How many of us have had enterprise software vendors that they plan to launch an Apple App Store-like offering in the "very near future" and that it will revolutionize how firms buy software?
Well, I am not biting.
There are many things that Apple can teach the enterprise-size firms. However software purchasing is not one of them.
Ever since Apple released its iTunes App Store for iPhones and high-end iPods, it raised the bar for all other software vendors in terms of intuitive user experience (UX) and pricing. The only problem is that it is focused strictly on the retail market.
For a great background on how the App economy works, listen to NPR's Planet Money podcast interview of Tumblr co-founder and Instapaper founder Marco Arment. In short, it depends on impulse buying and micro-markets.
Ever wonder why most applications for the iPhone are either $4.99 or below?
It is the same reason merchants put candy by the cash register- so that shoppers will not think critically whether they need it or not.
As Arment points out in his interview, online stores are better at capitalizing on impulse purchases than their physical counterparts. There is no counting out change or handing credit cards over to merchants that may have shoppers question their purchase decisions. It is all a click of a button.
How many of the applications that you have on your iPhone would you be willing to go to an electronics or software store, roam the aisles, select it over competing apps on the shelf, carry to the checkout and then take home and then install? Very few, I bet.
The second part of the model is that most app providers make most of their sales to a small percentage of the available market. There are a few that seem to hit superstardom like the game Angry Birds. But for each Angry Birds that makes millions, there are far more apps gathering virtual dust.
Again, according to Arment (you really should listen to the interview) even an absurdly small market share can turn a profit for individual app writers.
Assume that a $0.99 application garners one-tenth a percent market share of the estimated 37 million of the expected new iPhone owners. That would gross the app maker $36,630. It is not enough on which a programmer could live comfortably, but it is still a nice piece of change to have in your pocket.
If you look at it closely, the model is no more than last decade's telecom “walled garden” model that Apple polished up and renamed.
In this model telecom vendors provide extra bells and whistles (ring tones?) to keep their subscribers happy, entertained and tied to their current telecom carrier. The carriers continue to make most of their money from the subscriber's contract and split the micro-payment for the add features with the third-party providers. but the money they split with the third-party
The enterprise-software acquisition model is different than that of consumer mobile phone apps. It does not lends itself to major impulse purchase and its potential market is much smaller.
Firms may have problems keeping developers from purchasing time on Amazon’s compute and storage clouds or installing applications locally, but the app model is different. These apps tend to sit on top and enhance critical infrastructure like market data rather than act as standalone applications.
This is why market data vendors, aggregators and direct-feed providers, are in a prime spot to launch an app markets since the industry would not function without their products.
Bloomberg already announced its Open API Initiative earlier this year and Thomson Reuters touts Eikon's use of open-technology standards, without going into greater detail.
These potential apps would likely appear as new displays in an existing windows or additional buttons or pull-down menu items. They might not be as fun as Angry Birds, but at least the application integration would already be handled on the vendor’s end.
Various cloud-hosting providers may take exception to this analysis as they are trying to reinvent the financial-services software-as-a-service (SaaS) intranets in the cloud. However, there is a difference between applications and apps. Enterprise applications provide a number of features and capabilities while apps provide one or a few specific functions that enriches the underlying application. Consider them a sneak peak of what the next version of the underlying application will include in future releases.
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