Apple is unifying its cloud services to become more competitive

This story was delivered to BI Intelligence Apps and Platforms Briefing subscribers. To learn more and subscribe, please click here. Apple is moving its separate internet services units into a single platform in an effort to make its Cloud Services segment more competitive against Amazon Web Services (AWS) and Google Cloud, according to Bloomberg.

 Having the teams spread across multiple locations may have contributed to software bugs and slowed product development. Apple's efforts to improve product development and software quality to its Services segment, which includes Siri, Maps, iCloud, Apple Pay, Apple News, parts of iTunes, and Apple Music, come amid slowing global smartphone shipments. 

Revenue from iPhone sales accounts for roughly 60% of Apple's overall revenue, however, in Q2 2016, iPhone sales fell ~15% year-over-year (YoY) to 41 million devices, compared with 48 million units sold in Q2 2015. Apple CEO Tim Cook noted that the pause in Apple's growth would likely continue throughout the year. Apple is working hard to make its Services segment the bright spot of its quarterly earnings in an effort to supplement the expected pause in iPhone sales growth. 

The company is also making changes to the App Store to bolster its revenue-generating abilities, such as making it more appealing to developers with the addition of Search Ads and offering a larger share of app revenue — from 70% to 85% — for apps that sell subscriptions. In Q2 2016, Services revenue grew 20% YoY to reach $6 billion, but that's still a quarter of the more than $24 billion generated from iPhone sales. Meanwhile, cloud revenue from Amazon, Google, and Microsoft are all showing impressive growth. 

Revenue generated by AWS, for example, grew 58% YoY during Q2 2016, amounting to just under $3 billion. The global smartphone market is expected to slow considerably over the next few years. Despite a record-setting holiday quarter, 2015 was likely the last year of double-digit growth for smartphone shipments. Mature markets were at the heart of this year’s deceleration. Adoption has reached new highs in key markets in the United States, Europe, and China. 

The pool of first-time buyers in these countries is shrinking rapidly, and sales are now primarily coming from phone upgrades. Meanwhile, emerging markets will continue to see robust shipment growth. India and Indonesia, in particular, will help fuel a large share of the shipments growth within the global smartphone market over the next few years. Will McKitterick, senior research analyst at BI Intelligence, Business Insider's premium research service, has compiled a detailed report on smartphones by country that forecasts the market through 2021 to reflect slower, stabilizing growth in the long term. Here are some key points from the report: 

The global smartphone market is still growing at a steady pace due to more widespread adoption in emerging markets. We estimate the global market will hit about 2.1 billion units shipped in 2021. Shipments growth over the past few years has been driven by the falling price of smartphones, which has made handsets more accessible in emerging markets. The average selling price of a smartphone in India nearly halved between 2010 and 2015. With relatively low smartphone penetration, we forecast Indian smartphone shipments to grow rapidly over the next five years. 

Nevertheless, India has a long way to go before it surpasses China as the world’s leading market for smart handsets. India is estimated to account for roughly 10% of the global smartphone market in 2016, considerably less than China’s 30% share. The global platform wars are over, even as smartphone adoption continues to rise across various markets worldwide. Android and iOS are estimated to account for 97.3% of global platform market share in 2015, compared to 96.3% last year. 

Apple closed the year with another strong quarter on the back of its iPhone 6s and iPhone 6s Plus launches. Still, the vendor saw a slight decline in YoY growth of its share of the market in the face of stiff competition from Samsung and Chinese vendors such as Huawei. In full, the report: Forecasts global smartphone shipments through 2021. Explores why India is the next high-growth smartphone market. Breaks down the global smartphone platform wars.