for software, but easy to get them to pay for hardware.

      In other words: Apple is a software company that makes their money selling the only hardware in the world that runs their software.

      So I guess macs and iphones are, in a way, the world’s prettiest and most-sought after dongles.

  4. I fully believe that only connecting software and hardware can make customer experience full. But if I belevied for some time, that Apple was doing that great, after launching iOS 7 i started to have doubts – iOS 7 and 8 are poorly designed and they suck at places where they shouldn’t. So if Apple want to keep up with their idea they need to work harder on connecting these two worlds into one. Because looking at google, which has only one leg – software, they can at the moment create experience, which isn’t much farer than Apple’s for some customer needs.

  5. Then there’s the classic Alan Kay quote, this example lifted from a PED Fortune article:

    “It was Steve Jobs’ visit to Kay’s lab at Xerox PARC that led to the Lisa, the Mac and all that followed. Kay’s aphorism that “people who are really serious about software should make their own hardware” — an aphorism that Jobs often quoted — became one of Apple’s core principles, one that distinguishes it from all its competitors.”

    The implications being that you can’t be a serious software company if you don’t design and control the hardware.

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