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The Enterprise Opportunity in Apple’s Slowdown

On December 28th, Apple released a statement regarding the fact that it was planning to lower the battery replacement costs for Apple 6s and 7s from $79 to $29 as a followup to a December 20th statement made to Techcrunch in which Apple described how it was slowing down iPhone 6s and 7s. This piece provides guidance to enterprise IT, mobility, and procurement managers on what this issue is and how to take full advantage of this situation to improve your enterprise mobility environment.

Recommended Audience: CIO, Chief Procurement Officer, IT Procurement Directors and Managers, Mobility Directors and Managers, Telecom Directors and Managers, IT Service Desk Directors and Managers

Vendors Mentioned: Apple, Samsung, Huawei, Calero, DMI, DXC, Ezwim, G Squared Wireless, Honeywell, IBM, Intratem, MDSL, MOBI, Mobichord, MobilSense, Mobile Solutions, NetPlus, Network Control, One Source Communications, Peak-Ryzex, RadiusPoint, Stratix, Tangoe, vCom Solutions, Visage, Vox Mobile, Wireless Analytics

On December 9th, Reddit user TeckFire posted the experience that a used iPhone 6s was working slowly and saw that the performance increased when replacing its battery. This finding quickly burned up the internet as Geekbench verified this post with its own benchmarks and tech blogs such as Ars Technica picked up on these findings.

It turns out that Apple put this change into place when iOS 10.2.1 came out on January 23rd 2017 to solve a previous battery problem for iPhone 6. Initially, the iPhone 6 family were shutting down unexpectedly when the battery still seemed to have a significant amount of charge. This issue was an unusual flaw for Apple, which was long known for the quality of its production. If it hadn’t been for the Samsung Note fires at the same time, Apple would have taken more blame for this issue.

A Problematic Customer Support Approach

Although this update reduced the number of shutdowns that occurred, Apple failed to explain that its fix involved slowing down the iPhone as the maximum battery life lowered over time. Apple stated in its official statement that “Customer response to iOS 10.2.1 was positive as it successfully reduced the occurrence of unexpected shutdowns.”

Amalgam sees a problem right here in that Apple couldn’t have known what the true customer response was because it never explained to its users what the actual fix was. Technology companies are often faulted for providing overly technical or challenging explanations, but Apple has a key advantage in that its size and user base will quickly allow any explanations to be distilled into user-friendly terminology by its large ecosystem. Apple’s sin in this case was in not providing any explanation on the performance slowdown fix until it was basically caught.

The way that Apple treated this update is an issue because the iPhone is branded as the easiest, fastest, and best smartphone experience with the ever-present expectation of high performance. Throttling that performance, even to extend battery life, compromises part of the brand experience. Apple should have explained this functional compromise earlier as part of the natural aging of a cell phone battery. Instead, users were forced to find this out themselves and explore whether to voluntarily void their warranties to replace their batteries on the cheap or to pay Apple’s $79 battery replacement fee to keep the performance that they were used to having.

The Grants and Benjamins of Apple’s Decisions

First, Apple has responded by reducing the price of a battery change for the affected iPhone 6 and 7 devices from $79 to $29 for the majority of 2018 starting in late January (Apple wrote in a statement on Dec. 30, 2017 that it would be honoring this new $29 replacement price immediately). This is a significant change, as third-party batteries for these devices are typically in the $15-$20 range. Apple has taken out the profit for these changes and has passed a significant psychological barrier, which I like to think of as “Grants and Benjamins.”

Grant is the face of the $50 bill and Benjamin refers to Benjamin Franklin, who graces the $100 bill. Even in an increasingly cashless society, there is still a big mental gap between a service that requires a Benjamin to cover and one that can be covered by a couple of $20 bills (I guess I could call them Jacksons, but nobody says that unless they are referring to Michael and his brothers. Someday, we may call “Tubmans”)

This makes battery replacements more accessible both for consumer and enterprise users. Given the ubiquity of iPhone stores in metropolitan areas, Amalgam expects to see a sharp increase in iPhone battery changes over the next couple of months. Since a battery change takes about a half hour to complete and requires some fairly specialized equipment, Amalgam thinks that Genius Bars across the country are going to be in for a busy time.

Consider that Apple sold over 211 million iPhones in fiscal year 2016 (Running from October to September) driven by continued demand for the iPhone 6 and 6 Plus and over 216 million iPhones in the last Apple fiscal year, driven by the iPhone 7 and SE. Amalgam believes that this issue mainly affects mobile users who use their phones for 8 or more hours per day for over a year at this point, which would be the top 15% of users. But it likely also affects any normal users (those who use their phones 4+ hours per day) for over 2 years, which includes a large percentage of iPhone 6 users. Out of these users, Amalgam expects that a significant percentage have already upgraded to either the iPhone 8 or X and estimates that roughly half of the remaining users lack the initiative to pursue a battery change.

