In this edition of the CommonTime podcast, regulars Matt Bracewell and Andy Brinkworth are joined by UI/UX expert Dean Bates. Over the course of 20 minutes, the team discuss the rising cost of smartphone devices and whether businesses can justify the additional investment that is demanded.
Spurred by the launch of the iPhone X, this discussion weighs up the pros and cons of modern devices, their capabilities and the effect of different policies on ROI.
Why Are Smartphones So Expensive?
Nikolay: Hello everybody and welcome back to another CommonTime podcast, today were joined by Dean, Andy and Matt and we’ll be discussing quite a hot topic; should businesses be expected to pay a thousand pound for a smartphone? What do you think Andy? Should businesses be expected to do that or not?
Andy: So, my opinion is businesses shouldn’t be expected to pay a thousand pound for a smartphone, however I am fairly certainly that I will be wanting to spend a thousand pound on a smartphone. Obviously, the reason this is a hot topic is the recent release, or the discussion of the recent release of the iPhone 10 and of course the iPhone 8 which is due out on Friday this week. The prices of those devices are set, so do people have to be based around an iOS device?
Absolutely not, there is choice out there although that choice is reducing with every other person who comes out of that market. The demise of Window phone, finally, and also Blackberry and its decision to exit the market there, so businesses being expected to pay a thousand pound for a smartphone? No, not at all, there is choice, there are lots of options that are available. However, are the devices worth a thousand pound? That’s probably a much hotter topic! In my opinion, I would say, yes they are to the people who want to be able to use them.
Matt: There is another way which they could be worth a thousand pound. I’d love to see if it’s worth a thousand pound, it being worth a thousand pound because we’ve paid somebody a reasonable price for their labour and we haven’t polluted their environment and dumped all over their lifestyle in order for us to wander round with lovely shiny things in our hands. I think that could be justified on that basis, I doubt very much whether that’s the case.
You can’t contain your smirk can you? You said earlier off camera that their worth a thousand pound potentially because of their high resale value, so it comes down to the things beings worth what someone’s prepared to pay. As you previously said, you know that there are sufficient people willing to have the next best shiny thing.
Andy: Absolutely, and I have to claim to be one of those people.
Matt: It might be an interesting exercise to wonder at what price point you would delay that decision, because it would only be a delay for you wouldn’t it?
Andy: Yes it would, it would be lets set that back a little bit further. So, let’s just change that ever so slightly though, I’d like to come back completely to it, which is the original iPhone was sold between $399 and $599, which if you go back 10 years is still a considerable chunk of cash for a phone. There were similar devices being pushed out by Motorola at around the $350 mark, however what the iPhone did was a lot more than that. What people are forgetting is that the expectation now is that whatever device it is, it’s going to do so much more.
|"Often forgotten is the fact that smartphones today are capable of much more than their predecessors."|
Now the iPhone itself, if you were to go back over the last, and I’m going to take 8 as being the most current model, the last 3 models are probably still very valid devices, so still give plenty of choices for businesses in terms of adopting an iOS strategy. It’s always nice to have the very latest but actually the difference between the iPhone 7 and the iPhone 8, or even the 6s and the iPhone 8, is not substantial enough to maybe warrant having to go to the latest device. However, what you do see is that with every iPhone released, the resale value obviously decreases of the previous model. The depreciation against an iPhone specifically, is a lot less than maybe an Android device that as soon as you’ve taken the cover off it has suddenly dropped $100 in value, as soon as you’ve owned it for six months its dropped another $50 in value, because they don’t depreciate as well as an iOS device.
Matt: I think I prefer the economics of the Android model; it’s like buying a new car isnt it? Up front, you’re buying into the future resale value of the car should nothing happen to it while it’s in your hands. When you go and spend your 30-odd-K on a car, you’re paying for the depreciation up front.
On an Android phone you’re buying the thing at potentially the value, the cost of the value it represents to you right there, right now. Its £300, you’re going to get £300 worth of use it in the first instance and thereafter its free. So what’s the current price of an old gen, of the next, not the next most reasonable Apple, buy say the 7?
