The debate rages on over Adobe and Apple’s recent posturing, and yet I feel the big picture is being missed. The lastest salvo in the shots fired between concerned fans comes over recent changes to the terms of service used for the planned update to the iPhone SDK, which effectively state that all applications for iPhone must be written in Objective C only.

This effectively shuts down a number of vendors who were working on alternatives to Objective C and X-code (the editor used on macs) for creating iPhone applications. Adobe is hit hard by this, as ability to publish for iPhone was planned for the release of CS5 later this year. At first glance this move by Apple seems surprising, but in reality nobody should be shocked by this stance.

Developers have been speaking out against this unusual change, but have failed to recognize a few fundamental facts.
What we are really looking at is the age-old software/hardware push and pull relationship. Who deserves to make more money, the people who make applications, or those who make the machines they run on?

The Real Issue

The real issue here is one related to whether a company makes its money from hardware or software.

Fact 1:
Apple makes its money from hardware sales. Adobe makes its money from software sales.

Fact 2:
In an environment where developers can write code once and publish to all platforms (and browsers), software companies win but the smaller hardware manufacturers lose. Apple is such a company.

Despite their coolness, Apple is still a minor hardware manufacturer making a niche product. Currently Apple owns only about 14 percent of the US market and considerably less worldwide. They can not compete in production with the likes of HP, Dell, and Nokia in producing cheap hardware which is why their computers and devices are targeted at a very focussed high-income group. The last thing Apple wants to do is fight on even ground with other manufacturers.

In 2010, PC sales are still surging ahead, with Intel posting first-quarter sales of $10.3 billion, and a profit of $2.4 billion, the highest in its history.

PC shipments climbed by 27.4 percent compared to the previous year.

We in the interactive industry in North America live in a bit of a bubble, having the highest concentration of mac hardware available. However, mac sales have had them hanging out at around 4 percent market share globally since 1998.

Apple maintains that consistent market share by focusing on expensive computers. In fact, in North America Apple owns a big chunk of sales of computers over $1000 in price – between 65 and 90 percent depending who you believe. The point is that catering to a niche group of users with exclusive equipment (and software) is not something they want to give up or they will find themselves in the same arena with some superior players.

The Open Screen Partners

Adobe, with the partners in the Open Screen Project, has been attempting to lessen or end the differences between platforms. Their plan has been to make software that allows content to be written in one place and show up on all mobile devices and desktops no matter the operating system installed or the browser used. This is the whole point of Flash and derivatives like AIR.

But does this suit Apple? If you could run the exact same software on an Apple computer or an HP machine, but the HP computer was more powerful and less expensive, which one would you choose?

In reality, Apple never really had any choice in the matter. Everything about their business model is based on avoiding direct comparison with other more established hardware vendors. For them, a unified platform like Flash would be a disaster. They introduce new devices because they profit more from inventing new markets than competing in existing ones.

Think about it a little bit. On one hand, you’ve got Google, Adobe, Microsoft – all of them software companies (though some are making inroads into hardware by teaming up with the major hardware companies such as nVidia). All of these have expressed great interest in browser plugins, going so far as to work together to enable Adobe’s platform. On the other hand, Apple has done everything to disallow those things and tighten control of both the content creation for their devices as well as distribution.

Level of Control

Apple is currently enjoying a level of control far greater than they ever have. With the new terms of service, they have stemmed the last part of the content creation and distribution model that was outside of their influence (although they always have the option of rejecting apps at their discretion). From the first line of code written, to the launch of a product on the app store, to its continued distribution, Apple has full control now. This is necessary to retain the developer base, because Apple’s emphasis has always been on the end-user and less on the people making software.

Microsoft, on the other hand, has always catered to the developers (which makes sense when you make your money on software). As a result, they have not enjoyed the same reputation in terms of the end-user experience. One look at the vast arsenal of tools available to Microsoft developers, however, shows you that their focus has been on attracting and retaining top software talent. If that doesn’t convince you take a look at a Youtube video of Steve Balmer screaming “Developers! Developers! Developers!” at a conference. (You’ll be glad you did).

Conclusion

Neither software makers nor hardware manufacturers will hold this cold stance forever. Historically they tend to fall out, then come back together to make more money. A new piece of hardware comes out and developers must learn new skills for it. Then a new software comes out that strains the hardware and manufacturers must produce new devices. Neither side likes the initial expense but they like the new income later on.

The point is we should not read too much into what is in fact a very normal business cycle.