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04/13/2010

Whither RIM?

Following the recent ‘missed quarter’ by RIM there has been much chatter about the future demise of the company and its widely deployed BlackBerry at the hands of Apple’s iPhone and devices running on the Google-backed Android platform. While the articles bring up many valid points – iPhone’s encroaching RIM’s enterprise stronghold, RIM lacking a strong touchscreen solution, RIM’s App World metrics - the desire for sensationalist reporting may have kept the reporters from addressing some of the more important issues. More to the point: there remains much to be bullish about RIM.

BlackBerry’s core value proposition revolves around its best in class – in terms of security and manageability – enterprise wireless email and messaging solution. This has and continues to resonate with enterprise customers. BlackBerry is viewed as the Gold Standard in sectors – especially where security and compliance mandates are tight – such as government, financial services and healthcare. While RIM has done well to maintain and expand its position in these core markets, it’s value proposition has recently been challenged by individually liable (IL) devices entering the enterprise.  During the recession enterprises have been increasingly receptive to the idea of supporting their employee’s personal device for some enterprise applications (email, messaging, etc.). Moreover, enterprises have succumbed to the pressure from individuals to support popular consumer devices such as the iPhone. This has loosened RIM’s vice grip on the enterprise segment and has created challenges for RIM as the company generally performs best in accounts where it is the only device.

These challenges have shown up in market share figures as – according to our research – BlackBerry’s share of the enterprise segment in North America is expected to decline from just over 50% in 2009 to just over 40% by the end of 2010. The primary beneficiaries here will be Apple – capturing 22% of the enterprise market by the end of 2010 – and the various Android-based devices. However, even as BlackBerry’s market share declines, overall shipments and new subscribers are expected to grow, driven by the continued strength in Smartphone demand.

RIM clearly needs to address the IL issue more effectively – it has been targeting the consumer market with mixed results for some time now. However, according to our research, the share of corporate liable devices is actually expected to increase slightly in North America. Conversely the share of IL devices purchased from ‘approved list’ is expected to give way to IL devices purchased from ‘any list’. In other words we are seeing a splintering in the enterprise between highly controlled and regulated environments and those that are more open to multiple platforms. RIM’s position in the former is unquestioned. What it needs is a more effective answer for the latter.

The fact remains that the Smartphone opportunity is massive with growth continuing unabated. While hardware innovation – such as Apple’s multi-touch interface – can define and reward vendors, this market is not (entirely) about hardware. It is about delivering appealing services and user experiences. The killer applications for RIM and its BlackBerry platform have been wireless email and BlackBerry Messenger which offers some of the strongest real time communication and presence capabilities (through GPS location integration and proximity sensing). RIM needs to build on these platforms to extend a broader range of services in a broader range of environments.

RIM is addressing this and several of its recent acquisitions are targeted squarely at both improving the user experience on the BlackBerry and also extending RIM’s reach beyond the traditional Smartphone. More specifically, last August 2009 RIM acquired Torch Mobile to support its WebKit-based browser development – a major hole in its portfolio. The browser was officially released earlier this year at MWC. (OK, this is more catch-up than trial blazing). More recently RIM acquired QNX Software Systems from Harman International. One of QNX’s leading markets for its Neutrino embedded OS is the automotive sector. This acquisition has the potential to significantly enhance the integration of RIM’s BlackBerry platform with in-car computing, navigation, entertainment platforms (check out VDC’s Embedded Practice’s blog post on this transaction).

Another – more traditional – opportunity for RIM to lead is the creation of the de facto enterprise mobile software application channel.  The fact remains that with all the success of Apple’s App Store, its most successful apps are for gaming and other entertainment/consumer applications. No viable channel exists today to address enterprise applications. While much of this is tied to issues relating to back-end integration requirements and customization requirements evident with so many enterprise mobile applications – enterprise organizations are clamoring for ways to more efficiently distribute and manage mobile applications. Getting the developer community excited about BlackBerry development opportunities will be critical here. BlackBerry has taken a step in the right direction with its recently enhanced development tools (especially the HotSwap simulator which significantly reduces development time).

RIM clearly has its work cut out for them. Apple, Google and others are nipping at their heels and are intensifying their enterprise play. However, considering RIM’s loyal customer base, broad global partner network and best in class services it would be reckless to write them off.

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