Apple to Consolidate Service Teams to Bolster Revenue: Report

By Michelle Maisto  |  Posted 2016-10-08 Print this article Print
Apple plans, cloud services

As Apple's revenue-generating Services act as a counter-balance to its falling iPhone sales, it plans to bring together its Service teams at Infinite Loop, says a report.

Apple seems to have decided to run a tighter ship—or at least to get everyone in the same boat.

Apple plans to physically bring together members of its cloud services teams, which are run by Eddy Cue and include Siri, Maps, iCloud, Apple Pay, Apple News and parts of iTunes and Apple Music, Bloomberg reported Oct. 6.

Additionally, it's moving its infrastructure onto a single, Apple-made system, said the report, citing people familiar with but (and who aren't supposed to be talking about) the matter. The Next Web reported in April that Apple was working on its own cloud infrastructure, code-named McQueen, to "wean itself from Amazon Web Services and Microsoft Azure."

The new single platform, code-named Pie, will "give Apple more control and may speed up load times," said the Bloomberg report.

On an Infinite Loop

In 2011, Apple introduced plans for a new headquarters. A few minutes down the road from its headquarters at Infinite Loop in Cupertino, Calif., the building's spaceship-like design drew global attention. "The spaceship," as it's known, has minimal offices and mostly open floor plans, and can accommodate 14,000 people.

While most employees will begin moving in next year, Cue believes circling his troops at the Infinite Loop campus will help improve the organization, according to the report, which added that the teams' current structure has contributed to "software bugs and slow product development."

"Obviously, when you have teams of thousands of people, you can't have them literally all sitting in the same room, but this is the next best thing," Jan Dawson, chief analyst with Jackdaw Research, told eWEEK.

"Apple's lack of space in Cupertino has led to teams being distributed across a whole host of buildings around the area," Dawson continued, "and that's not really conducive to the kind of casual sharing that's often critical to people working together effectively."

And Apple needs to keep its people effective, as it faces falling iPhone sales.

On July 26, Apple reported that its third-quarter revenue and net income fell for a second consecutive quarter, down 15 percent from a year earlier. While iPhone sales dropped 15 percent, the Services division was a bright spot, up 19 percent year-over-year.

Ezra Gottheil, a principal analyst with Technology Business Research, calls the team consolidation a "good and important move."

"Services is an important part of Apple's long-term evolution. iPhone sales are likely to continue to decrease, at least for a while, not because fewer people are buying them, but because people are keeping them longer. Services, on the other hand, is an annuity business," Gottheil said. "Once a user has subscribed, in most cases the revenue will continue for a very long time. This means that Apple has an increasing revenue stream that it can count on, instead of having to drive individual buying decisions for almost every dollar of revenue."

Dawson agreed, calling Services "one of the three legs on Apple's hardware-software-services stool."

"But it's all the more important in the context of an increasingly saturated market," he added, "and Apple's efforts to have financial analysts see Apple as a company with predictable revenue streams beyond hardware." 

Apple will announce the results of its fiscal fourth quarter on Oct. 25.



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