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Apple, Google wooing businesses to keep growth streaks going

SAN FRANCISCO — Apple, Google and Amazon.com rose by riding consumer demand for their products. Now, the companies are trying to keep their growth streaks going by tapping another type of customer: Businesses.

As part of Apple’s deal with IBM, the latter’s sales force will recommend its clients to buy iPhones and iPads. PHOTO: REUTERS

As part of Apple’s deal with IBM, the latter’s sales force will recommend its clients to buy iPhones and iPads. PHOTO: REUTERS

SAN FRANCISCO — Apple, Google and Amazon.com rose by riding consumer demand for their products. Now, the companies are trying to keep their growth streaks going by tapping another type of customer: Businesses.

While the technology giants have long had offerings for businesses, they are now broadening their product line-ups and more aggressively marketing them to companies. Google is pushing to get its computerised eyewear, Glass, into corporations, while Apple is adding management tools to its iPhone operating system. In total, businesses are set to contribute more than 15 per cent of Apple’s sales by 2016, up from less than 10 per cent now, while Amazon’s enterprise revenue is projected to reach about 10 per cent in 2019, double that of last year, said investment advisory firm Evercore Partners and investment research firm International Strategy and Investment (ISI).

The moves to get deeper into the traditional customer strongholds of Microsoft, Hewlett-Packard and Dell have been building all year. Last month, Apple unveiled a pact with International Business Machines (IBM) to help sell its gear to corporations. Google — which on Tuesday celebrated its 10-year anniversary of trading as a public company — in June added unlimited storage for businesses and debuted new mobile tools for enterprises. Google and Amazon also slashed the prices of their cloud-computing services for businesses earlier this year.

The firms are seeking to sell more into businesses as corporate spending on technology hardware, software and services is projected to reach US$1.6 trillion (S$2 trillion) worldwide this year, up 7.7 per cent from a year ago, said research firm IHS. That is slightly bigger than the US$1.5 trillion global e-commerce market and the US$140 billion online advertising market, said market research firm EMarketer.

It is also a way to make up for slowing growth in each firm’s larger business. Apple’s sales are estimated to be up 5 per cent this fiscal year, compared with growth of 45 per cent two years earlier, while Amazon’s revenue is anticipated to rise 22 per cent this year, a deceleration from 27 per cent in 2012, showed data compiled by Bloomberg. “Some of these companies have to broaden their revenue base,” said Ms Danielle Levitas, an analyst at market research firm IDC. “If there are too many fish in your pond — or your pond is reaching saturation — you need another place to play.”

Apple, Google and Amazon need to tap meaningful pools of spending to make a dent in their already-enormous sales. In total, the three firms had a combined revenue of US$305 billion in their 2013 fiscal years, showed data compiled by Bloomberg. That is larger than Singapore’s economy, data from the World Bank showed.

“When you’re a company as big as an Apple, an Amazon or a Google, there are only so many markets that you can go to that will actually move the needle,” said Mr Ben Schachter, an analyst at Macquarie Securities USA.

The percentage of revenue from business customers is climbing for Apple, Google and Amazon — with room for more growth. While Apple gets less than 10 per cent of its annual US$170.9 billion in revenue directly from corporations, that is up from less than 5 per cent in 2009, said Mr Brian Marshall, an analyst at ISI.

Amazon received about 4.5 per cent of its US$74.5 billion in sales from business-focused cloud offerings last year, up from 1 per cent in 2010, said Evercore Partners. Google gets well less than 5 per cent of its US$59.8 billion in annual revenue from businesses, up from less than 1 per cent in 2009, said Mr Schachter.

Representatives for Apple, Google and Amazon declined to comment.

Executives at Apple, Google and Amazon have turned up the volume on what they can offer companies. Enterprise is part of a trifecta of emerging new businesses, Google’s former chief business officer Nikesh Arora said earlier this year on a call with analysts. Through its IBM partnership, businesses are set to be one such catalyst for future iPad growth, said Apple’s chief executive officer Tim Cook late last month.

Other consumer-technology companies are also taking more steps to sell to businesses. Facebook, owner of the largest social-networking service, last year acquired a start-up called Parse that offers technology to help companies more quickly build an application and keep users engaged.

A Facebook representative declined to comment.

Some tech firms made inroads into businesses with little effort in the past. Workers bought Apple’s iPhones in droves and forced information-technology departments to take note. Consumers also helped boost the popularity of Google’s software in corporations. However, it is not enough to rely on individuals bringing technology into their workplaces any more because spreading products throughout companies often requires official buy-in and extra bells and whistles such as security. “It’s not for the faint of heart,” said Dr Jagdish Rebello, an analyst at IHS, who added that corporate customers are typically more focused on security and support than consumers might be. “It’s a different beast.”

The consumer-technology providers are fighting to gain more of the business of companies such as Yext. The firm, which helps manage information on websites for enterprises, recently moved much of its computing over to Amazon Web Services, the cloud offering from the online retailer. Amazon was proactive in winning Yext’s technology budget, including sending multiple emails to executives to woo them, said Yext CEO Howard Lerman. “Amazon is super aggressive,” he added.

Each of the companies has taken different routes to plumb enterprises. Google has been expanding its products for businesses for the past few years by rolling out a line of low- cost laptops, called Chromebooks, which use its own operating system. It has also expanded videoconferencing services and struck deals with companies such as Sprint and Hewlett-Packard to help sell its business software.

The search engine giant also last year fully rolled out its Compute Engine product, building on a previous cloud offering that lets customers remotely access data centres. In March, Google slashed prices by more than 30 per cent for the computing-capacity product and lowered the costs of storage by about 68 per cent for most users.

That triggered a fee war with Amazon’s Web Services division, which also offers cloud computing. A day after the Google announcement, Amazon said it was cutting prices by an average of 28 per cent to 61 per cent, which has since curbed some of the revenue growth of the Web Services business.

Amazon continues to invest in the cloud offering, adding about 250 significant services and features so far this year, said chief financial officer Thomas Szkutak on a call with analysts last month.

At Apple, Mr Cook’s move to pursue more corporate clients reverses the stance of co-founder Steve Jobs, who focused on consumers. In particular, Mr Cook is looking to make the company’s iPad more of a business tool as sales of the tablet have recently fallen for two consecutive quarters, the first such decline since the product’s 2011 debut. About 20 per cent of people in firms use an iPad, compared with more than 60 per cent who use notebooks, giving Apple an opportunity to expand, Mr Cook said last month.

As part of Apple’s deal with IBM, the latter’s sales force will recommend its clients to buy iPhones and iPads, as well as 100 business-focused mobile apps the two companies are building together. While iPads are being used widely within companies, the software is mainly modified versions of what was originally created for a traditional computer, Mr Cook said.

Apple does not have a big sales force targeting enterprises or a services group that will help business get their devices up and running after they make a big purchase. IBM will help with that, said Mr Tim Bajarin, an analyst at market research firm Creative Strategies and who once consulted for IBM. “Once you get into these enterprise accounts, there are issues that happen on site and because Apple doesn’t have those services available, most people in the enterprise world didn’t look at them as being serious.”

FedEx has bought more than 4,000 iPads, as it moved to replace paper-based documents last year with the sleek digital devices, said Mr Josh Kendrick, the firm’s managing director of flight technical. He said FedEx is due to refresh its technology soon, giving Apple and others a new opportunity to make their case.

“There’s a level of familiarity that’s out there within the consumer space with a lot of people,” Mr Kendrick said. “It’s not like we’re handing them something that a lot of people haven’t seen before.” BLOOMBERG

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