Apple vs. Dell: Who is Beating Whom?

It is amazing how quickly things can change in a few short weeks. Several weeks ago I was thinking about changes in how PCs were being purchased that were driving Macs into the enterprise. This week a bunch of us are looking at Apple’s lines and wondering how badly the company is going to be hurting because most of what they sell is priced in excess of what people, under the current economic conditions, are willing to spend.

Dell, historically, hasn’t been that innovative and is often thought of as a firm that waits until others break new ground before they join in the market move. Particularly when it comes to areas of design, Apple and Dell have been at polar opposites with Dell lagging significantly.

However, for much of this year that has been changing, with aggressive changes in Dell design, with the latest focused on a much higher level of physical customization. In short, where Apple is increasingly the Model T of providers, in that you get very few choices, Dell is going in a direction that appears more consistent with where the market is in terms of providing choices where the buyer can create a product that is unique to them.

In a weird way Apple was hitting Dell where Dell lives in the enterprise by providing choices that Dell wasn’t, and Dell is hitting Apple where they live by doing much of the same.

Choices in the Enterprise

One of the new myths is that IT has control of what goes on an employee’s desk. This certainly used to be the case and centralized buying has resulted in products sold to corporations that are distinctly different than those that are sold to individuals.

But, in the end, it is individuals who use these products. And quietly, behind the scenes, the decisions have been moving closer to these individuals.

What has been happening is that, in order to contain costs and increase revenues, purchasing authority has been moving toward the line managers who own the corporation’s revenue. This better allows these managers to make the critical decisions between choices like a new piece of manufacturing equipment that is critical to their line or new PCs for their employees.

IT can’t make these tradeoffs because they aren’t close enough to the problems that need to be solved, and no company has unlimited funds so these tradeoff decisions are common. They were just being made badly.

As a result, in some of the largest companies, Apple computers have been quietly coming in to replace corporate PCs. This appears partially related to the tendency for Apple shops to be self-supporting because they have to be, given that Apple has no corporate support structure to buy from. The strange end result is that where a typical fully supported leased PC from a company like Dell would cost $150 a month or $1,800 for a 2 year live cycle, an Apple Notebook charges through at around half of that, with a cost tied directly to its purchase price.

The employee and department head, given a choice between a generic corporate PC or a currently more unique and attractive Apple offering (coupled with the cost savings), has an easy decision and one that favors Apple. Thus, even though Apple’s prices for hardware are higher, once services are taken into account, they were cheaper and the products more attractive so choice favored them.

That was until the current economic problems tossed a monkey wrench into this trend. The monkey wrench is capital cost, which now likely requires board-level approval given how tight capital is. Leases are expensed but when you buy something it has to be put on the balance sheet as an asset and depreciated, and many companies are on various forms of capital asset purchase restrictions to conserve cash. So this may undo the choice, as continuing with an expense like a PC lease is within the line manager’s authority but buying a bunch of Apple PCs, given it is a capital expense, probably isn’t.

And going to the board with a request for several thousand MacBook Air machines under the current economic climate, regardless of the savings, is probably career limiting.