VDC Research: Enterprise & Government Mobility Market Blog

Does the New SecuTABLET Foreshadow BlackBerry's Transition to Software?

Following a turbulent year which saw sizable contractions and the launch of two new devices, the BlackBerry Passport and the Classic, the company once again made headlines this week with the announcement of its first foray in years into the tablet market after the failure of the ill-fated PlayBook with the unveiling of the SecuTABLET, a high-security tablet based on the Samsung Galaxy Tab S 10.5. Presented in collaboration with IBM at CeBIT 2015, the device is squarely focused on security, with the public sector and security-minded enterprises as its target market. Aiming for the highest levels of security, the device, which has been designed with European governments in mind, is currently undergoing certification for a German VS-NfD (classified – for official use only) rating, making it one of the most secure tablets to enter the market in an era where concerns around data leakage and breaches continue to grow. The tablet marks a notable departure for BlackBerry, as this represents the first device from the company that does not feature proprietary hardware or OS. 

A powerful enterprise partnership

As noted in BlackBerry’s press release, a study from IBM’s Institute for Business Value (IBV) found that 63% of public authorities want mobile access to mission critical apps, but the level of security required through legally mandated restrictions towards data privacy present a considerable obstacle. As a result, there is a dearth of solutions that fit a “government-grade” level of security demanded by the public sector. To address the gap, BlackBerry has worked to form a partnership with some of the best-in-class solutions providers to create a turn-key, secure tablet solution that meets stringent security requirements. The device features recent acquisition SecuSmart’s security architecture and secure SD card and driver, in addition to the trusted execution environment protections from Samsung’s KNOX platform, and is complemented by Apperian’s secure app store and app-wrapping capabilities. The latter’s app management, which has proven itself to be best-in-class and speaks to the firm’s strength in the MAM category. Meanwhile, IBM brings considerable industry-specific expertise to the table, as well as the ability to bring mobile solutions to a wide array of both regional and vertical environments.

Embracing the niche

Despite a high price point of €2,250 (US$2,380), the move represents a smart and positive development for BlackBerry, which has struggled to maintain enterprise relevance in the face of steep declines in market share against Android and iOS devices. By teaming with Samsung, not only can BlackBerry offload the hardware requirements in bringing the SecuTABLET to market, it also can take advantage of a considerably larger user and application base than would be available to its own proprietary OS, whose market share has dwindled to single digits in recent years. If anything, this strategy holds significantly more potential as it allows BlackBerry to pivot away from its hardware roots While it is still too early to tell, preliminary guidance reveal tepid adoption rates of its smartphones that mean any attempts to regain general market share will be an uphill struggle at best. By focusing on the niche that is government and high-security enterprise, BlackBerry can leverage its differentiation through high-level security to its advantage, especially with its acquisition of Secusmart. However, while there have been competing solutions from the likes of Motorola’s AME 2000 and Apple, through its collaborations with KoolSpan and its own Root of Trust to provide similar hardware-based solutions, BlackBerry’s traditional strength in the public sector and the sophistication of the SecuTABLET solution will offer a meaningful point of differentiation to help it withstand the competition.

With Eric Klein, Managing Director

Realizing the New Normal at Zebra Technologies

Zebra Technologies announced its Q4 2014 earnings today for the first time since its acquisition of Motorola Solutions’ enterprise business officially closed. The results included two months of the enterprise business in addition to Zebra's existing operations. Zebra’s core printing and consumables business has been on a tear of late hitting record numbers on a consistent cadence. Q4 2014 was no different with the company reporting YoY sales growth of a strong 10.6%. The Enterprise business, conversely, was flat on a nominal currency basis (up a couple of percentage points on a constant currency basis). However, on a sequential comparison, the Enterprise business was up approximately 14%. While this is a positive number and may signal a strengthening of the core Enterprise business, it is somewhat misleading as the 4^th quarter represents one of the strongest quarters in the year and the 3^rd quarter one of the weakest. In addition, as Zebra absorbed the Enterprise business, gross margins predictably took a hit, declining by 700 basis points to 42.6% for the quarter.

So what is the new normal for Zebra? Clearly its core printer business cannot be expected to sustain its recent torrid run rate(VDC is projecting this market to grow by 5-7% annually). . However, the printer business does appear to be the early beneficiary from the sales synergies from this merger. The acquisition has provided a significant boost to Zebra’s cross-selling efforts, enabling it to proactively position its offerings as a complete data capture solution set as opposed to an ad-hoc aggregation of a broad range of devices.  Moreover, from a market/competitive perspective we do not anticipate any major technology disruption or new vendors dethroning its leadership position. On the enterprise side the dynamics are vastly different with the disruptive impact of consumer (mobile) technologies, lower barriers to market entry and a much more fragmented competitive landscape. Pricing pressures have mounted leading to a lack of pricing discipline and opening the door to margin erosion. That said, we do see the market dynamics for ‘enterprise-focused’ mobile solutions improving in 2015 with Zebra well positioned to take advantage. So while the new normal for Zebra is certainly one of lower top line growth rates and margin compression, it is also operating at a significantly greater scale with a substantially higher upside.

