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How Apple's iCloud Could Change Everything -- Again

Barring a major surprise, the big announcement during the Steve Jobs keynote at Apple's (AAPL) Worldwide Developers Conference (WWDC) will be iCloud, the company's new cloud-based service. The rumors and some common sense suggest that iCloud will be vital to Apple, its users and the industry as a whole.

Not only would the new service replace iTunes, according to Apple watcher John Gruber. Patent applications made public earlier this year suggest that the new service could store most everything Apple users do or access in the cloud, creating a compelling new reason to use iPhones, iPads, and Macs.

In other words, iCloud could be an all-encompassing system that would tie consumers to Apple even more thoroughly than they are now. Customers would buy and rent media; store what they own; synchronize contacts, emails, and media; back up everything; and keep a complete application and data history -- all under Apple's auspices.

Such a move would show how Jobs and his management team have once again out-maneuvered such competitors as Google (GOOG) and Amazon (AMZN). That's because Apple knows how to develop ideas over time, negotiate effectively with vendors, and take an encompassing systems approach to its business.

One massive cloud
Gruber writes that he has heard "fourth-hand" that iCloud is the new iTunes:

Syncing data between devices tends to work best when there's a canonical store. I.e. with Dropbox, you might have three, four, five devices syncing data on the same account. The canonical central store, however, is Dropbox's cloud-based server. With iPhones, iPods, and iPads, the central store for almost all data stored on the devices is iTunes running on your Mac or PC.With iCloud, that should shift to the cloud. iTunes, the desktop app, currently syncs the following things with iOS devices: audio, movies and TV shows, iBooks e-books, App Store apps, contacts, calendars, bookmarks, notes, and any sort of files shared between iOS apps. All of these things would be better served syncing over-the-air via the so-called cloud.
Fourth-hand leaves a lot of room for error. However, given Apple's inclinations, it makes sense, and there's evidence:
  • Apple built that massive data center in North Carolina. This indicates a need to process and store a lot of data.
  • Apple is announcing iCloud at the same time as iOS 5 and Mac OS Lion. Given that a cloud service would need to tie into operating systems for a seamless and uncomplicated user experience, a must at the company, some kind of cross-device and cross-platform integration makes sense.
  • If people go to the cloud to store media and applications, why not integrate your e-commerce storefronts?
  • Patent applications show Apple's interest in an online backup service that could selectively restore media, data, and applications and also add version control that would let users restore previous versions and states of devices, applications, and media.
  • This is a time of year that Apple generally rolls out something big. As a new iPhone doesn't seem to be in the cards, it would likely be something else as compelling.
All this points to plans for a comprehensive re-imagination of the relationships among computers, mobile devices, data, applications, media, and consumers. Apple could literally move people to cloud computing single-handed. Not that there aren't drawbacks. The more that gets stored in the cloud, the less need there is for storage on individual devices, which could reduce demand for the more expensive versions of iPhones and iPads, reducing Apple's average selling prices and margins. However, additional sales and a rumored $25 a year charge might make up for any loss.

Apple thinks and does bigger
Even if Apple doesn't take such a giant step, the signs are that, over time, it will move in that direction. The approach would achieve several long-standing goals, including tying customers even more closely to the company, reducing complexity for consumers, and creating a more-encompassing walled garden.

Compared to this vision, Google's and Amazon's recently-announced online offerings are nothing more than a place to dump files. There are several reasons that Apple would create a concept beyond what its competitors would offer:

  • Apple doesn't rush a product to market. It took years to bring out the iPhone as it honed the concepts. What Apple loses in early market adoption by taking more time, it makes up for by delivering something that grabs the attention of consumers.
  • Apple is smart about negotiating with vendors. Although it can be heavy-handed, from what a number of its vendors have told me over the years, Jobs also knows when he has to develop relationships and prove that his view is the smart one. For example, originally Jobs talked the labels into cooperating with Apple on iTunes by limiting sales only to Mac owners, as they were a small part of the market. One week in, consumers had purchased a million songs. Six months later, the labels let iTunes work on Windows machines as well.
  • Apple has developed its consumer approach away from single products and toward highly integrated systems that involve hardware, software, content, and services. In comparison, Amazon and Google are fractured in their product concepts and sales.
Apple's strategy and method are more effective. It helps management, engineers, and designers to think in ways that other companies can't duplicate. And, in this case, it could help Apple pull away from Google on the mobile front, Amazon in virtually all media, and Microsoft (MSFT) on the operating system front.