Editor’s note: Sachin Agarwal is cofounder and chief executive of simple blogging startup Posterous. He first published this article on his personal blog.

When Google announced the first Android phones, I was not impressed. The hardware was large and clunky, the software was young and lacked polish. But Android is emerging as a real threat to Apple, because Google’s cloud services are so well-executed. A user can buy an Android, log in with their Google account, and instantly have their contacts, email, and calendar.

Apple needs to follow Google’s lead. Why do I need to USB sync my new iPhone or iPad with iTunes before I can use it? I blogged about this before. Apple’s syncing service MobileMe should be the true hub for all your data, while your laptop should be just another client device with equal rights as your iPhone or iPad. All your devices should sync with the cloud.

But for MobileMe to be this hub, and for Apple to maintain their dominance on the mobile front against Google, they must make MobileMe free. Until they do this, Google will have better cloud integration with their mobile devices.

  • MobileMe is not a significant source of revenue for Apple. Most money comes from sales of Macs, iPhones, and iPads.
  • MobileMe costs $99 per year. While that’s a fair price for 20GB of email and storage, most people won’t pay it if there are free alternatives. Even though GMail is filled with ads, people choose free. So MobileMe will have a hard time growing and being successful on its own.
  • MobileMe should be a loss leader designed to tie together Apple hardware, and to sell more of it. OS X development sells Macs and iPhones. MobileMe development should be thought of the same way. By making MobileMe free, more people will experience the Apple ecosystem, and it would make Apple hardware stickier. You won’t buy other hardware if the integration with your personal cloud isn’t there.
  • While Google’s cloud services are fine, Apple can show these can be done better. Ad free and beautifully designed. I predict people will use Apple’s version and prefer it.
  • Mobile Me can go beyond email and calendars. It can be your media repository with an online iTunes, and it can be your online document storage with iWork online.
  • One of the great benefits of Google Docs is being able to collaborate with others. This is only possible because almost everyone has a Google account, and this is because they are free. MobileMe needs the same.
  • In many ways, MobileMe isn’t that good! By making it free, they will gain a lot of users, and therefore gain resources from Apple to make it better. They will be able to hire smarter people who will be drawn to work on a large platform.

Rebranding .Mac to MobileMe already shows a movement away from the Mac. This isn’t your “Mac” login, this is the login for your personal cloud.

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So picture it: You buy an iPad, iPhone, or a new Macbook Pro. You turn it on and login with your MobileMe account. You already have one since it’s free. Instantly that device has all your media and other data. There’s no more USB syncing.

And the next time you’re looking for a new phone, there’s pressure to stick with Apple products because the hardware, software, and cloud will be perfectly integrated.

Apple can continue trying to sell MobileMe as a standalone product, but they are slowing adoption of their cloud services and hurting their overall mobile platform. Instead, they should focus on selling hardware, and give away the best software and services to run on that hardware.