Some of the comments made by Zebra’s leadership team during the earnings call that we found most compelling include:

1. Emphasis on rugged Android. As VDC has mentioned in previous discussions, rugged Android hit critical mass in 2014, accounting for approximately 15% of overall rugged handheld market. Previously a Europe and emerging markets trend, major deals with Home Depot and a tier one North America logistics carrier provided a much needed boost. While growing pains persist, there is today a viable alternative to Microsoft for rugged handheld devices and Zebra arguably has the strongest portfolio to address this opportunity.
2. Major issues impacting the Enterprise business in 2014 were directly addressed with strong comments by Zebra. Specifically these included commitments to improve service levels and SLA performance by the service center in Mexico and addressing/reducing the inventory issues in Asia. Moreover, in Asia, Zebra’s sales leadership is expected to drive renewed engagement, especially in China.
3. Zebra had a phenomenal year from the barcode printer perspective with record sales for desktop printers and resurgence in the tabletop printer segment. Desktop printer sales were particularly strong in the Transportation & Logistics segment, and mobile printers fulfilled large orders in retail. The company released several new printers over the year, which highlights its efforts to introduce updated models to better meet the demands of today’s business environment. By their own admission, what also significantly helped Zebra in the printer market following a lackluster performance in 2013 was its acquisition of Motorola Solutions’ Enterprise business unit, which served to make the two organizations exclusive with each other.
4. Addressing the recent pricing pressures – particularly in Europe – Zebra commented that they are “actively looking at adjusting list prices”. While it is clearly too early to tell what this means, the sentiment among channel partners following the recent wave of consolidation creating two mega AIDC vendors in Zebra and Honeywell was that many anticipated much greater pricing discipline moving forward and focus on key business performance metrics. VDC has been very vocal about this issue and the perception that vendors/solution providers have left money on the table with its aggressive pricing practices and deal rationalization. Yes, the market has changed with (lower cost) consumer devices eroding some of the traditional market potential. However, not all opportunities are worth chasing and it will be important for a successful Zebra to realize that delineation.

Investors have not taken too kindly to Zebra’s earnings miss with the stock down by almost 4.5% since market opening. With much of Q1 2015 already behind us, Zebra’s guidance for the quarter was YoY growth of 6-8% on a constant currency basis (or 1-3% on a nominal basis), representing a strong start to the year. Ultimately this deal is about creating synergies throughout all aspects of the business and providing customers and partners with a stronger technology and solution value proposition. 

With Richa Gupta

The EMM Pivot is Upon us #MWC15 EMM Recap

Mobile first EMM vendors know they must evolve — and they are ...

As one might expect, the high profile handset refreshes from Samsung (Galaxy S6), HTC (M9) and LG (G Flex 2) and the notable (and well timed) acquisition announcements (NXP acquiring Freescale, HP acquiring Aruba Networks, and Mitel's acquisition of Mavenir) garnered the lion share of the post MWC media coverage. However, there was something different at MWC this year. There was a "new partner" sitting in on several of the briefings we had at MWC.

Google sent several senior executives to Barcelona (Sundar Pichai, Rajen Sheth, and Andrew Toy were the most visible) — either Rajen or Andrew was present (and actively participating) at several of the meetings we attended at MWC — the exception? Our meeting with Good Technology. Why? Read on.

Android for Work is Legit and KNOX is Not Dead (yet)

Every prominent enterprise mobility vendor has moved quickly to completely integrate with the Android for Work platform.

Good is negotiating with Google and is likely to join the other prominent vendors listed above who were quick to announce their integration with the Android for Work Platform — however, it appears as though Good (and SOTI) have forged strong(er) partnerships with Samsung. Both seem to have gone further than their peers in integrating with the company's KNOX platform (which is not just a container). While all of the vendors listed above have been working with Samsung's KNOX platform; after speaking with several Samsung executives, the level of integration with KNOX is varied. Good and SOTI have seen traction from their partnership with Samsung and have figured out creative ways to go to market (one sure fire method is to give away the device — while not sustainable, it appears as though Samsung is willing to do so). Here's what my colleague David Krebs wrote in his MWC Event Recap post:

In summary, we see both Good and SOTI benefiting by working with both Google and Samsung. Both vendors have a sizable footprint in both government and financial service industries. We expect that Good will formalize its partnership with Google soon.

