Firm Seeks Business With World’s Biggest PC Customer : Once-Aloof Apple Computer Woos Uncle Sam

For years, idealistic and California-cool Apple Computer treated the federal marketplace “like it was another country,” and a hostile one at that, in the words of one distributor.

“There were people in the company who did not want Apple products sold to the government for philosophical reasons,” recalls John Snook, marketing manager for Falcon Microsystems, a Landover, Md.-based Apple computer distributor. “They said they didn’t like the concept of Apple Computers being used to kill people.”

Today, the federal government has grown into the biggest personal computer customer in the world, expecting to purchase 500,000 more systems by the decade’s end.

The IBM Personal Computer has become the bureaucracy’s de facto standard--and Apple is now desperate to establish itself as a player in a multibillion-dollar market it previously ignored.

“In retrospect, we may have made a big mistake,” concedes Bill Campbell, Apple’s marketing vice president.

Indeed, the numbers are enough to frighten an Apple to its core.

The company that pioneered the personal computer has a federal market share of barely 2%, according to several surveys, and most observers doubt that Apple has a real chance to do much better.

“They’re good people, excellent people,” says Avner Parnes, chairman of MBI Business Systems, the Washington area’s top government computer retailer. “But I think they missed the opportunity to be a strong player in the government.”

Not so, insists Ron Okliewicz, Apple’s new federal operations manager: “It’s never too late; there’s no such thing, in my estimation, as a closed window of opportunity in the federal government.”

The government market is important for more than just its size. Many government agencies--some inside the national-security community, some not--often are quick to explore leading-edge technologies and serve as test beds for innovation. The government was the first customer for the electronic digital computer.

More importantly, the federal marketplace is a powerful standard-setter. When the government settles on a technical standard, leading government contractors usually adopt it.

Moreover, success in federal marketing is a signal to private industry that a company is serious about serving large organizations’ needs.

After years of relative apathy and indecision, Apple opened its new federal operation in Vienna, Va., in September and plans to open an executive briefing center in Reston, Va., in October.

Apple’s top management says it is now committed to viewing the federal government as a “strategic market,” and a potentially lucrative one.

“The future is bright; there’s a lot of interest in Apple,” says Okliewicz. Okliewicz’s optimism bubbles in to his company’s market forecasts.

According to Snook at Falcon Microsystems, which has been distributing Apple to the government for four years, Apple thinks it can take its market share “from 2% to 10% within three years.”

“I don’t know where they’re going to do that,” said Robert Dornan, vice president of Federal Sources Inc., a local market-research consulting firm. “I have absolutely no confidence in that happening.”

“Wishful thinking,” says MBI’s Parnes.

“Not wishful thinking, aggressive thinking,” counters Snook. But he acknowledges that the odds aren’t with Apple at this time.

Apple’s problems in Washington are, in many respects, a macrocosm of its problems in marketing to other large organizations. Despite the fact that the Cupertino, Calif., company has created technically excellent products--most notably its Macintosh line of personal computers--Apple has painfully discovered that technology is not enough.

Key Ingredients

That’s particularly disappointing for Apple, because its Macintosh computers and laser printers are ideal for “desktop publishing”--one of the hottest areas in personal computing.

Essentially, desktop publishing uses a combination of software, computer and quality printer to fashion manuals, reports and other documents. Federal desktop publishing offers potential for a new generation of red tape.

“The largest publisher in America is the federal government,” says Campbell, “and we have to service it.”

But because Apple so studiously avoided the federal market for so many years, the company has been unable to translate its technical expertise into market share.

Instead, the IBM Personal Computer standard dominates the government’s acquisitions process. The government doesn’t just buy personal computers; it procures them according to certain specifications. To date, the IBM standard is the federal standard.

Many IBM-clone companies--notably Zenith Data Systems and Compaq Computer--have done extraordinarily well in the government market by scrupulously adhering to standards and pouring significant resources into creating a presence on the federal scene.

Apple is paying the price for being a Johnny-come-lately.

“Almost every large procurement that has happened in the last year has specified MS-DOS (the IBM operating system) for microcomputers,” says Falcon’s Snook. “There’s no question that we haven’t been able to bid Apple products on the large procurements.”

In effect, the MS-DOS standard has become the technical barrier of entry for Apple in the federal marketplace.

The irony of that is MS-DOS standard is not directly related to the quality of a specific computer application--such as desktop publishing or word processing. Instead, it is a “compatibility” standard: A program that can run on one MS-DOS computer can run on another.

“There may have been a time when (Apple’s) clear superiority in desktop publishing might have overcome MS-DOS,” says Dornan of Federal Sources. “But that time is gone.”

Apple argues that MS-DOS shouldn’t be the standard that it has become.

“We’re going to have to find Apple champions in government,” says Campbell. “We’re going to have to mitigate the MS-DOS standard. We have to convince government computer people that the MS-DOS standard is an artificial barrier to applications excellence.”

Call for Change

“Unquestionably, the specifications need to be changed,” says Snook. “The government is not an irrational beast. We definitely need to have some large procurements without an artificial MS-DOS standard.”

While welcoming Apple’s new aggressiveness in the federal market, General Services Administration’s Frances McDonough, who oversees microcomputer procurement policy, warns that Apple should be more concerned with joining them than beating them.

If Apple can prove doubters wrong, the company will have successfully tapped into the world’s biggest customer. If its doubters are right, however, Apple Computer will have made one of the most costly mistakes in its history.