If you lease your vehicle fleet, you’re already familiar with Netflix logic, where access is prioritized above ownership.
It looks as if Apple is moving in the same direction.
Apple as a service
Most businesses (maybe including yours) are striving to offer at least some services on a subscription basis. Apple is no exception, and has grown an $86 billion services business since roughly 2015. Now, it appears the company may have a hardware-driven plan to extend that.
Apple has reportedly begun work on a more extensive ‘Apple as a service’ offer in which users can purchase its products for a monthly fee. (Apple has already quietly commenced offering equipment leasing to business via a trusted partner.)
While nothing has been announced, reporting suggests the option may be introduced late this year or in 2023. There are challenges, but the benefits in terms of incremental income — particularly in a business environment characterized by growing risk — make sense for any company, not just trillion-dollar consumer electronics firms.
“Migrating to a consumption-based licensing structure can be risky operationally and financially,” said Dave Egloff, vice president analyst at Gartner. “But buyers and suppliers increasingly prefer subscriptions.”
Credit Kudos: Rental for the rest of us
McKinsey once claimed 82% of businesses prefer to subscribe to software than purchase a perpetual license. Why not extend this to hardware, too? 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 isn’t new. The iPhone Upgrade Program means the company already provides some of its products on a subscription basis. Join that scheme, pass a credit check, and you can have a new iPhone every year for a monthly fee.
Of course, the credit check is a limitation to consumers and poses an operational risk to companies making a transition to “as-a-service” models. The need to assess credit-worthiness means many potential iPhone customers are already kept from the plan because traditional systems see them as high risk.
Apple has picked up lots of information concerning the workings (and limitations) of such checks in the last couple of years, thanks to Apple Card. Most recently, the company invested in UK credit checking start-up, Credit Kudos. This is being reported a strategic acquisition to support Apple Pay and rumored moves into the BNPL market.
However, the purchase could also reflect Apple’s desire to transition more of its business to subscription income. This is because the charm of the system is that it can extend credit to otherwise overlooked sections of the population. That’s an important consideration for mass market brands seeking growth and hardware-based subscription income, particularly in emerging markets.
It’s plausible to think that may be part of what Apple CEO Tim Cook was alluding to when he said Apple Pay/Card have “a great runway” ahead. After all, if you can extend credit for payments, you can extend 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 the pandemic. There are other solid economic reasons access-based ownership models make sense.
Here are three:
- Making hardware available at a monthly cost makes it accessible to a wider group of customers, particularly as incomes face the likelihood of a second recession in a decade.
- Access-based models may reduce overall cost of ownership as maintenance may be included within the fee, reducing bill shock.
- The need to protect what’s left of the environment is driving product manufacturers to work towards closed loop manufacturing systems, in which effective recycling is key.
That last argument reflects another deep drive at the company.
Saving the planet, one lease at a time
Closed-loop manufacturing is potentially critical to future hardware manufacturing. We know Apple is working to develop its own closed-loop manufacturing system, for which end-of-life product recycling 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.
Announcing plans to use a new cutting-edge aluminum recycling process to make the iPhone SE, Lisa Jackson, Apple’s vice president of environment, policy, and social initiatives recently told us the company seeks to use “only recyclable and renewable materials across our products to conserve the earth’s finite resources.”
So, can Apple-as-a-service models save the planet? Certainly not alone, but its many moves to transition its business for a post-pandemic reality — characterized by urgent need for climate action — sounds an alarm suggesting every enterprise must seek and find resilient new business models for a post-consumerist economy, if they want to survive.
Good luck with that.