ACE to the Rescue

The launch of App Configuration for Enterprise (or ACE) was timed for MWC. Five prominent enterprise mobility vendors (AirWatch by VMware, Box, Cisco, Workday and Xamarin) have collaborated on the standard which aims to simplify and scale the deployment of apps in the enterprise. The benefits are clear and straightforward (see below).

There is no question that enterprises are challenged by app provisioning and distribution. Considering that multiple versions of the same app (built with different SDKs) is now normal, the standards-based platform agnostic approach (thanks to the ability to seamlessly invoke both the latest iOS and Android   APIs) will be welcome. However, the consortia needs to get other important vendors on board (Citrix, IBM, Microsoft, Oracle and SAP come to mind). 

EMM Evolution

My next report (scheduled for May) will focus on the evolution of EMM. I'm seeing some interesting (and consistent) thinking from prominent EMM vendors on how they intend to evolve and differentiate their platforms moving forward. Key initiatives that are in development and on most road maps include:

• Split billing
• Unified Endpoint Management
• Enhanced email clients
• Architecture enhancements
• UX / Console optimization

I'm actively scheduling briefings to discuss the evolution of EMM and the pivot that I anticipate. If we didn't meet at MWC, I'd welcome to opportunity to discuss this topic with you in the next few weeks.

Kudos to GSMA for hosting another top-notch event. See you at MWC 2016!

 

MWC 2015 Recap

Although the Mobile World Congress event we just attended in Barcelona is still largely a carrier show – as measured by the audience it attracts and the general lack of attendance by enterprise IT decision-makers – the roster of vendors on display is remarkable. VDC spent three agenda-packed days at the show meeting with a variety of enterprise mobility and IoT-focused solution providers. Some of our team’s observations are summarized below:

Samsung Galaxy S6: Back to Basics? Our week kicked off on Sunday evening with the Samsung Unpacked Event and the anticipated unveiling of the Galaxy S6. First things first – the device is absolutely stunning. Beautiful build quality with a gorgeous display, including the unique Edge option. However, the unveiling of the device felt flat. Clearly we are spoiled today with the expanding capabilities of smartphones; thus, the bar is set extremely high for each device with all of the upgrades needed for it to be considered a success. Moreover, today it is much more than device features that make a launch compelling; rather, what’s important is how those features enable use cases. However, with Samsung’s focus on features and specs, the company missed a real opportunity to translate these capabilities into meaningful value for everyday – or new – applications.

This was especially evident with the introduction of Samsung Pay, which leverages NFC for tap-to-pay in addition to the integration of technology Samsung recently acquired from LoopPay (Magnetic Secure Transmission) which enables the devices to be used with magnetic stripe readers. This is truly differentiated in that it enables the Galaxy S6 to be used as a mobile wallet at approximately 90% of merchants or 30 million payment terminals worldwide. Although this technology conceivably fills a temporary gap while retailers in the US rush to meet the end-of-year mandate to support chip and pin requirements, magnetic strip readers are not disappearing from the retail landscape anytime soon. Thus, with payment infrastructure access meaning everything when it comes to mobile payment acceptance, Samsung has a strong competitive advantage with this technology, especially over arch-rival Apple. Too bad they spent all of 30 seconds covering it during the unveiling.  

Coming off an extremely challenging 2014 with slowing shipments and massive profit erosion, much is riding on this release. It is widely known that Samsung’s leading smartphone position is being challenged by Chinese upstarts on the low end, and with the iPhone 6 Apple now has an answer to Samsung’s larger display differentiation. In this context, it was perhaps important for Samsung to “revert to the basics,” focusing on device functionality and features and the “language of engineering” they have mastered. However, the decision to enclose the battery and remove the microSD card will be seen as a significant departure for many and will eliminate some much-needed differentiation, especially against Apple. 

Wearables and the Smartwatch Use Case Conundrum. On the wearable front, both LG and Huawei made headlines with the introduction of their respective smartwatches. This represents Huawei’s first foray into the wearable market, and rather than take the low-cost approach for its smartphones, the Chinese manufacturer has opted for a more fashion-forward device that runs on Android Wear and boasts the most impressive smartwatch display. However, LG’s upcoming Urbane seeks to push the boundaries a bit further by being the first offer a 4G LTE-enabled watch that also features NFC capabilities. Another unique attribute is its interface, which – based on recently acquired WebOS – is markedly more intuitive than Android Wear alternatives. Moreover, Google’s Wear platform does not currently support cellular connectivity. While these smartwatches are essentially consumer devices, enterprise opportunities are beginning to emerge, especially around notification and alerts for line workers. However, enterprises will need to be prepared to “manage” these types of devices as their employees bring them to work and look to connect them to corporate networks. In discussions with EMM vendors, who are increasingly extending support to wearable end points, an interesting use case emerged that leveraged the smartwatch to support two-factor authentication. Ultimately this category – especially from an enterprise perspective – remains very much a work in process. Even with Apple’s pending smartwatch (available this April) today’s products still lack in overall functionality – particularly battery life – and meaningful use cases to justify their expense.