This leads to Amalgam’s estimate that between 8 – 15 million iPhone users will get battery changes because of this price change. This change will allow legacy users to maintain their iPhone 6s and 7s for at least one additional year.

Given that the average iPhone sale was roughly $650 in the last fiscal year, this means that Apple will get roughly $300-$400 million in services revenue and postpone refresh revenue of roughly $5 – $10 billion over the next year as a result.

Even for Apple, this is going to be a significant bite, but with $268.9 billion cash on hand, Amalgam believes that Apple will somehow find a way to survive.

How does this affect Amalgam’s enterprise mobility and telecom expense communities?

First, all affected or potentially affected iPhone 6 and 7 phones under management or under corporate expense reports should be upgraded to the new battery. The $29 cost to add an additional year of life to a device should be a no-brainer. The challenge will be in coordinating these battery replacements at scale and to keep employees up and running during these replacement cycles. Ideally, these replacements will tiered based on the current age of the phone and the potential for reduced performance. From a pure logisitics perspective, this is a good opportunity to engage either a managed mobility services or telecom expense management provider to support these battery changes without taking up the operational bandwidth of internal employees.

Second, read the fine print. We all knew in January of this year that 10.2.1 had no feature updates and was built to fix bugs and performance. At some level, either internal staff or mobility management services needed to provide an update of what this meant. Although there was some clarification on the security aspects that were fixed, the performance issue was not clear until now. How many IT service desk hours were wasted in troubleshooting an issue that ended up being vendor-created?

Third, Apple has responded to the threat of widespread third-party battery swaps by lowering its battery replacement charges and eliminating its margin. See if Apple starts responding similarly to other repairs as the threat of breaking a warranty associated with third-party repairs becomes less threatening to enterprise IT.

Finally, get back to basics and take a closer look at the current battery and processor utilization of devices.

Frankly, it is embarrassing that this finding was posted on Reddit in early December and was not a commonly known IT issue given the vast number of enterprise iPhones currently being managed.

If IT isn’t monitoring basic battery life and processing power, IT is missing the forest for the trees. Basic uptime and performance need to be the responsibility of a competent IT organization. Monitor your devices or force your vendors to provide this information. Smartphones are computers. This reduced processor performance that is endemic across iPhone 6s and 7s could potentially have been a virus or a security breach just sitting there for months. Apple will be providing additional battery detail in its next iOS update, but enterprises should have the same visibility to smartphone performance as they do to server, network, and personal computing performance. This is a lesson across the board in IT. As everything becomes software-defined, sensor-enhanced, and data-collecting, everything must be monitored as a computing asset. This will happen again in the mobility and IoT worlds. Next time, let’s prove our worth as enterprise IT departments and be on the forefront to drive down battery replacement and other contractual costs. With the depth of mobility investment, skills, and services that IT has in place, there is no reason for us to be on the tail end of this issue.

I don’t think Apple made a bad decision in reducing performance for low-potential batteries. Lithium-ion batteries have a limited lifespan and after a certain point, either the battery life or processor speed have to be compromised. The crime was in not explaining the fix that was in 10.2.1. This lack of communication provides an opening for Samsung, Huawei, and others to demonstrate openness in its technical documentation and support and provide a stronger case for enterprise procurement. If nothing else, this is an issue that enterprise procurement should remember for its next round of negotiations.

Recommended vendors: Managed Mobility Services and Telecom Expense Management vendors to assist with mass iPhone battery replacements include, but are not limited to the following. For more information on these vendors or to discuss your mobile challenges in greater detail, please access our research or email Amalgam Insights to set up inquiry time to discuss:

  • Calero
  • DMI
  • DXC
  • Ezwim
  • G Squared Wireless
  • Honeywell
  • IBM Global Services (AppleCare for Enterprise)
  • Intratem
  • MDSL
  • MOBI
  • Mobichord
  • MobilSense
  • Mobile Solutions
  • NetPlus
  • Network Control
  • One Source Communications
  • Peak-Ryzex
  • RadiusPoint
  • Stratix
  • Tangoe
  • Valicom
  • vCom Solutions
  • Vox Mobile
  • Wireless Analytics

Additional Coverage: Take a look at the following reporters’ takes:
CNET’s Sean Hollister
CNN’s Heather Kelly:
Huffington Post’s Carla Herrerla:
LA Times’ Lauren Raab
The Verge’s Nilay Patel

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