1998.08: Don Crabb wrote today about Apple’s backorder problems (Supply and Demand, MacCentral, no longer online). Almost all dealers are out of iMacs, PowerBooks are back ordered, and Power Macs are hard to get.

The price of success?

Apple’s in a real catch-22 situation. Market share is low, yet they can’t produce new computers fast enough to vastly increase market share.

Cloning was supposed to address that issue, increasing the Mac OS market at the expense of Windows machines. Instead, most clone buyers would have bought a Macintosh if clones hadn’t been available, so Apple’s sales declined.

That’s the tailspin that Steve Jobs pulled Apple out of.

Cloning was a good idea. It could have worked. It should have worked. After all, it worked on the other side. So why did it fail for Apple?

The biggest difference between Macintosh and the Wintel world is the number of players. Apple makes the Macintosh and the Mac OS. On the other side, Intel makes CPUs (along with a few other companies), Microsoft makes the dominant operating systems (but others are available), and probably hundreds of companies build and sell the computers, from huge corporations to people working out of their basements.

Apple found some valuable partners in the clone era. Power Computing was founded on the promise of Mac clones. Radius, a longtime Mac-oriented company, made a great clone, which later became the basis for the Umax S900. Daystar Digital not only sold clones, they introduced multiple CPUs to the Mac OS world. And Motorola made both the PowerPC chip and StarMax computers.

There were other companies also trying to ride Apple’s coattails: Pioneer, Tatung, Mactell, Bandai, APS, and many more. IBM even has a Mac OS license, although IBM never used it.

Problem and Solution

Today the only clones left are discontinued models. (My Umax J700 is a great clone, bought at fire-sale prices after Umax left the Mac OS market.)

Today only Apple makes and sells Mac OS computers. They design them, build them, market them, ship them out, and even sell them directly to end users.

Only Apple – and it isn’t enough.

Apple is running 24 hours a day, seven days a week to meet the demand for the iMac – and maybe squeeze in a few Power Macs and PowerBooks if they can. (I’ve had a 250 MHz 13.3″ PowerBook G3 on order at work for some time. My dealer says not to expect it, because it will probably be discontinued before Apple can ship one.)

Mac users are immensely loyal. We are willing to wait, but that doesn’t mean we aren’t frustrated by the wait. After all, dozens of mail-order companies can put together a custom Wintel machine and have it to me within 48 hours.

The problem is Apple’s limited production capacity.

The solution is outsourcing.

Apple needs to work with other companies that have the ability to build Macs to Apple’s specifications. These wouldn’t be clones, but Apple computers built in other plants. (Like “Japanese” cars built in the U.S.)

Apple would provide the designs. The manufacturers would supply the facilities, expertise, and manpower to build these computers to Apple quality.

They’re Coming, but Who Will Build ’em?

Apple really stung Motorola and Umax, companies that had invested a lot of their own resources into developing Mac OS computers that weren’t mere Apple knockoffs. They lost a lot of money when Apple discontinued OS licensing.

Outsourcing could give them the opportunity to recoup some of the money they lost in the Mac OS market. And there would be little risk since Apple would provide the designs and market.

In fact, it wouldn’t even have to be a former Mac cloner. Maybe IBM, who already makes the CPU, would get involved, or some of the well-known Wintel clone companies with extra production capacity.

Today Apple is completely dependent on the output of plants in Singapore, Ireland, and California. Even at full capacity, it may take months before Apple can catch up on iMac, Power Mac, and PowerBook demand.

Contracting someone to build Macs and iMacs for Apple would give them the ability to catch up on the backlog, reduce the wait on back orders, and worry more about increasing market share instead of just keeping up with demand. This wouldn’t require Apple to invest in new production facilities, which could also increase the bottom line.

Is this thinking different enough?

Further Reading

• Apple’s Good Moves, 4 February 1999
• Apple Must Outsource, Mac Musings, 5 October 1998
• Apple May Outsource iMac Production, c|net, 15 September, four weeks after this column first appeared
• Demanding More Supply, Don Crabb, MacCentral

keywords: #outsource #outsourcing #imac #production