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Perceived Value

Value, like beauty, is in the eye of the beholder – De gustibus non est disputandum [1].

In the field of smartphones this is played out very well in the iPhone vs. Android wars where one side will stick, sometimes fanatically, to the superiority of its platform over the other. (Note: the overwhelming majority of people Continue reading

The importance of iCloud

The importance of iCloud should not be underestimated!

  • The iCloud is the biggest shift in computing paradigm since personal computers replaced the client-server model.

Strong statement. Let’s look at it.

First, what is it?

iCloud provides a set of internet based (cloud) services. While these services differ a bit in specifics, they mostly are a form of:

    1. Internet based storage of user data files: photos, videos, settings, documents, mail, calendars, and applications.
    2. Any one of these items is instantly available to a user on any connectable device (iOS or OSX, Others via internet).
    3. Any update to any of these is instantly available across all your  devices. This includes photos taken with other cameras and imported to iPhoto on your Mac.
    4. On iOS and Mac OSX Lion, all this occurs transparently to the user. It just looks like everything is right there.
    5. Backup functionality.
    6. Find my friends.
    7. Find my iPhone (any iOS device and Macs).
    8. If the user loses connection to the internet, some files will not be accessible.
    9. User also gets a free email account.

Usage Model

The main concept is that you have instant access to all files on any device with access to your account. You take a photo with your iPhone, and your iPad and computer see them virtually instantly. All your iTunes media (songs, movies, podcasts) are stored in the iCloud. They are always ready to be viewed, on whatever machine you are using.

All this happens without you doing anything. Theoretically, you could login on a Mac at a cybercafe in Jakarta, link to your iCloud account, and have the identical environment that you have at home. Heck, if you have setup internet file sharing, you would even have access to your hard drive.

Now, while there are other services that provide similar functionalities, (Dropbox) none do it so transparently and pervasively as iCloud. The functionality is not an add-on. It is built into the operating system and any application can choose to participate in it.

Now, whatever you changes you make to documents, or to media files (take or edit photos|video|music) these changes instantly appear everywhere. Of course…

You must be connected to the internet  to view any files that do not have local copies.

One more benefit. Your files are all effectively backed up. Assuming that Apple never has a breakdown or break-in, you never have to worry about losing any of your files. If your devices are lost or stolen or break, all your data is safe up in the iCloud, accessible from any other device you own. (You DO need to be aware of the iCloud photo policy. I believe it actually does delete certain photos after a period of time

Why so good for Apple? (Investors take note.)

While the benefits for the user are exceptional, there are also incredible benefits for Apple. And this is something that the investor need to mark!

Differentiator. First, the service really improves the overall user experience. (This is assuming there is no repeat of the MobileMe launch experience!) This means it drives users to their products at least in part for this feature. It is a differentiator from the competition. As mentioned above, no one else has a system as deeply integrated as iCloud, although Amazon’s Kindle Fire approaches it. (More on that below.)


More importantly… iCloud provides real incentives for users to stick with the iOS products. When you have this on your iPad, you are much more likely to buy an iPhone and shun the competing systems. This is really leveraging the current total dominance of the iPad.

More importantly yet… It provides a very strong motivation to select a Mac as your next computer. Let’s face it. Macs are expensive. You can buy Win-based computers for a lot less. [I do not want to get into a discussion here as to whether they are worth it or not. This is irrelevant to the current discussion.] People buy any product for only one reason – Perceived Value. Therefore, in order for someone to overcome a significant price differential, he must have a sense that it has additional value over the alternative. In the past, arguments for this have been many and debatable. But the value of iCloud, of having instant, transparent access to all your files, this is a strong positive that is not really debatable. Lion connects seamlessly to iCloud. No other system does. Period. End of argument.

Now, there are about 60 million Macs in the world, but over 250 million iOS devices! Ever since the original iPod, there has been a “halo effect” moving customers to the Mac. The iCould will greatly accelerate this! Here is a very strong motivation to move to the Mac. Mac has always been easier than Windows® (at least so they say), here is a system in which they definitely excel. Again – a very powerful motivation to switch.

Stickiness (the dark side?)

Here is one more very powerful benefit to Apple. Once you spends some time in the iCloud system, you have you have a lot of data that exists up there, and only up there. It becomes much more difficult to move to another system.

Suppose you currently use iTunes for your music and have an iPhone. All your music is physically on your computer. If you want to switch to another phone system, you just need to figure out how to gobble the music from iTunes into your new phone. Pretty easy really. When you move to the iCloud system, however, your files never really live on your devices, but up in the cloud. Now you can still change to another phone, just download all your music to your computer. Repeat with photos and video. And documents. Not terribly difficult, but it is is an extra step that takes time and patience. A bit of a pain.  A real motivation not to change.

Broader Strategic Implications – Why Amazon is on Fire

OK, OK! So there are some benefits for Apple here, but this is not so earth shattering. Apple gets to tie up their customers with “velvet handcuffs” to their system. It helps them out. Not really a big deal. Is it?

I think yes it is. The cloud is the battle ground for the customer space of the future. Sure, Apple does not own its customers. They are free to purchase from anywhere they want. BUT! they are within the Apple system and spend their their time there, and Apple has access to all their information.

Apple lives by hardware sales. Amazon lives by retail sales. They need these customers, and this is why they have created a cloud based system with a lot of similar features.

As I outline in my post:

    • There’s gold in them thar hills!
      That’s right, there’s gold, and if you don’t stake your claim PDQ you are out. Period! The gold is customers, and any company that wants to play big in the online sales business had better stake out a claim or forever be a has-been. Amazon realizes this and they are in the game to win.

This is why they are willing lose money in order to stake out their claim in the Internet Cloud.

Amazon is a very smart company that sees the implications here, realize their importance, and has gone all out with a brilliant strategy to buy into the top-tier marketers of the future. They are one of the few that is holding its own against Apple.

Still, the amount of energy and money they are investing show how really important it is to them!

Their strategy?

    • Do not go head to head with Apple – at least not at first. (Fire is not directly competing – see above link)
    • It is OK to lose a little money at first.
    • Slowly build:
      • Services
      • Experience
      • Customers
    • When customer base is sufficient, move up to more competitive products.
    • When customer base and experience are sufficient, move to profitable products.

Profit for Amazon always includes the value of an added customer who is to some degree locked into their system.

I know that some of these ideas are not original to me. However, I feel I have put them all together in a unique way. I also think that not many others see the real implications of the Cloud Computing paradigm, and how important it is.

Let me know what you think!

In Summary

Perhaps this statement, “biggest shift…” is a little too strong. Whether it is exaggerated or not, however, the important thing is that the impacts are real.