Executive Summary:

Apple has addressed limitations of its iPhone, especially in regard to enterprise users, and in July 2008 the company shipped iPhone Software Update 2.0, which, among other things, adds key functionality for the enterprise, including full support for Microsoft Exchange Server.

When the original Apple iPhone appeared in June 2007, it was accompanied by a level of hype that was almost unprecedented in the consumer electronics space. The hype was all the more impressive when you remember that this first iPhone lacked so many crucial features—for both consumers and business users alike—and was hobbled by AT&T’s lackluster EDGE data network. Over time, Apple began addressing many of these limitations, and in July 2008 the company shipped iPhone Software Update 2.0, which, among other things, adds key functionality for the enterprise, including full support for Microsoft Exchange Server. Here’s what you need to know about iPhone enterprise features.

It’s All About Exchange
Although Apple isn’t particularly well-regarded in the enterprise, knowledge and mobile workers in businesses large and small are as taken with Apple’s innovative smart phones as are consumers. And they’ve been asking companies in droves to let them use the iPhone. The problem is, when the iPhone first shipped last year, it offered no direct support for Exchange, the de facto messaging solution at most businesses. (Apple’s half-hearted response at the time—enabling IMAP support—was met with stunned silence.)

To address this need—and, frankly, to dramatically grow iPhone sales—Apple took the unexpected step of licensing Microsoft Exchange ActiveSync (EAS) technologies. Beginning with Software Update 2.0, iPhone customers will be able to access push email, push calendaring, push contacts, and global address lists (GALs) via Exchange.

But Wait, There’s More
Apple isn’t just adopting Exchange. It’s also providing enterpriseoriented features in Software Update 2.0, including VPN support (specifically only Cisco IPsec VPN), certificates and identities (twofactor authentication), enterprise-class Wi-Fi (WPA 2 Enterprise, 802.1x), enforceable security policies (such as mandating the use of PINs on the iPhone), centralized device configuration, and remote wipe (so that a stolen or lost iPhone can be erased to remove any personal or corporate data on the device). These features might not seem particularly leading edge to anyone well-versed in enterprise mobility, but remember this is Apple we’re talking about here. That this company is willing to go to these lengths to make the iPhone roundly successful is amazing.

Apple is implementing this enterprise functionality using the latest Microsoft-oriented techniques, and it will all work with the existing Mail, Phone/Contacts, and Calendar applications already built into the iPhone; you won’t need separate applications. (On a related note, Apple is also building Exchange client support in Mac OS X 10.6, codenamed Snow Leopard, now due in mid-2009.)

Enterprise Application Deployment
hen Apple first announced Software Update 2.0 back in March 2008, one of the big questions was how enterprises would deploy their own custom applications. The company responded to this need by providing a way for enterprises to distribute apps themselves. Basically, enterprises can authorize iPhones, then create applications that run only on those phones. They will distribute those applications on their own intranet, using any security they like, according to Apple CEO Steve Jobs. Users will download those apps onto their computer and sync them to the phone through iTunes. That last bit may cause some nervous glances: I have a hard time imagining enterprises rolling out iTunes to their users.

Apple also announced a third, ad hoc form of iPhone application distribution. This style of application distribution should be particularly interesting to educational institutions, which might need to email iPhone applications to classrooms of users or other large groups, although Apple didn’t provide many details. There are limits to ad hoc app distribution—each entity, which could be a classroom, for example, syncs with only 100 phones—but it does appear to meet a need that’s somewhere between what consumers want and the more stringent needs of enterprises.

Availability and Pricing
Software Update 2.0 will come with iPhone 3G devices and will be made available for free to users of original iPhones. Interestingly, this software will also be made available for the iPod touch, Apple’s touch screen (and iPhone-like) portable device, which could turn this iPod into an interesting mini mobile tablet. However, iPod touch owners will have to pay $9.99 for the upgrade.

Unfortunately, users who access the enterprise-oriented features of the iPhone or iPhone 3G—by, for example, accessing Exchange resources—will immediately find themselves in a monthly plan that’s more costly than that offered to consumers via Apple’s cellular carrier partners (AT&T in the United States, other partners worldwide). Business customers will have to pay an additional $15 a month over the cost accrued by consumers, or a minimum of $95 a month after all fees and taxes. That’s exorbitant, even by the data plan standards of today. It’s unclear if AT&T will offer better international pricing, another weak spot with the original iPhone. (Note, too, that iPhone 3G data plans are already more expensive than those of the original iPhone, so adding enterprise functionality will be even more expensive.)

Recommendations
Given its price—free—Software Update 2.0 is a no-brainer for all iPhone users. That said, the iPhone’s heady set of enterprise functionality comes at quite a cost. Whether the cachet and functionality of the iPhone will overcome cost fears remains to be seen, but I will say this: The iPhone is in a league of its own and is a far nicer device than any RIM BlackBerry or Windows Mobile smart phone. It’s worth at least examining. If the lack of Exchange support was your only barrier to iPhone adoption previously, iPhone Software Update 2.0 removes this problem.