Andy: So, look at a comparable iPhone 7, so an iPhone 7 128G is £699. For that same price you could get the, assuming that you’re on the list, an iPhone 8 at 64G.
Matt: And a Samsung Galaxy?
Andy: Something that’s going to burn you, yeah?
Matt: I don’t believe they all burn you.
Andy: Yeah, you could probably get a very reasonably spec’d Samsung model for probably a couple of hundred pounds less.
Can the Cost be Justified?
Dean: Well that’s always been the case hasn’t it, if you look at iPhones in general over the last few years, the top end model has always been roughly a similar sort of price point; whether it’s the iPhone 5, the 6, the 7 or the 8. Its only really the iPhone X that’s kind of jumped up by a couple of hundred dollars. And you’re actually, the couple of hundred dollars that you’re paying is probably expected because of the level of technology increase that you’re getting with that device. Ultimately, you’re buying a premium, brand device and you’re buying the flagship model of that premium brand device.
Matt: Does premium mean that there is an expectation that as soon as you’ve bought it you need to carry on paying Apple to use it in the way that you want to use it? With all the adapters to get around all the holes being filled in? Is that now the new definition of premium?
Dean: It probably is!
Matt: I’ve got a product here in my pocket that every month I know I’m going to need to subsidise in order for its utility to continue.
Dean: But then that’s the same with any premium product isn’t it? If you buy a Rolex watch you’re expected to pay £400 a year to have it serviced, if you buy a premium BMW car it’s going to cost you six or seven hundred pounds every year when you take it in for a service.
Matt: I agree, yeah absolutely. So the difference, and the key difference here and it’s a massive difference, is that in opting to go with an iPhone you are choosing to enter a, well it’s not a monopolistic position but, within that OS you’re buying into a Monopoly. If you choose Android you’re choosing an ecosystem. If you choose iPhone you are jumping into bed with Apple and discarding everything, all your clothes and there’s no jumping back out again is there?
Dean: Well, it’s probably not dissimilar to Android because ultimately you’re jumping into bed with Google. So you’re either jumping into bed with Google or Apple.
Matt: OK, yeah – but the thing that makes the iPhone awesome, as far as I understand, is that you can absolutely guarantee that the software has been developed to work with the hardware and vice-versa. With Android that’s a completely different environment, anybody can make the hardware and apply the software to it, so it’s completely different in that way.
Andy: I think what is very clear is when people move to iOS from Android, they rarely return. Now what does that say? I don’t think that’s everybody going; I’m going to take a premium product, I want the status that goes with it. So, is that actually down to ease of use, is it down to the fact that Android can be a little bit fiddly in some cases?
I know Android have upped their game, but I remember the point with my wife that actually she couldn’t get on with her Android phone, she wanted to go back to a Blackberry and so I had to give her an iPhone and then she suddenly realised that things could be OK with a touch screen. That to me was a revelation moment, she’s got a degree in Computer Science so she understands how stuff works, but she couldn’t get on with an Android, yet with an iPhone it just worked, and it worked out of the box.
In the same way that if I was recommending a device to give to my mother-in-law or my 82-year old father in law it would absolutely be an iOS device be because they are very easy to use, very intuitive, so you’re paying I suppose for the work that’s gone in to making sure that happens.
Dean: I think as well, because we call it a ‘phone’ we almost put a perceived value on that in that; oh well it’s a phone, so actually it shouldn’t really cost a lot of money. But when you think about what you’re getting for your money, if someone was to say to you; you can have one of the most powerful computers, personal computers, in the world where you can watch 4k videos, you can take 4k video content you can edit 4k video content in real time.
|"Value is perceived - the power of a smartphone is greater than many comparative devices combined."|
Andy: Its secured with a biometric scanner.
Dean: Yeah, it comes with a biometric scanner, its waterproof, you can use it professionally so you can take photos with it, take videos with it, mix audio with it, you can play the latest cutting edge games on it, and it fits in your pockets, and it costs $800. Its more than a phone, its taking what you would have traditionally have probably paid £2000 for in a desktop or a laptop, condensing it, and putting it in your pocket for £800. And it’s a premium product!
