Platforms are an especially powerful deterrent to customer churn
The holy grail of most businesses is recurring revenue. Comparatively low touch sales, in the form of software renewals, provide a soothing balm to the wounds a business incurs winning a beachhead with a big customer.
The computer hardware and software businesses exhibit this same characteristic. Hardware device obsolescence is an important life cycle event for publicly traded computer hardware manufacturers (most prominently Apple) and, whether the tactic appears to be releasing a new resource (battery) hogging O/S, or wowing the market with “innovation” (beauty in the eye of the beholder on this one), the objective is the same: get them (the customers) back in the virtual or physical store to buy a new one.
Software may have an easier go at hopping over the recurring revenue hurdle than hardware. Since the primary resource required to produce software is coding, producing solutions is a less complex experience (than building smartphones, PCs, or tablets) with far fewer components. So updating software for an annual or bi-annual release is a frequently used tactic to deliver yet another round of buying on the part of customers. In 2019 sellers of cloud computing are plentiful. All use annual subscription renewals as a method of achieving the same goal.
Computing platforms (pure software or, better yet, a combination of proprietary hardware and matching proprietary software) can be used, with great success, to keep customers in your corral, regardless of the perceived value of offers from a competitor to make a switch. Switching is far from easy. It may take years for consumers to recoup the cash they need to lay out to make the change.
Case in point: Alphabet has recently spent promotional dollars on promoting Google Fi. The advertised monthly cost for a single mobile service line & 2 GBs per month of data, $40.00, is substantially lower than comparable offers from even lower cost providers like T-Mobile. Google Fi also claims to offer relief from the hardware walled garden cellular telephone and data service providers all use, namely, custom configured mobile computing devices (think smartphones and tablets at the consumer level) specific to a provider. Sounds great, right?
Well yes and no. Google Fi works great with Android hardware, but iOS hardware is only in Beta. So what is an iPhone user to do? Roll the dice on the subscription working? How long will the port for iOS devices remain in Beta (no answer provided to this question on the offer website)? If Hulu Live is an example, Beta can translate, literally, into several years of wait time prior to release to production. Who wants to put up with iffy Beta service? Worse yet, who is willing to pay for it while the bugs are worked out?
But an even more formidable obstacle in front of Google Fi as it sprints to capture iOS users is Apple computing as a platform. Computing professionals have known about the Apple platform effect for quite a while. The trap works like this: buy an iPad – no worries. Tack an iPhone onto the iPad & you’re starting to stray off the nice, low cost path of progress. Tack an Apple Watch and Apple TV onto your smart lifestyle and you’ve sunk in mud you won’t be able to get out of. It may be tough, but acceptable, to chuck an iPhone for a Google Pixel 3a, but my Apple Watch, hmmm – not willing to go there. Gotcha
Without Google Fi delivering same QOS (quality of service) to iOS as it manages to deliver to Android devices, Alphabet’s hope of making this “other bet” into a money maker is severely limited. Despite the promise of enormous savings for subscribers, Apple watch fans (especially those with LTE connectivity to the watch) aren’t going to budge. Chalk one up for Apple and its telephony partners. Nice try Alphabet. Hope you manage to deliver calling over wifi to iOS Google fi subscribers. Let me know if you do.