How Apple outflanked Microsoft in both business and education

With all eyes fixed upon the expected iPhone 5 announcement next week, it’s too easy to overlook the extent of the challenge Apple’s other products are posing to Microsoft. Not only are sales of Macs continuing to grow much faster than that of PCs (which we all knew), but a recent report out of Wall Street indicates Apple is making strong gains in business — Microsoft’s seemingly impregnable fortress — and the iPad is cannibalizing sales of PCs and even Macs in the education market.

“The role of the iPad cannot be overemphasized. Some observers estimate the iPad sales in the business market might represent up to half of all iPad sales,” writes Charlie Wolf, who follows Apple for Needham & Co., an investment bank.

[ A year after Steve Jobs: Bill Snyder grades Apple CEO Tim Cook. | Stay ahead of the key tech business news with InfoWorld’s Today’s Headlines: First Look newsletter. ]

As I’ve written many times, Microsoft is hardly on the ropes; PCs still outsell Macs by a huge margin. But Wolf’s analysis underlines how crucial this fall’s launch of Windows 8 and the related Surface tablet, as well as its struggling tie-up with Nokia to gain a meaningful presence in the smartphone market, are for Redmond’s hopes to finally succeed in the mobile market and remain dominant on the desktop. A generation of new users (and their parents) are being exposed to the iPad and iOS, and unless Windows 8 and devices like the Surface strike them as compelling, they may never be willing Windows customers again.

What’s more, Apple is riding the crest of the “consumerization of IT” trend. Indeed, BYOD (bring your own device) has practically become synonymous with “bring your own iOS device to work,” maybe even to the detriment of real user choice and empowerment.

The halo effect even works in businesses

Apple’s overall sales of laptops and desktops have grown faster than PC sales for about six years now — for 25 straight quarters, to be exact. That margin was a bit narrower last quarter, but not in the business market.

During the April-to-June quarter, Mac shipments to businesses in the United States grew 56.6 percent, while overall PC sales slipped 8.8 percent, says Wolf. Meanwhile, Mac business shipments worldwide increased 22.1 percent, amid a 4.5 percent decline in overall business PC sales. Of course, Apple still has a very long way to go in the business market: Apple’s share of that segment last quarter was just 5.9 percent, an all-time high.

It’s not easy to know exactly why Apple is gaining ground in business, but there are several good suspects. The most likely is the so-called halo effect. As users learn to love Apple hardware and software via consumer products like the iPod, iPhone, and iPad, they start wanting to use them in the office; replacing PCs with Macs, a once unthinkable alternative for many, becomes increasingly attractive.

Writes Wolf: “No doubt many mobile professionals purchased an iPhone for their personal use, which cast a favorable light on Apple’s app ecosystem. … The iPad undoubtedly reinforced the more positive perception of Apple products, encouraging some IT professionals to consider the Mac in their purchasing decisions.” It’s worth noting that many pundits dismissed the existence of a halo effect several years ago, entirely missing the start of a significant trend.

At the same time, Apple’s OS X and iOS are playing better and better in corporate environments, and the Apple ecosystem is growing in new places. Last month, for example, Cisco Systems announced plans to add code to its wireless LAN controllers to make Apple’s Bonjour-based zero-configuration networking technologies like AirPlay and AirPrint behave better on enterprise networks. Cisco isn’t alone; Aerohive and Aruba Networks are planning similar Bonjour gateways. Now, mobile management companies such as AirWatch, AppSense, AT&T, MobileIron, and Symantec have added Macs to what their tools can manage, taking advantage of the hooks Apple has added in the last two versions of OS X.

On a less technical level, OS X — via its native Boot Camp and through programs like Parallels Desktop and VMware Fusion — makes it much easier to run familiar Windows applications, including Microsoft Office. OS X also supports Windows networks.

Take an iPad to school — not a PC

It’s not just businesses and the vendors that serve them that are shifting to Apple. The shift to iPads in education was dramatic in the April-to-June quarter. Says Wolf: “We believe the inescapable conclusion is that the iPad is beginning to cannibalize a material portion of PC sales in this market.” Mac sales in business declined very slightly in that quarter to about 520,000 units, whereas overall PC sales declined from 1.90 million to 1.64 million units, Wolf says. In other words, much of the money formerly spent on Windows PCs has shifted to iPads, and the amount of money for Macs is stable.

Although it hasn’t been confirmed, there’s certainly reason to believe that Apple is going to announce the “iPad Mini” later this fall, at a lower price than the full-sized iPad. If it does materialize, the iPad Mini becomes an attractive alternative for cash-strapped schools. By comparison, the Windows 8-powered Surface is expected to cost as much as an Ultrabook. And it’s hard to picture teachers and school district purchasing agents wanting to buy the cheaper Surface running Windows RT, a Metro-only version of Windows 8, because its software capabilities will be so unfamiliar to them — and much more llmited than what an iPad provides.

All of this dramatically raises the stakes for Windows 8 and Surface. Windows 8 has gotten terrible early reviews; my colleague J. Peter Bruzzese, a true Microsoft believer, dubbed it “Windows Frankenstein.” The prospects for the Surface are less clear, but even if it is nicely designed, the new tablet may be too a thin reed to base Microsoft’s hopes of slowing the rising Apple tide.

I welcome your comments, tips, and suggestions. Post them here (Add a comment) so that all our readers can share them, or reach me at bill@billsnyder.biz. Follow me on Twitter at BSnyderSF.

This article, “How Apple outflanked Microsoft in both business and education,” was originally published by InfoWorld.com. Read more of Bill Snyder’s Tech’s Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.