The Apps Store Phenomenon

Apple’s announcement this past week of another apps store, this time focused on offering products for the Mac, is one in a rapidly growing series of app store launches in the last year or so. It’s not really a surprise announcement considering Apple’s leadership in popularizing the concept but it does have some interesting ramifications for the Mac ecosystem. I doubt that anyone would argue that Apple is an innovative company, but often in my opinion the innovation associated with a new gadget has been more in the business model or support structures for the gadget than the gadget itself. I think that the proliferation of app stores is starting to have some far reaching consequences and has the potential to be disruptive for some larger software vendors.

The basic idea, that Apple could manage and control distribution to a new device goes back to the iPod and iTunes. MP3 players were not new when Apple first introduced the iPod, and were cheaper by a far margin. Now I suppose the iPod’s form factor was somewhat better than it’s competition but in general the devices features were not particularly differentiating. What was new was the simple way in which consumers could  find, buy, load and manage media through iTunes. Other MP3 plays required the user to find music scatted across the web or try to convert the music from CD’s and other media. For these players consumers had to manage files and file types / formats, but not so for the iPod. On the iPod the consumer managed the media itself, which was in fact what they were trying to do. iTunes provided an elegant and simple way to manage media.

Fast forward to the iPhone and the apps store. Now I won’t claim that the apes store was the only innovation from the iPhone, even though there certainly were already smart phones on the market. Certainly the multi-touch screen and the convergence of media player – phone – mobile computing device are innovations and helped drive the impressive adoption statistics. Still though, I’d argue that the iPhone’s (and iPod Touch’s) ascendance as the mobile computing platform of choice was in no small part driven by the success of the apps store. I would also argue that Android’s fast following has accelerated because of the Android Marketplace.

So what’s really unique about an apps store and why are they so popular? An apps store generally has these characteristics:

• cloud based Internet access

• one click (or simplified) automated buy, download, install

• central management and control of what is offered

• guaranteed device (or system, solution, ecosystem, etc.) compatibility

• consistent user experience

• simplified and automated upgrades

• community based rating system

Apps stores are popular with consumers / end users mostly because they simplify the process of finding, buying, installing and maintaining software. The electronic distribution keeps costs lower as well. The app store democratizes software distribution, creating a more equal playing field for large and small vendors. Large marketing budgets can still influence buying of course, but because of the contained nature of the process it has less of an effect. The apps store leverages the power of community with reviews, ratings and recommendations giving buyers a more credible source for selecting what they need and want.

For the Mac ecosystem the new Mac app store could create quite a disruption and open opportunities for new, innovative vendors to quickly gain share in a fast growth user base. Finding good software for your Mac hasn’t always been an easy process. Yes the large vendors have some products but are they the best solutions out there? From Microsoft for example, the Mac versions of the Office product line has lagged the Win versions in functionality (I’ll refrain from any other commentary on the products). Finding a quality product in general often involves reaching out to your network, lots of online searches and a bit of trial and error. Even installing those packages once discovered can be confusion for the non techie, since there are a few variations of the amount of automation you’ll find in different packages. Creating a centralized Mac software community around an apps store with all of the associated automation and ability to centrally locate various alternatives will be popular. I’d guess that the model will be popular with smaller and niche ISVs as well and will see a lot of new and interesting products, perhaps even a whole new class of micro software products. Will it be popular with the larger vendors, I doubt it. Because of the hyper-competitive nature of the apps store pricing tends to be low and there is considerable pressure to keep prices low. Adobe premium prices its creative suite software for example, and depends mostly on enterprise sales to keep ASPs high. Could the app store bring new competitors to this market? Among users the perception that there will be good free and low costs apps available adds to that pressure. Freemium and free ad supported software is also very common. It will be interesting to see how the larger vendors respond.

Apps stores are growing out of there consumer beginnings and moving to the enterprise as well. Several companies are launching or have launched enterprise apps stores and are starting to build a robust ecosystem of partner apps to support and extend their own solutions. If the enterprise app store keeps to the same basic characteristics as the consumer counterparts the opportunity for disruption is great. That’s one of the big questions though, can enterprise level solutions be distributed through an apps store process? This is different from providing a catalog of partner apps or even a marketplace. A true apps store has to simplify and automate the buy, install and maintain process, an increasingly difficult task as software complexity increases. There are some products that could be provisioned through an apps store model though, so would CIOs embrace this or would it be a way for line of business to work around IT controls? Questions that will no doubt be answered as more vendors join the growing app store movement.