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Friday
Sep282012

The Apple Beat: Ecosystem of Inheritance

By Gadjo Cardenas Sevilla

There's some real genius to Apple's iOS hardware strategy and how they manage to come up with new devices each year while still benefiting heavily from iPhone models that are two-years-old.

Once could think of it as the ecosystem of inheritance or smart trickle-down logic. By keeping one to two-year-old products current through iOS software updates, Apple makes it possible to extend its user base and keep their products desirable far beyond anyone else in the mobile industry.

If you want to buy a new iPhone today, you of course have the option of getting the latest iPhone 5. Going for the latest and most powerful smartphone Apple sells, means a huge investment up front or a frightening three-year contract with a telco. 

If you want to buy a new iPhone today, but aren't keen on the iPhone 5 because it is too expensive, or if you prefer something else, there are  other options.

You can still get a new iPhone 4S at a reduced price and if even that is too much phone for you then the iPhone 4 is still available. If you want to save even more money, then you can take your chances and buy these second hand or used from users who are upgrading to something newer.

The three generations of iPhones all run on the same version of iOS. While earlier models are limited by their hardware as to what features are enabled (iPhone 4 is single core, iPhone 4S is dual core but with less RAM), most users will be able to take advantage of the majority of apps  and functions out there. The critical ones like iMessage, FaceTime and all the Internet apps will work just fine.

Keeping one-year-old and two-year-old models of the iPhone in circulation through the Apple Store and through telco partners also creates a robust second-hand device economy around the iPhone and iOS. Upgraders are selling their iPhone 4 and iPhone 4S for good money towards an upgrade to the iPhone 5.

Families can benefit as well. Dad gets the new iPhone 5 while mom gets his one-year-old iPhone 4S (or vice versa) and Junior can finally move from his iPod Touch into mom's old iPhone 4 or 3GS.

The fact that most of these devices are still current and available new, makes it more acceptable for other members of the family to inherit devices. You're not giving away an obsolete smartphone no one wants, but something people know and love and have already invested hundreds of dollars for apps and accessories for.

For Apple, this also means they totally maximize the investment they put in manufacturing models like the iPhone 4 (which shares 75 per cent of its components with the iPhone 4S).

They're still selling a lot of units and the lifetime of the product extends much farther than competing smartphones. The more you make of something, the cheaper manufacturing gets. So even at reduced prices, Apple still profits heavily from selling its older iPhone models.

So, while many are whining and groaning about Apple's closed ecosystem, consider that this ecosystem is makes it possible to keep more devices current (and desirable) longer.  

Apple pushes out a software update and everyone has access to it at the same time, all over the world. This is better for Apple and better for its customers.

Apple doesn't have to create cheaper iPhones for the lower end of the market because one or two year old iPhones can serve that market well and still run the gamut of apps as well as many of the new iOS features introduced each year.

Some of Apple's competitors still take the approach that they've used for feature phones. Have a flagship device, a midrange device and an entry-level device out each year for specific segments, don't upgrade the software (or leave it to the carrier to control software upgrades) then release upgrades to the three devices again next year with updates operating systems.

The value of the one-year old devices depreciates completely and the fact that they can't run the latest OS and as a result are left out of newer apps doesn't make them as desirable even in the second-hand market.

Apple's ecosystem of inheritance even starts before many users get a smartphone.

A number of parents buy the iPod Touch for their children as a cheaper alternative to a smartphone. The iPod Touch has the same screen, run the same apps and is better geared for games, email, iMessage and FaceTime calls without the expensive data and calling plan. The iPod Touch is the starting point into the ecosystem and leads to loyal users.

Kids amass a lot of apps and games on their iPod Touch as well as music collections. Once it is time for them to choose a smartphone, which one makes most sense for them to graduate to? An iPhone.  This is how an ecosystem is cultivated and how products are made more valuable for longer periods of time.

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