Matt: It’s a compelling argument for how to define or justify the cost of an iPhone. If we throw it back in, the question is; is it justifiable for a business?
Dean: Well for any smartphone, that goes for any smartphone, if you look at any top end Samsung smartphone or a Google Pixel your probably all around a similar sort of price point give or take possibly a £100 or so between them. So, it’s not necessarily you paying a massive premium because it’s an Apple product, the general price for like-for-like hardware is fairly similar. In the past we had the same argument with desktop computers and laptops. People say; Oh well an Apple laptop is always two grand more than a Windows laptop. Whereas in reality when you actually compare like-for-like in terms of build quality, reliability, resale value after you’ve had it for 5 years, there’s actually not a massive difference between them.
You take a PC and put it on eBay after 5 years of professional use you’ll get next to nothing for it. You put a Mac book Pro on eBay that’s had 5 years of professional use and you’ll probably still get a few hundred quid for it, and that’s probably the price difference ultimately between the two if you were comparing them like-for-like. So I think we have to compare like-for-like when we’re talking about these price points and ultimately it’s; what are you getting for that money?
Andy: I think that’s the interesting part there, couldn’t justify paying that much? In reality a lot of small and medium enterprises probably can’t justify paying that much. They can still get similar performance and a great product paying a couple of hundred pounds less and going for not this years model, and that’s the benefit of going for a previous model, where they’ll still be able to get the benefits of the type of device, but paying a thousand pounds per person? If I were to put that against our business, could we justify paying somewhere between 45 and 55 thousand pounds just to give people the latest iPhone? Absolutely not. It’s a cost that we wouldn’t want to necessarily carry, especially seeing as what we’ve already decided is; we want to upgrade year-on-year so that couldn’t be something we want to do every single year.
But actually giving people iOS devices, it’s a great operating system and really shows to employees that they’re getting a decent device. I know there are people who maybe don’t like iOS or iPhones or don’t like Apple and they would much rather have something different, but actually it is a quality product and there is an ecosystem that goes with it, not just within iOS but also when we use our day-to-day devices.
The Mobilisation Question
Matt: Bringing it back to what we do and why we’re asking the question, if an organisation has decided they are going to mobilise their business in some respect and deploy devices to their users in order to facilitate that, are they going to be looking at Apple? In my experience, almost all of the projects I’ve worked on have deployed Android devices and I assume that is because the business has not been able to justify going to an Apple device.
Dean: I think that’s a fair point, because ultimately as a business unless a device has a clear business benefit to you; so if for example is bringing some capability to your business that a cheaper device can’t bring and you need that functionality in order to form your business activities then you can justify that higher cost. But ultimately, the needs of most businesses are probably fairly basic really in terms of what it needs to be able to do with a mobile phone. So, you can’t really justify spending a huge amount of money on a device, certainly in businesses where perhaps there’s a good chance that phone is going to get dropped, damaged, lost, stolen, banged up – it might only last 6 months or a year. Which often in a lot of businesses is probably the case because the devices are provided, people don’t really care about the devices because they don’t necessarily, well it’s not theirs, they’ve not had to buy it.
Andy: Apple don’t subsidise the big network providers either, I think that’s another reason why it’s very difficult, you don’t get a subsidy. Whereas someone like Samsung or possibly HTC or LG will actually subsidise the provision of those devices into an organisation. If you were to take an organisation like Carillion where there are 40,000 users of which there could be 25,000 smartphone users, 25,000 times a thousand pounds each becomes very difficult, without adding just the device but also the calls, the connectivity and everything else that goes with it.
We talk about this as a thing as a stand-alone but actually, the iPhone itself is useless without a SIM card, unless your connected to WiFi. By the time you add all those other items, a subsidised handset actually makes more sense for a business. So, again; can they justify it when they can get the same features from something that’s been subsidised that’s going to cost them less as an up-front payment, then it becomes very hard to justify. However, there are probably some things that would be beneficial if they were to go down the iOS route, but actually if its priced out of the market and those benefits don’t add up then a business won’t make that decision.
