Apple's Next Killer App

Killer applications fuel demand for a product by exploiting new features or efficiencies in a way that changes how the world works. Here's the next big application, and how Apple is positioned to ride the wave of new hardware sales it will bring.

Apple and Killer Apps

Apple's first computers seemed like mostly a novelty, but once number crunching users discovered how much time they could save using the VisiCalc spreadsheet, Apple II sales went through the roof.

When the original Mac was released, anyone could see that a graphical interface was a good idea, but it wasn't obvious how it could be applied in a functional way. Once the idea of desktop publishing arrived, Apple's sales of Macs and LaserWriters accelerated dramatically.

Apple has also developed a number of technologies that never seemed to go anywhere, because there was no killer app to demonstrate their utility. Early adopters might buy into fads just because they offer something new, but unless a product has real value, it does not drive demand.

The Application Killer

OpenDoc seemed like a good idea across the industry. It broke down the idea of monolithic software into raw technology components. Rather than buying Microsoft Word and learning how to use it, users were expected to buy and intelligently assemble chunks of application components as if they were individual tools: a text editor, a graph creator, a spell checker, and so on.

OpenDoc was the opposite of a killer app: it was an app killer. Nobody could get a clear and obvious idea of how this idea would save them any money or make their job easier and more productive. It was technology without an obvious application, and consequently was ignored by the market.

Looking For Killer Apps

Since Apple's reinvention at the hands of NeXT in 1997, Apple has focused on delivering products with clear utility. Steve Jobs gained the reputation for killing anything that lacked obvious and practical application. If it couldn't be reasonably expected to deliver sales in excess of its development costs, it got steved.

Jobs pulled the recently spun off Newton group back into Apple and killed it. Only its handwritten technology survived, as Mac OS X's InkWell. Other products were axed as well, but the real focus was on finding new killers apps. Apple reinvented itself as a purveyor of fine software titles designed to highlight useful applications of their hardware.

They bought a range of media applications, including Casady&Greene’s SoundJam MP to create iTunes, Macromedia's Final Cut, Astarte’s DVD software, and Emagic's Logic music portfolio, and assembled them together with their own new apps to create consumer and professional suites that drive hardware sales and differentiate the Mac platform.

Apple's foray into the Enterprise market is driven by the Xserve RAID's low cost storage. Apart from that, Xserve lacks a real killer app to drive sales. That's due in part to Apple's unique platform, which faces the same barriers to market penetration that Apple has in the desktop arena. In my Xserve mini article, I promised to reveal a killer app for the Xserve. Here it is:

The Next Killer App: Telephony

Are you disappointed? Talking on the phone doesn't sound very exciting. However, remember that the original Mac was considered a toy by early PC users, and the iPod was greeted by Slashdot's infamous blurb:

"No wireless. Less space than a nomad. Lame."

The reason why telephony will become a killer app stems directly from its boring utility: everyone needs to place calls and exchange voice mail, and everyone pays a phone bill; businesses pay extraordinary phone bills. The holy grail of any industry is to find a way to collect regular, ongoing fees for use of a system. In addition to all those phone bills, there is also a market for billions of dollars in telephone equipment.

There are huge stacks of money waiting to be collected by players who can innovate in the telephony space. The only question is: can Apple deliver telephony, or will they drop the ball?

Why Telephony Will Drive Xserve Sales

Telephony is a perfect market. For decades, phone service has been owned outright by government monopolies. Phone hardware has lingered in the dark ages, safe from the encroaching threat of fierce hardware competition common in the tech industry.

That hermetically sealed market is about to get ripped wide open by a combination of new ideas that fall under the name VoIP. In general, it means phone service will become another bit of data on computer systems.

Telephony is also a perfect market for Apple's core strengths. Apple markets their Mac OS X Server as "open source made easy." Much of the core technology in Apple's products isn't based on wholly new inventions Apple came up with, but a novel, clean, and functional implementation of existing industry standards.

Apple earlier pioneered WiFi wireless by introducing the Airport base station as an appliance that anyone could set up. Their client software for wireless networking was similarly brain dead simple. Competing products can only differentiate on price; they offer too many complications for end users, expose too much technical gibberish, rely on clunky web page configuration, and PC wireless client software is atrociously user hostile.

The same scenario has played out with Apple's iPod. Competitors offer products that are typically very similar, but are uglier, more complex, and suffer from feature bloat. They also commonly lack the iPod's smooth integration with a well designed music and media library, and a similarly easy to use online store.

