iCloud, a new ballgame for Apple

With the recent announcement of iCloud, Apple joins Google, Amazon and Microsoft in its push towards cloud computing. The general idea of the “cloud” is to store your media and other files on a public network such as the Internet so you can access it from any device anywhere, as opposed to leaving it on the hard drive of your PC/laptop/phone.

The cloud services as proposed by Apple allow you to synchronise data and files across multiple devices.

Apple has so far been steadfastly a product development company. With product and the associated operating system and applications vertically integrated under its belt, Apple was able to ward off competition. The company beat all expectations in the last quarter, with its magical touch, and is now cash-rich at $76 billion, more than the US Government!

The innovation cycle repeated itself after the launch of breakthrough products such as Mac PC (1984), iPod (2001), Appstore (2007), iPhone (2007), and iPad (2010).

Apple's strategy was to come out with a breakthrough product that had an entirely new set of features. Its software and application ecosystem are tightly vertically integrated to provide the required economies of scope in its offerings.

After creating a critical mass of loyal customers to its product and associated frills, it would move on to another product and create a new market space. For example, when imitators came up with devices and services similar to the iPod, rather than cede its dominance as a media player, Apple leveraged a strategy known as envelopment, where a firm seeks to make an existing market a subset of its product offering.

Apple deftly morphed the iPod into the iPhone, which enabled its users to not only play music files, but also make phone calls. Further, the iPhone is WiFi-capable, offers Internet browsing, and e-mail access, thus providing a “sticking point” for its loyal customers.

As of now there are 5,00,000+ applications in the Appstore, and more than 75 million iPhones and more than a million iPads sold.

Storage space, for free

Of late, however, there seems to be stifling of innovation on the product front. The new iPad2 launched in March 2011 has only a small variation from its predecessor. In September, iPhone 5 will be launched, which is expected to be not much different from its previous version.

This could possibly be the reason for Apple's latest announcement of its cloud platform and its entry into the ‘iCloud' services business. Apple always attracted its loyal innovative users through its breakthrough product features, while keeping price high. Its products were never sold at discounts in any part of the world.

Now, for the first time, Apple is giving some thing for free — much like Google — storage space on its Cloud!

A user, once signed in, gets 5GB free storage space. For $25 per year, iCloud will wirelessly push up to 25,000 documents to a user's device automatically and update the documents when changed on any device wirelessly.

Is Apple thinking another breakthrough — in services this time?

However, Apple's loyal customers are aware of its “Bonjour” — Apple's trade name for the implementation of Zeroconf, a service discovery protocol on the local area networks. Bonjour is used by Apple devices to locate printers, shared media files, applications and other services.

iCloud is a magnification and adaptation of its Bonjour on the wide area network. By making its newer operating systems such as iOS4 and iOS5 bundled with Bonjour backward-compatible with the older Apple products, Apple already has the required critical mass for its iCloud services. Hence Apple is better prepared in this space than its cloud rivals.

By enabling only Apple-supported proprietary products to connect to iCloud, Apple will try to ward off imitating competitors — a strategy that it has always been using.

Different ball game

For now, Apple will provide its cloud services through public Wi-Fi networks. However, Apple has filed a patent called ‘dynamic carrier selection' that would allow it to establish an optimal communication link with a network operator for each voice or data call dynamically.

It is a question of time before Apple sells its own SIMs, buys wholesale network capacity from telecom companies (telcos), and locks customers to its iCloud platform, thus integrating the access and backbone network services. The mobile operator will be ousted.

Vulnerability of public network platforms

Is Apple thinking of becoming a network service provider — providing devices, network access and content to the end users? Will this vertical integration be a threat to competition? Will anti-trust rules be evoked?

However, cloud technologies are far from mature. The outage of Amazon's EC2 web hosting service in April for more than a day and the recent outage of Google's cloud- based Blogger Service for nearly 48 hours on May 11 indicate the vulnerability of public network platforms.

Regulations have not caught up with cloud services with respect to data theft, breach of security, availability and reliability of services.

It is an entirely different ballgame for Apple and hence the need to watch out for challenges it never faced in the past! An interesting question, though, is the reaction from its cloud rivals, such as Microsoft and Google, to break the network value of iCloud.

The authors are with Sasken Communication Technologies. Views are personal.