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Apple and IBM CEOs See Companies as "Puzzle Pieces" That Fit Well

Rivals decades ago, they don't compete anymore and have now resolved to conquer the mobile enterprise together.

As you’ve read by now, Apple and IBM have announced a significant partnership to jointly attack the enterprise market with the iPhone, iPad and specialized mobile apps for business.

Earlier today Re/code sat down with Apple CEO Tim Cook and IBM CEO Ginni Rometty to talk about the details of their plans.

The initiative brings together two historic rivals from the earliest days of the personal computer, who now compete virtually nowhere in the tech economy that has developed in the last decade. IBM divested itself of its PC division in 2004, and doesn’t sell anything to consumers directly. Meanwhile Apple has no meaningful presence in the enterprise software market, but sells a lot of computers, phones and tablets to businesses.

The deal is the result of several conversations between Cook and Rometty over the last few months. “If you were building a puzzle, they would fit nicely together as puzzle pieces with no overlap,” Cook said of the two companies. “When you put our teams in the room together, we both have engineering cultures, so they feed off of one another. And when you do that you end up with something better than either of you could produce yourself.”

Rometty described it as a combination of two companies that are leaders in their respective markets. “We both think of each other as the gold standard. … We really do get to remake professions and unlock value that companies don’t yet have. … We have a complementary set of assets that go into the deployment. We have the big data, the analytics capabilities, the integration work, the cloud. But they have the device, the development environment, the usability. So that’s why we work so well together.”

Together they’ve decided to address some troublesome issues that corporations have until now been wrestling with on their own using a patchwork of products, services and internally developed software. While there’s the business of simply helping companies deploy and manage wireless devices in the workplace, there’s a far larger challenge making them useful beyond the typical examples of email and calendars and incorporating meaningful company data that’s specific to lines of business and industries.

IBM has MobileFirst, an initiative to convert its industry-specific apps to mobile devices, and is now extending that with MobileFirst for iOS. While it will still be supporting other devices like Android, it will be selling iPhones and iPads directly to its customer base.

The larger issue, Rometty said, is to try to break the logjams that companies face when trying to deploy mobile devices. She called them “inhibitors.”

“We want to address everything that’s inhibiting them,” she said. “When you look at the surveys of companies and how they think about mobility, 60 percent of them are doing calendars and email and the like. But they’re not remaking professions and industries with mobility. We can do a whole lot more with this. … I think a lot more companies would like to make more progress with mobility, and they’re frustrated.”

As far as the division of labor, IBM will be doing most of the heavy lifting. Its sales force and consultants will be pushing iOS devices to its thousands of corporate customers around the world. When enterprise data is involved, it will be running on IBM servers or private clouds it has set up for its customers. While Apple will be creating an enterprise version of its AppleCare program to support the devices, it will be IBM personnel doing on-site support and service with its customers.

Were Apple to try to attack the enterprise market on its own, it would almost have to create a new division. Working with IBM removes the need for that. “We get a kick out of transforming things and reinventing things,” Cook said. “We’ve transformed the consumer experience. I’d love to be a part of transforming the enterprise experience. We can’t do that alone. You need a lot of deep industry expertise that’s not in our DNA, but is in IBM’s DNA.”

Even so, Apple has quietly built its presence in the workplace through the sheer consumer popularity of its devices, whether blessed by corporate IT departments or not. Cook says that its share of the commercial smartphone device market in the U.S. is more than 80 percent, and more than 70 percent for the iPad. “We feel great about the market share, but market share without penetration that’s high doesn’t get the business to the size that it could be.” By that he means that companies haven’t yet adopted mobile devices as widely as they could, and if they do, that would mean a lot more growth in device sales, he said.

For IBM, the partnership creates another opportunity to push its software and services around big data and analytics, the notion that there are money-saving or money-making insights that can be gleaned from sifting through huge troves of corporate data to detect previously unseen patterns. Rometty said that analytics alone is a $16 billion business for IBM.

The deal will also create new opportunities for IBM’s SoftLayer cloud services business, which it acquired last year for about $2 billion. IBM finished last year with $4.4 billion in combined revenue for cloud services and applications, and it has even argued that by that metric, it’s the biggest cloud company in the world, though that’s debatable.

But IBM isn’t the only enterprise game in town. In tying up with Big Blue, Apple may have limited its ability to craft partnerships with other companies addressing different areas. As Pat Moorhead, head of the research firm Moor Insights and Strategy, put it: “Apple now has a focused enterprise partner.” But, he cautioned, “Given IBM’s limited reach, Apple needs to make sure it doesn’t have all its eggs in one basket. It will still need to address channels that Hewlett-Packard, Dell and Lenovo own.”

Correction: A quote attributed to Cook above incorrectly said Apple has an 80 percent share of smartphones in the consumer market in the U.S. He said commercial, referring specifically to the enterprise. Sorry about that.

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