Robb Beal is up in arms about Apple competing with third parties (Watson with Sherlock 3, PIM vendors with Address Book 2 and iCal).
One question I've got, which likely motivated iCal/Address Book: why is it so hard to find decent PIM software for the Mac? I've tried Palm Desktop (fine, as far as it goes, but a shadow of the Windows version), Now Up-to-Date and Contact (stagnant, expensive, hard to use, extremely flaky Palm sync), Entourage (nicely designed but feature-poor), and Personal/Group Organizer (weird interface). I use Palm Desktop now (previously I used Claris Organizer, from which it descended), and wish it included calendar sharing features. If iCal does, I'm switching. If the Now products were any good, I'd use them.
So, for me, it's a question of quality, not just price. iTunes is the best MP3 player I've found for my purposes, so I use it. iPhoto is poorly designed, and thankfully iView MediaPro is there to fill the void. I won't use iChat when it comes out because it only supports AIM: instead I use Proteus, a beautifully designed multiprotocol chat client.
Sherlock 3 is the first example I've seen in which Apple has just outright copied a third-party app, down to the interface details. While Sherlock 3 offers features Watson doesn't (maps) and Watson has more tools (recipes, etc.), and more extensibility, most people will likely not bother with Watson after Jaguar ships. This is annoying, but an open-source Watson would have presented a similar challenge: in fact, many open-source products are clones of commercial ones. Watson is a great tool, I use it every day, and will keep using it, and paying for upgrades, if it keeps getting better.