When Steve Jobs last week gleefully prank-called a Starbucks during his demonstration of the Apple iPhone, the crowd at MacWorld went wild. And why shouldn't they? If Apple made iSand, Jobs could sell it in the desert.
But Jobs' keynote, which was peppered with callouts to smartphone heavyweights BlackBerry, Nokia and Palm, may have been a touch premature.
Venturing into the mobile phone market is new ground for Jobs and Co., and though mobile experts and device users alike agree that the iPhone is one hot-looking phone, it is not yet equipped with the guts to get it through the enterprise door. Nevertheless, some experts admit that a few may sneak their way into the corporate office.
At the same time, iPhone may be too much for the typical consumer. In order to be successful, experts say, the iPhone has to shake its identity crisis and aim at either consumers or mobile professionals. It's not going to survive trying to reign in both markets.
There's no arguing that last year was the year for slick new devices to break through enterprise walls. BlackBerry had its Pearl, Motorola had the Q, Nokia had the E60, Samsung came through late in the year with the BlackJack, and Cingular hit the ground running with the 8525. But the iPhone, with its touch-screen and music player, isn't quite at that level -- yet. Especially with a price tag that reaches up to $600.
iPhone uses Cingular's EDGE network and Wi-Fi for Internet connectivity, and supports POP and IMAP email services. It can display rich HTML email and receive Yahoo! Email with full push functionality. According to the Radicati Group, a technology research firm, that may not be enough connectivity to captivate corporate users.
"The messaging and Internet connectivity features of the iPhone, along with its price tag, seem to position the device more appropriately in the enterprise market," according to Radicati. "However, we believe that in its current form, the iPhone will fail to meet the needs of most enterprises."
In its present form, iPhone lacks wireless push email support for Microsoft Exchange and IBM Lotus Domino, which is a key requirement for companies accustomed to real-time email, contact and calendar synchronization.
"Seems to me that the price tag and lack of 3G are a problem when you compare it with the low-cost smartphones like BlackJack, 8525, etc.," said Kathryn Weldon, analyst with Current Analysis.
Weldon is quick to note, however, that BlackBerry maker Research In Motion Ltd.'s stock dropped once the iPhone was announced, indicating that a good portion of the world sees Apple as a worthy foe in the smartphone market.
"In the short term, I wouldn't expect all the executive types who buy BlackBerrys to go out and buy the iPhone in droves," Weldon said. "Considering it's still not clear what level of email synchronization, support for third-party mobile business process applications, or centralized configuration and management are available, it's still too early."
Avi Greengart, senior analyst with Current Analysis, put it more bluntly.
"At this time, there is absolutely no case for enterprise use of the iPhone," he said. "It won't view or edit Office docs. It doesn't support secure corporate email. It doesn't have a hard keyboard -- the error correction software it uses is neat and rather spectacular for casual messaging, but that's not the same as physical keys that provide tactile feedback when you press them. You can't add software to it to manage inventory, enter orders, or provide your physicians with drug information."
Still, Greengart admits the iPhone is pretty sweet when it comes to devices.
"The iPhone is an innovative, addictive, expensive closed system that does what it does extraordinarily well," he said. "But that's it."
Ultimately, it will be the folks using the iPhone who determine whether or not it will aid them in their day-to-day work lives. Jack Gold, president and founder of research and analysis firm J.Gold Associates, said there are a number of Apple and Mac faithful out there who could take iPhone to great heights.
"There's going to be a fringe factor," Gold said. "There's diehard 'I love Apple, I hate Microsoft' folks out there."
Apple's lack of establishment in the mobile phone market could, however, keep it on the outskirts until iPhone proves itself a viable competitor to the other sleek smartphones, Gold said.
"If they're going to bring something like this into the marketplace, they have to meet the expectations of the users," he said. "Apple is not a formed entity here, so they have to show me they can do it."
In a recent Technology Flash, Gold wrote: "In the past, most high-end phones have been sold to business users who were willing to pay for a fancy phone with capabilities they wanted. But these users almost universally demand connectivity to corporate systems, especially push email and Outlook integration. How well the iPhone does at integrating to these systems remains to be tested. And although the iPhone will likely integrate and sync well with the MAC, very few businesses run on MACs; so if it doesn't do a good job with PCs, Apple has a big problem."
Tony Arroyo, senior distributed technology engineer at MetLife and a self-proclaimed device junkie, said the iPhone is "intriguing and downright gorgeous," adding that "it sounds like it's everything people wanted the Newton to be."
Arroyo said the iPhone could be seen as a viable business tool if Apple succeeds in a few key areas:
- "Security is robust -- probably the case since it's running OSX -- and granular, meaning we can tweak what the hard drive can store. [It] has to support encryption too."
- "Integration with existing platforms like RIM, Good, etc. -- no one wants to have to invest in another management platform."
- "Support for third-party applications -- that's still up in the air from what I've read. If it's locked down and you can't load apps, there won't be much benefit."
Arroyo said it is a "great thing" that the iPhone has an Intel CPU and runs MacOS X, but he noted that both price and the limited list of carriers -- at first, iPhone will use Cingular's network exclusively -- could be hindrances. Running GSM was a good decision because of its worldwide coverage, he said.
"I think Apple has a ways to go to break into the corporate side," Arroyo said. "They need to work on the services side piece." He later said that, with the expansive iPod-like music player in the iPhone, "liability could be an issue with users who have music – corporations don't want to be sued by the RIAA."
Greengart said that, over time, the iPhone could evolve and eventually some enterprise-class features might emerge.
"However, even then you may have a tough time convincing IT managers and corporate accounting to buy widescreen iPods for employee use," Greengart said, "so the more likely scenario is that employees purchase the devices on their own and then ask IT to enable mobile email on them, once that is possible. Of course, if Apple opens up the iPhone for corporate application development, then anything is possible."
Weldon also said that the iPhone may be able to fill a void in the market for converged consumer and business devices. She noted that most corporate device users still use a BlackBerry for mobile email, a separate phone, and an iPod for music. Merging all three into one device may hit a sweet spot for some.
"I'm not sure how many business execs or mobile professionals need this level of convergence, though, especially at a $600 price point," she said. "On the other hand, if they are shelling out corporate bucks for device and data plans for all three applications -- data, voice and music -- it would certainly cost them a lot more cumulatively."
In a recent report, the Radicati Group suggested that the iPhone, as a consumer device, is far too advanced and pricey, and enterprise users will lament its lack of basic wireless messaging and collaboration features.
"We expect the iPhone to experience initial strong demand among Apple aficionados and tech-savvy prosumers, but only moderate demand from the general public," Radicati said. "Sales growth will not mirror the success of the iPod but instead proceed at a more measured pace that reflects the device's cost and practicality."
Still, Radicati indicated that it doesn't believe iPhone will be Apple's last stab at the phone market. It expects that Apple will correct some of iPhone's shortcomings in future releases.
"There is no question that the iPhone is an impressive device," Radicati said. "However, Apple's constant innovation will force us to take a wait-and-see approach for new products in the iPhone family."