Thursday, June 17, 2010

Give Apple and AT&T a break

I want to take some stands for AT&T and Apple. I read the last view days a lot of complains, how the website from AT&T is down and Apple can’t deliver enough iphones. Give them a break.
I don’t say it is OK what happened but I want to give us a chance to look at this picture from a bird view.
How many high tech items with over 250 parts (as I heard) got in our history 600,000 times sold on its first day?


We had on Tuesday 10 times more users requesting an upgrading verifying than at its best time when the iPhone 3GS was released. This is 12 Million people hitting the DB, over a Million an hour and up to 4 Million at its peak. This is a lot. The request for upgrade is not just a call to the DB. There is a complex query to define if you are eligible to get an upgrade. It looks on the contract lengths, on your monthly average bill amount and if you belong to a corporation account. All this together goes in a query to the DB millions of times (over 1,000 times a second). This is a lot of data to process and I don’t know who could have handled it. Of course AT&T could have invest upfront a lot of money to be able to process the request, but is this really necessary for something which will last only a few days, and something you might have not be able to foresee?
But I have to admit their query to define upgrade had an error. We have two iphone both bought last year at same time, but I only could upgrade one phone for the low $199 the other was $399. I went to an AT&T store and they told me they will reimburse me. I guess it is rare that a household has on the same plan multiple iphones.
When a new product gets released we all make our homework first. We look on statistics of old releases and multiply with what we expect because of hype. If we do his homework we would still not expect that 12 million users want to see if they can get an update. Maybe 2 million best 3 million. Imagine AT&T has right now 73 Million subscribers, this tells us that almost 20% of all AT&T subscribers would like to buy a new iPhone. Give me a break; I don’t think anybody of us would have thought about this.
Yeah there were issues, which users saw other peoples account or that the credit card reader in stores did not work. But again AT&T has over 10,000 stores in the United States. If each store will access at the same time their billing system, then there is a problem as well. Nobody has thought about this.


People did complain, about the problem to access the pre-order process at Apple. I say of course, because there store access the AT&T DB to get upgrade information, if AT&T is down then Apple might be too. I was able on Wednesday to place my order, but I had to full fill two full check outs because the system did not allow me to do one check out for both phones even I had given for each another phone number. Again, I think they are not used to family plans with multiple iPhones. And Apple did want prevent people to buy unlimited phones for resale. Un fortunately it prevented as well end customers like me to order two phones in one transaction.
Now, please, take the seat of the CEO chair at Apple. Try to be a leader. You find yourself that your team did build a very nice phone and you talk to the analysts how big the factory should be to build the phone and how much items the suppliers for the iphone (like the glass, battery, etc.) should be able to deliver each months. The analysts will tell you that over the last years in average 3 million iphones got sold a month and the peak might be during Christmas time at 6 Million. They might tell you that they anticipate that 30% of the phones will be still build as 3Gs. You as the CEO says let us double the production to 6 Million a month. Let us build the factory to be able to assemble up to 10 Million a month but should be still profitable with only 2 Million a month.
This is what I would have said as CEO, my people would call the suppliers to make sure they start to produce enough parts. And I would tell my factory to be ready to start to assemble as soon the first pre-order comes in (to keep in stock supply small, to keep the costs small). Don’t forget the iphone costs more in parts than it get sold. Keep the costs low as possible.
Now we assume we can produce 9 million 4G iphones a month (rest is reserved for 3GS which totally different assembly line). We had 600,000 pre-orders the first day, who could have thought this?This is the same amount apple can produce on one day and then test and ship out. BTW shipping take at least 3 week if Apple does not want to pay ridicules high priority air shipping. If the speed keep half up, this will be rough 9 Million in the first month, exact what the factory could assemble, but then they need to be shipped and the suppliers must be able to keep up. I think you get the point. Even if we as a CEO plan upfront and try our best to anticipate growth, it would be not possible to imagine that the growth of pre-order is 3 times higher than when the 3Gs got released (3GS was sold 1 Million in the first 3 days). And if AT&T could have kept up with requests and allowed more users to get an upgrade I believe now the pre-order would have gone up to 2 Million. And to be honest nobody, no analyst, no CEO would have ever thought this upfront.
It is like having each year a birthday party with 10 people because you never send an invitation. But the next year you have your 40st birthday. Would you suddenly order food for 100 people only because it is a special event? And risk to throw tons of food away and to have to rent a big place in case 100 people would have come to the party?

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