Ripe for Apple's Picking

Telephony is currently lacking in the same areas. Business phone systems commonly pair expensive desk phones, via proprietary connections, with a PBX hidden away in a phone closet.

The PBX connects to the phone system over a PRI; it acts like an automated switchboard, setting up new calls between office users or with outside lines. It often delegates voice mail messaging to additional equipment maintained on the side.

This equipment is astronomically expensive. A PBX serving a company of 100 users can easily cost $100,000, and voice mail might be handled by another $40,000 of equipment. Why is it so much? Many voice mail systems are just a dumpy old PC running OS/2. These systems cost so much because there hasn't been widespread competition driving their price lower. After all, companies buy a phone system and then forget about it.

They then pay members of a high priest class fantastical fees to do things like set up new phone extensions, program additional outside lines, or install expensive, licensed features like conferencing, forwarding, and message notification. Companies who sell phone systems typically roll their own software, so there is little interchangeability in each vendor's equipment and software offerings.

All those things are about to change. Asterisk, an open source software project, has kicked down a barrier to delivering a fully functional PBX. Now, anyone can install Asterisk on a regular server and run their own phone system.

Emerging standards for VoIP are also challenging hardware incompatibility. Rather than every vendor selling phones that only work with their own switch, new SIP based VoIP phones, or SIP software alternatives to phone sets, now allow users to choose phones from any vendor. That gives Apple a functional market to enter where they can add value.

The Xserve Telephony

I'm not sure If I'm a fan of Apple's excessive X branding, but Xphone Pro has a certain ring to it. Apple could sell a polished version of Asterisk for Mac OS X Server that would convert their Xserve into an Xserve Telephony.

The competitive advantages of price and usability would give Apple access to companies they never would have as just a file server vendor. Once businesses got a taste of Apple's phone server, they'd be back for more.

Here's the product lineup:

Server Hardware

•Xserve Telephony

bundles the Xserve with new Xphone Pro software and an optional PRI interface card.
•Xserve mini

Telephony - same but smaller.

Phone sets

•VoIP ethernet desk SIP phone sets
•VoIP wireless portable SIP phone sets
•iChat AV - the software virtual phone set

PBX Software

• Xphone Pro
Asterix with nice UI, tuned for thousands of users supporting multiple PRIs.
• Xphone Express

Asterix with a nice UI, for a hundred users or less, a single PRI or IP only.

Value Added by Apple

By closely integrating their PBX Xphone software into Mac OS X Server, Apple could make setting up phone extensions as easy as setting up a file share. Programming names on phones and assigning voice mail boxes could be performed by anyone, not just an expert in arcane PBX codes who charges $200 per hour.

Apple has already blazed far beyond simple VoIP call placement with iChat AV. Users have been able to set up video conferencing with multiple parties since its beta release prior to Tiger.

Apple could similarly push the envelope in delivering voice mail features. Messages could be delivered right into users’ email, or sent to their mobile phone.

Apple also has the technology to provide features such as voice synthesis, that would allow users to call in and review a spoken version of their email by telephone, or similarly call in remotely to trigger actions on client computers, or change their availability status. Imagine further integration with an Xserve Telephony in the areas of message notification, intelligent call forwarding, and automatic Bonjour discovery of phone devices.

None of these ideas are far off technologies, they're simply rarely put in use because phone system features are so complex that nobody bothers to set them up. The Xserve and the Xserve mini would bring functional phone systems to businesses and home users with a need for call features and multiple extensions.

After delivering a drop-in replacement for the huge installed base of aging PBX and voicemail systems out there, Apple could decisively push into IT departments as a followup strategy by integrating phone features into Open Directory and other existing Mac OS X Server features: blogging, print and fax services. That would sell a lot of Xserves and Xserve RAIDs, and tie in nicely with Apple's core strengths: usable software interfaces and sexy product design.

Not Just Hardware

Apple's competition in the VoIP hardware arena includes Mitel, Cisco's Windows-based Call Manager software and VoIP integrated switches, Cisco's Linksys consumer brand gear, and more conventional PBX vendors like Avaya, NEC, and Nortel.

However, Apple can do more than just compete with the other emerging VoIP hardware vendors in price and features. They can also offer VoIP service and tight integration with their own platform and applications. I'll investigate how in a follow up article.

Apple iPhone Rumors Off the Hook

This Series

Tech: Mobile Phones and VoIP Telephony

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