Apple's upcoming challenge

Up to now, Apple's business has been simple: sell hardware. Software such as macOS, GarageBand, and even iTunes was made to sell hardware.

Up to now. Or some time in the recent past.

Apple now has two major lines of business: hardware and services. At some point, conflicts between the two will arise. How will Apple navigate those conflicts?

Here is how this affects consumers and developers -- and Apple.

In the past, developers were reluctant to build certain types of apps. The fear was that Apple could build their own version of an app and include it in iOS or macOS, and that such an inclusion would reduce sales of the independent app to near zero. (Apple includes lots of apps for its phones and for its laptops. macOS includes a word processor, a spreadsheet, an e-mail client, and sound editing software, among other things.)

But now, with income from the sale of apps (or subscriptions to online apps) Apple faces a choice: Do they build an app or let someone else build it?

If Apple builds the app, their hardware/software offering is more complete, which makes it more appealing to customers. On the other hand, Apple must invest in the app and maintain the app over time.

Suppose Apple doesn't build the app. Odds are high that someone else will build the app, and submit it to Apple for inclusion in the Apple App Store.

And charge for it. Either a one-time charge or a subscription fee. Both of which provide income to Apple.

Notice what has happened. The app, when developed by Apple, is an expense. When developed by a third party, it is revenue. But the differences are more than financial.

Removing the financial aspect, the big difference of the two modes is control. When Apple builds the app it has complete control over the appearance, functionality, performance, and reliability. Apple can ensure that data is stored only on Apple devices or Apple-approved cloud servers. When Apple lets third parties build the app, it cedes some control to those third parties.

I can see two trends in the future.

One is that Apple will cease adding apps to its macOS and iOS operating systems. (It will add utilities that control and configure hardware, like the AirPort utility for AirPort devices. But it will add few games or office tools.)

Another is that Apple will increase (or attempt to increase) its control over apps that run on macOS and iOS. Apple will issue stronger and more detailed guidelines for user interfaces, security, privacy, and reliability. In this case, Apple is trying to have its cake (maintain control) and eat it too (farm out development to third parties and gain revenue).

I think this strategy just might work for Apple. They sell lots of hardware, and third-party developers want access to that market. Apple customers are loyal, replacing their old Apple laptops and phones with new Apple laptops and phones.

There are some risks.

Such a strategy will mean a difficult time for third-party developers, who will have to jump through more and more hoops to get their apps published in Apple's App Store. Some developers may give up on the Apple market, and this is the risk that Apple must manage. If too many developers abandon the Apple ecosystem, then Apple loses apps and income, and could lose customers for hardware.

Another risk is that Apple loses its ability to develop apps. If it relies on third parties to create apps for iPhones and Macbooks, will it shift its internal resources from app development to something else? Will it lose the ability to create regular, non-system apps? If it does, then returning to a strategy in which Apple creates apps (user apps, not just system apps) will require the re-development of that development experience.

But if Apple avoids those problems, they can succeed and reap the rewards.