Samsung KNOX: Dead or Alive? The exclusion of Samsung’s KNOX platform from Google’s Android for Work was, for many, the death knell for KNOX. The message we got from Samsung and its partners at MWC contradicted this scenario and pointed to the progress Samsung has made over the past year. Although the volume surrounding KNOX turned down significantly in comparison to the fanfare at MWC a year earlier, it is becoming more clear where KNOX fits. Ultimately we do not see KNOX and KNOX Workspace as a volume play across most of the enterprise or government organizations. That would be too limiting in today’s multi-platform/multi-vendor reality with Android for Work representing the more viable option in that scenario. However, in highly secure/regulated environments (government, financial services, etc.) we do see a real play for KNOX. Whether that is too limited given Samsung’s investment in KNOX remains to be seen. Other KNOX developments include the collaboration with Microsoft and the integration of OneDrive, OneNote, and Office 365 with KNOX Workspace. Although smartphone end users dislike the amount of pre-loaded software they receive on their devices, this one makes sense and is in direct response to the availability of Google’s productivity apps on its Android for Work platform.

Wireless Charging: Ready for Prime Time? Another bet placed by Samsung with its Galaxy S6 is around wireless charging. While this feature has been available as an aftermarket capability for previous devices, it will come fully integrated with the S6. What is perhaps most unique about Samsung’s approach is that it integrates two of today’s more common wireless charging standards: WPC’s Qi and PMA. While Samsung is making a bold bet by integrating this functionality, the technology from a performance perspective is impractical and not ready for prime time. Challenges with charging speed and charging range (relative to mat placement) remain real concerns. An interesting development from our perspective is the shift from today’s magnetic induction technology to solutions leveraging magnetic resonance. The Alliance for Wireless Power (A4WP), which recently announced its intent to merge with PMA, is introducing Rezence, which addresses many of these issues, supporting a superior charging range and multi-device charging. Although still in the specification stage, support from Qualcomm, Intel, Samsung, and others will make this a very interesting technology to follow. Is 2015 the year of wireless charging? In our opinion, no. However, significant strides are being made.

IBM & Apple: 3% closer to home! IBM and Apple announced the “next three” IBM MobileFirst for iOS Apps at MWC, bringing its total to 14 against the stated goal of 100 by the end of 2015. At the end of the day the numbers are somewhat meaningless, especially considering the number of mobile apps already developed by many of IBM’s closest competitors. However, as this is their stated goal, it is something they will inevitably be reminded of. What struck us as especially compelling was not so much the apps themselves – many of these are IBM versions of mobile apps that have already been created. Rather, it was how Kathryn White, IBM VP of Marketing and Head of Sales for the Apple partnership, conveyed the process through which they identified mobile use cases. Starting with an acute industry pain point – for example, the $20 million airlines lose each year by improperly calculating excess fuel requirements – IBM’s approach is to focus on analytics, identify a feature that “changes the moment” and ultimately develop and app that empowers the employee to make meaningful decisions. This a low-risk win for Apple with no real skin in the game on application development and access to IBM’s enterprise channel, which – especially for the lagging iPad – could provide a nice boost. Among the potential issues we are tracking is the ability of the IBM sales force to effectively “sell” enterprise mobility solutions (we are seeing similar sales cycle issues with Oracle and SAP). In addition, the critical aspect of professional support services for enterprise customers surrounding the mobile device (provisioning, depot services, advanced exchange, maintenance, white glove, etc.) represents a potential gap or vulnerability to the existing model.

The Windows 10 Wedge. That Microsoft or its Windows platform is on the outside looking in when it comes to enterprise mobility should come as no big surprise. That said, Windows remains extremely critical for enterprises, especially in the more traditional PC, server, and embedded endpoint domains. One of the more interesting questions will be the extent to which Windows 10 changes Microsoft’s fortunes, especially considering mobile devices. Today’s Windows smartphone marketshare is negligible at less than 5% globally. However, and especially in markets that lack strong BYOD momentum (i.e. outside the US), the recent trends have been encouraging. Surprisingly where Microsoft has done especially well in the enterprise is in the lower-end tier of the smartphone market with its lower-cost Lumina devices. With the launch of Windows 10, Microsoft is undergoing a rebranding effort, emphasizing a singular platform/store/Microsoft experience. While Microsoft does not have an answer today for more BYOD-centric environments, we do see an opportunity for Microsoft to take advantage of the continued enterprise uncertainty surrounding Android and wedge itself more firmly back into the enterprise mobility discussion. 

with Kathryn Nassberg