Thursday, September 17, 2015

Apple Launch of "Phone as a Service" Could Flip Business Model

Life is full of apparent ironies.

Mobile service providers work very hard to create differentiation and value for their core connectivity services, but new device leasing programs offered directly by Apple will further divorce the device decision--and the value the device represents as the embodiment of the service--from the connectivity service, which necessarily becomes a subsidiary decision for the consumer.

The other aspect of the iPhone Upgrade Program is that device subscriptions turn a device purchase into an on-going subscription relationship for Apple and other device manufacturers using leasing programs. Make no mistake, though Apple remains a device manufacturer, it also shifts into the role of “phone as a service” provider.

Recall that the iPhone represents 66 percent of Apple’s revenue. So while it might yet be too soon to say Apple has flipped its business model--exchanging its “sell devices” model for a “sell service” model--it potentially is poised to do so

Some might note that does tend to reduce the leap to becoming the connectivity provider, as well.

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