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Apple's Winning Tablet Insight: Consumers Are Corporate Gatekeepers

Verizon (VZ) will reportedly sell the Motorola Mobility (MMI) Xoom tablet for a presumably unsubsidized $799. The closest competing Apple (AAPL) iPad is $729. And yet, Best Buy (BBY) will reputedly sell the Xoom for $700.

Dueling prices. It doesn't matter which is correct, because the potential spread shows a nervous dynamic in the tablet world. Vendors want the old world of selling high margin products to IT departments, but those days are dwindling. Not only are the corporate purse strings tight, but business users with a consumer mindset are quickly becoming the gatekeepers of what companies will use.

Traditionally, hardware vendors have had two categories of product: cheaper goods for the consumer masses and more expensive, higher margin ones for corporate clients with less price sensitivity and more exacting needs. To date, a number of tablet vendors have priced their products higher than Apple.

Setting a high price is certainly a viable strategy. Samsung, for example, sold a million units of its Galaxy Tab in two months. But unless it changes its strategy, Apple will ultimately win, as it understands one thing that its rivals don't. The nature of corporate IT decision making is different than in the past. Hook the consumers, and they will bring products into work and ultimately force IT departments to support them.

While many companies see that dynamic, they don't grasp what Apple does: the consumer has become the decision maker. Not for servers and network equipment, obviously, but but client devices, absolutely. The bring-your-computer-to-work concept is IT's fearful reaction to the shift in power.

Apple has begun to do a marvelous job of turning consumer desires into corporate support:

Yes, there are limitations on what iPads can do, but they do enough of the right things to attract many consumers. If enough buyers who happen to work at a given company push for support of a device, eventually the IT department will have to give in.

Never before did Apple have a computing product with a low enough price tag to create a practical point of entry for so many. Combined with the company's understanding of simplicity and style, the iPhone expanded its foothold in corporations for the first time in many years. The iPad has continued the process.

And that's why the attempt to create the "corporate" tablet is a losing strategy. The more Apple's competitors try to appeal directly to IT departments and managers, the farther they fall behind, because they're not talking to the right people. Setting a higher price and offering "better" features may be a traditional tactic to entice corporate buyers, but Apple already has the long-established reputation of selling premium-priced products. Trying to sell for even more only makes a company look either greedy or silly.


Image: morgueFile user earl53.