An Apple Hardware Subscription Could Drive Greater Loyalty And Expand Their Services Business

Last week, Mark Gurman of Bloomberg broke a story about how Apple is working on a subscription service for the iPhone and other hardware products in the future.

Apple has not confirmed this rumor, but this would be an interesting program should Apple offer this type of subscription. It would be especially attractive for those who want the latest and greatest Apple smartphone that gains better cameras and more features each year.

The idea of ​​hardware as a service is not new. Most major PC and cloud computing companies offer some form of Anything As A Service, also known as XaaS. It describes a general category of cloud computing and remote access services. It recognizes the vast number of products, tools, and technologies currently delivered to users as a service over the internet. Many PC makers also offer special programs that sell PCs as a subscription, that includes a PC, software, and service agreements.

For Apple, this would be their first foray into hardware as a service that could drive even more significant revenue and advance their services business exponentially.

Apple’s iPhone revenues for 2021 were $192 billion, and their services revenue was $68 billion that same year. Service revenue for 2021 represented 15.76% of Apple’s $378.35 billion total revenue last year.

What makes a potential hardware subscription program from Apple different from the PC and cloud companies is that they are a vertically integrated company and would control the hardware, software, and services of this type of offering. PC and cloud-based companies have to cobble together their hardware, software, and in many cases, their service offerings from multiple vendors and outside suppliers. This multiple-provider solution can add cost to any of their subscription services. In most cases, they cannot control their entire services agreement without deep relations and tight integration from partners who provide technology for a dedicated XaaS offering.

On the other hand, Apple controls the entire stack, which would reduce costs for their subscription offerings and could deliver a better and much tighter bundle of hardware, software, and services solutions.

Hardware, software, and services subscription would also provide Apple with a more predictable approach to forecasting demand and, most likely, give them more significant bits of intelligence on the types of products and services these customers want in the future. Of course, this subscription type is an important goal in itself. Apple does well forecasting overall product demand now but imagines how more precise these forecasting models would be internally based on subscription demands.

It could also offer Apple the ability to provide dedicated customized apps and services just for XaaS subscribers that are exclusive just to them. This could entice even more to join any Apple hardware, software, and services subscription program in the future.

While Apple has not confirmed this type of subscription program yet, it makes a great deal of sense for them to move in this direction. It would be a win-win model for Apple and many of their customers who want the ability to have annual upgrades that include better overall ties to Apple hardware and services. And it would drive even greater loyalty to Apple well into the future.

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