Details on How Apple iBooks Lost to Dell Inspirions in Henrico County (VA) High Schools

Apple rocketed back onto the frontpage of K-12 educational computing with a deal to supply tens of thousands of iBooks to the Henrico County (VA) Public Schools for daily use by students, teachers and administrators. This pioneering effort revolutionized K-12 education as many school districts across the U.S. and in Canada followed suit and supplied their students, teachers and administrators with laptops. But, like in all walks of life, success brings serious competitors. In the case of one-to-one classroom portable computing, Apple's success attracted Dell, the company that has been eating Apple's education desktop lunch for some time.

This year the four-year contract for high school laptops in the Henrico County Public Schools was up for re-bidding. Dell was awarded the new four-year contract over Apple (and CDWG) through votes of 9-0 by an evaluation committee and 5-0 by the school board. Apple retains the contract for elementary and middle schools, at least for now. But how did Apple lose unanimously at every stage in the high school contracting process?

Three principal issues were brought up by students, parents and teachers for consideration in designing the new contract: downtime for maintenance, the fees the schools charged parents and teachers and the desire for Microsoft Office. On the surface, none of these issues appear to be decidely in favor of Dell over Apple. In fact, the maintenance issue would seem to subtantially favor Apple and Mac OS X over Dell and Windows XP.

The iBooks' maintenance rate was 4-5 per cent of the laptops at any given time and Apple was 96 per cent effective at fixing things within 24 hours according to a school system report. This is actually surprisingly good performance to us, especially for laptops in the hands of high school students. Downtime could be reduced to near zero by having a small percentage of the laptops available as loaners as some school districts have done. Indeed, this is the approach taken by Henrico County and both Apple's and Dell's bids contained a 2 per cent overage for loaners. But, according to a school report, Dell also bid that it would increase the number to 5 per cent if that proved necessary. Dell appears to have been the smarter bidder by promising to cover the repair rate experienced with iBooks and appearing to offer a no downtime solution. But what if the Dells experience a repair rate that greatly exceeds the iBooks 4-5 per cent and fails to meet Apple's 96 per cent rate of repairs in 24 hours? The school district loses, of course. What data did Henrico County look at to determine if the Dells would have an expected repair rate lower than 5 per cent? The schools system's report does not say. The next four years will tell if the school system got bamboozled. We think they did.

The fee issue is partly an issue of how the laptop program will be paid for. But if eliminated, the fees are simply transferred to the cost of the contract and the county's school revenue sources rather than individual parents of students and teachers using the laptops. Doing so will also likely have the effect of increasing the repair rate since the damage waiver fee for students is an incentive to maintain the laptops. Henrico County kept the $50 student use fee but eliminated the $50 teacher use fee and the $100 student damage waiver. Care to guess which way the repair rate is headed?

Penultimately, there's the Microsoft Office issue. Dell's bid included Microsoft Office, of course, and Apple's included AppleWorks. As far as I am concerned, AppleWorks is perfectly fine piece of software and meets any possible actual requirement for high school use. But since the users expressed a desire for Microsoft Office, this issue is a no-brainer. If you offer people what they say they want, all things being equal they are going to take it, no? Even if all things are not exactly equal, an expressed desire is really an unwritten requirement that very definitely will be weighed in the decision, like it or not, especially when it is a voting situation rather than a strictly technical decision. Apple could have offered Microsoft Office but doing so probably would have increased the cost of its bid more than that of Dell's.

Finally, there is price. Dell bid $256 lower for each of 15,800 laptops than did Apple, i.e. $1,130 per 14" Inspirion 600m versus $1,386 per 12" iBook. The Henrico County Public Schools report did not include an estimate of the total cost of ownership. The report does mention a transition cost that it will bear in switching to the Dells but it did not reduce it to dollars for comparing the bid prices.

So, it looks like meeting repair rate expectations, Microsoft Office and price beat Apple. We think the first is bogus and Henrico County will regret its decision on this issue alone but only time and good, honest monitoring will tell. Microsoft Office, like it or not, is a monopoly just like Windows and the only way for Apple to win in situations where Microsoft Office is a desired element is to offer it. The only way that Apple can do that and come close on price is to license Microsoft Office for many if not all of its computers just like the Windows computer makers. It is curious that a base Inspirion 600m with 256MB RAM and base Microsoft Office sells for $1,610 on Dell's Web store while a base 12" iBook sells for $999 on Apple's Web store. On the surface, it looks as if Apple could have done better on price. Apple will have to do better on price or come up with some new killer innovations to beat Dell. We are betting on the latter. [Bill Fox]