10:28 AM

Back to the Past: Apple becomes more closed with each new device

In 1976 Apple was one of the first of the microcomputer companies -- selling kits that hobbyists could build, then selling fully assembled systems.

In those early days, every microcomputer company had its own hardware and software, there was very little that was common between companies and that was seen as the key to success.

As businesses began using Apple microcomputers, IBM jumped in and created the first standard platform -- the PC -- a relatively open hardware and software system using common of-the-shelf parts. Microsoft provided the operating system and made it available to anyone. It led to hundreds of IBM PC clone makers and the modern PC industry was born.

Apple stayed proprietary and closed. It later experimented with licensing its technology to Mac clone makers but that didn't work out.

Gradually, it moved onto industry standard Intel chips, it adopted PC standards such as USB, and made its disk operating system files compatible with the PC world.

With the arrival of the Internet, the browser on the Mac offered the same user interface as on the PC, and it became a common software platform. At that point, there wasn't too much difference between the Mac and PC worlds. And that's still true for Macs and PCs today -- In fact, you can (unofficially) port the Mac OS to a PC systems and it runs Mac apps.

But over the past ten years, since the introduction of the iPod, iPhone, and now the iPad, Apple is becoming less and less open, it using fewer standard components and chips, and far fewer Internet technologies common to Mac/PC desktop and laptop systems.

The iPhone and iPad, for example, doesn't support common Internet platforms such as Adobe Flash or Microsoft Silverlight. That means you cannot watch streaming video from Hulu, or Netflix.

And while iPhone chips are available from other manufacturers, the iPad runs only on the A4 processor -- an Apple designed chip that no one else can buy.

Why is Apple becoming more proprietary and closed? Because that's how you make money.

Proprietary and closed systems mean you can only get it from Apple. If you have great apps, content, and a great user interface (user experience) you can charge more money than if you produce a copycat system that is easily available from many manufacturers. Less competition means larger profits.

There's money in closed systems...

It's a lucrative formula and that's why with each new device, Apple is moving further back to its proprietary roots because that's where you can make a lot of money.

Thanks to iPod, iPhone sales, Apple is now a $50 billion a year revenue company. Since the iPod was introduced in October 2001, its share price has multiplied by more than 23 times from $8.78 to $207.88.

The strategy works, and it works great.

What's puzzling though, is that Apple has a very enthusiastic, early adopter customer base, which consists of people that are big supporters of open standards, and open platforms.

Yet these "Fanboys" haven't seemed to have lost their enthusiasm for Apple products despite the increasingly closed nature of Apple.

Maybe that will change with the iPad, which is a much more closed system than any of Apple products from the past ten years. Will the Fanboys rebel? Will it matter if they do? Probably not.

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Disclosure: I've owned Apple systems since the Mac 128K "Tombstone," I currently have a Powerbook, Macbook Air, and an iPhone. I've also owned PCs, Thinkpads for many years.