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January 5, 2009

The future is already here - it is just unevenly distributed. —William Gibson

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iphone app revenues. whither enterprise?

Apple recent announcement of the 3G iPhone, along with several enterprise features, stands to bring in a windfall for Apple, according to investment bank Piper Jaffray. Best-case estimates put the market reaching $1bn in 2009, with per-user annual revenue estimates for Apple between $10-$15.

I am quite puzzled that the note, while stating that the ‘iPhone heavily overindexes other smartphones in advanced services’ makes no mention of revenue that could be derived from enterprise-oriented applications on the iPhone. The 3G-iPhone features several enterprise class features such as connectivity with Microsoft Exchange, network security and management features and even a remote data wipe feature. iPhone users are said to occupy the upper echelons of technological savvy and sophistication among mobile device users. Given the high standards of iPhone users, an explosion in applications specifically targeted for the enterprise is plausible. Example applications I can think of off the top of my head include advanced unified messaging, video conferencing and background security processes that phone home periodically.to guard against corporate data leakage.

Vendors of these applications will sell through the Apple App Store, from which Apple will take a 30% cut; large enterprises can distribute applications developed in-house on their own networks, from which Apple likely won’t see per-user revenue. My sense is that beyond simple applications such as time and expenses tracking, most large enterprises will probably not develop in-house applications for the iPhone and will prefer to buy them instead. Unlike casual games sold for a one-time fee, advanced data protection and collaboration applications should be able to command $15 per user per year on a subscription basis from enterprises. All this should handily jack up the above per user revenue estimates by at least a dollar or two, if not $5.

Outside of the above estimate, Apple could potentially rake in even more green if it aligned its incentives with those of its developers even better. Powerful application analytics, analogous to Sun’s Project Insight (or even of the kind provided by young startups like Pinch Media) could easily be tied to an advertising or commerce engine, from which Apple can take a variable cut.

Perhaps the talk of enterprise-oriented apps isn’t the most fashionable in this consumer technology lovefest, but I think the iPhone is only beginning to hit its stride.

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