Dean: You mentioned something quite interesting there Andy in that when you look at the scale of devices that businesses might purchase, so if you’re in a small business where you might only be looking a half dozen or handful of devices, then spending a thousand pounds per device, you could possibly get away with doing that. Whereas when you scale that up to 25,000 devices, and typically big businesses probably write those off after 18 months or 2 years and replenish the whole stock – if you can save fifty pounds or a hundred pounds per device then you’re looking at a lot of money.
|"Economies of scale mean that small unit price differences can lead to large scale savings."|
Nikolay: But how can businesses ensure they make the most out of their investment? If they have to spend, if you have say a handful of people and you’re going to spend a thousand pounds, can’t you spend, obviously this is a bigger question for bigger corporations really not for small businesses, but small businesses you go into the area of not having the capital to spend so much money.
Dean: I think it comes back to need, if you buy what you need, because ultimately it’s a tool just like a computer is, just like any other kind of tool is that you use within a business. If there’s a need to have to buy a thousand pound device because it’s going to give you something that an £800 device or a £500 device doesn’t give you, then as a business, if you’re making money from that, then actually it’s really not a lot of money in the grand scheme of things. It’s the fact that, if there isn’t a need for it and you’re buying it just because it’s the next fashion, then as a business you’re wasting your money really.
Matt: I think it doesn’t make a thousand pounds of sense.
Andy: I would have to agree, if you’re looking at a large enterprise, if you, we’ve talked basically about a phone being used for email, for browsing, for – old fashioned I know, but using it as a phone as well, but it isn’t just limited to that. The apps that we do for people are bespoke applications that people need on a device to facilitate their day to day work, and if you can not spend the difference on an iOS device, spend it on development and have something that is bespoke for you that works for 100% of your requirements, then you immediately start to get some real benefit for the saving that you’d make from using Android devices. I just know that I personally wouldn’t go back.
Dean: I think one other thing worth mentioning is the fact that, the fact that we have a thousand pound device in a way is a good because what that means is that its lowered the price point of all the other devices. So now for example, if you were to look at the range of Apple devices, probably for the first time ever you’ve been able to get an Apple device across a broad range of price-points. I’m not sure what the lowest price of an iPhone SE is, but it’s certainly not a thousand pounds. So that’s a great thing from a consumer’s point of view, from a businesses point of view, because year-on-year the price of entry into iOS, Androids the same, has been coming down. If you look at the stats for the last 10 years smartphone prices have actually come down year-on-year.
Matt: Economically speaking I’m not sure that you can argue that Apple putting up the price of their flagship product, pushes the prices of their other products down. I think that the fact that were seeing the prices of devices coming down is part of whatever electronics law.
Dean: I think it does though, because they’re not removing their old devices from the store so because they’re keeping those older devices with older technology which has already been paid for I n terms of R&D, you’ re getting entry into that ecosystem at a much lower price.
Andy: It becomes a gateway phone.
Dean: People buy into it and upgrade eventually.
Matt: I think it’s fun having this discussion because ultimately we can all sit back knowing that we can leave the decision to our customers safe in the knowledge that we sit astride a fantastic cross-platform app building solution, so bring it on whether its iOS or Android.
Nikolay: At the end of the day, I think it’s, from a personal point of view obviously and individual consumers, as Andy was kind of saying, that he personally would justify let’s say spending a thousand pounds to get the latest iPhone but some people wouldn’t. But, in terms of businesses we’ve all king of agreed that it’s not really worth it because at the end of the day you really want a device that you’re going to give your employees to do what you need it to do – nothing more. Obviously it will do the other stuff, but you’re not concerned with that.
I’m also trying to kind of bring it back a little bit because I think we’ve talked for quite long enough and it was an interesting chat, we’ve touched upon the dark and light side of iOS and Android with Matt and Android squaring off a little bit.
Its been quite a good conversation I guess, thank you very much guys, I think we’ll be closing off this time, thank you everybody for joining us.
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