VDC Research: Enterprise & Government Mobility Market Blog

Is Augmented Reality Primed for Warehouse Automation?

The trend of augmented reality (AR) has been picking up steam. Much of the recent hype stemmed from the Microsoft announcement of its HoloLens last month, where there was considerable buzz surrounding consumer applications for the device that bordered on the futuristic appeal of 1950’s world of tomorrow. However, the more grounded applications for Augmented Reality that are emerging are firmly planted in the realm of enterprise. Warehousing and logistics have long been a hotbed of activity for portable and wearable technology, where the opportunity to free up a workers hands has immediate productivity benefits and a strong ROI profile. Wearable voice-enabled picking solutions and wrist and finger mounted scanning solutions have been successfully used in these environments for over a decade. These early wearable logistics solutions, however, have also not changed materially opening the door for innovation.

 Much of the recent wearable technology attention has been directed towards heads up displays and smart glasses. What became evident very early was that this technology was not suitable for mass market consumer applications. However, in the enterprise for B2B applications, the barriers regarding aesthetics and implications for social interactions can more easily be overcome. Therefore it is not surprising to witness the level of interest and evaluation these solutions have garnered for workflows in logistics, field service and others where the benefits of hands free operation could be clearly articulated.  The question, however, is whether these next generation wearable solutions are ready for prime time and whether they significantly improve workflows – and/or lower cost of ownership – when compared to existing automation solutions.

There have been several prominent and well designed demos designed to show the potential smart glasses and AR overlays in the warehouse. VDC recently had the opportunity to speak with a prominent Tier-1 logistics company to understand what its early-stage technology incubator was doing with its AR evaluation efforts.

The future isn’t quite here

Although the application of AR and smart glasses could support various workflows across operations, the firm in question focused its initial evaluation on the most approachable opportunities in warehouse operations and, more specifically, picking, packing, and sorting applications. The higher level objective was to test the overall viability of these solutions and also measure the results against traditional RF scanning solutions. At the end of the day the key takeaways suggested that picking productivity improvements and picking accuracy improvements were very real in addition to ancillary benefits from employee satisfaction and paper reduction. However, what was also clear was that the underlying technology was not sufficiently mature.

While smartglasses and AR overlap technology was clearly easy to use and employees took to it fairly quickly, key challenges surrounding scanning functionality (i.e. using a scanner integrated with the glasses), severe battery life limitations, unstable connectivity and price point of some of the options represented real issues.

However, the bigger question for us was WHY? Not so much why the company was testing smart glasses and AR overlays, but rather why was its picking workflow so inefficient and error prone to begin with. The use of (error prone) paper pick lists, handheld RF scanners and other process inefficiencies could (or rather should) all be mitigated with the adoption of other technology best practices widely accepted for these workflows, namely wearable voice-based solutions.

Existing solutions today – either purpose built from vendors like Vocollect (Honeywell) or multi-modal solutions from vendors like Wavelink – have proven themselves as especially effective for applications such as high speed picking. Recent research conducted by VDC reveals that end users of these solutions experienced at least a 10% increase in picking productivity and 10% increase in picking accuracy after deploying these solutions. If cost remains a reason why many warehousing operations have opted to remain with handheld devices over voice-based solutions, AR will do little to alleviate the issue. At the end of the day, technology should serve as a means to an end, rather than serving as the end itself. While the pace of innovation in enterprise mobility is continues to pick up speed and organizations should constantly be pushing themselves to do better, often times the “shiny new toy” does not quite live up to expectations and the “tried and true” represents the better option. 

 

With David Krebs, EVP

Mobile Payments Race Heats Up with Samsung’s LoopPay Acquisition

Samsung announced yesterday its acquisition of the Burlington, MA-based startup LoopPay Inc. for an undisclosed amount after reports of the two companies working together a mobile payments solution in late 2014 towards. The announcement heralds Samsung’s entry into the mobile payments fray, pitting it squarely against Apple and Google Wallet as the market for the digital wallet continues to evolve.

Making a digital wallet retailers will work with

The mobile payment market, particularly in the US, has undergone considerable change in recent years although much of the progress has been dependent upon both the cooperation from banking institutions and retailers’ willingness to adopt newer point-of-sales terminals. The latter in particular has been a key stumbling block for NFC-enabled solutions, like that of Google Wallet, which launched in 2011. Although the announcement of the iPhone 6 and Apple Pay did much to raise general awareness to the technology, its impact remains somewhat limited. Estimates from Apple from its Q1 earnings call show that less than a quarter of a million retail outlets out of a total numbering in the millions have the ability to accept Apple Pay. While this obstacle will eventually overcome as the migration continues from traditional the magnetic stripe to the EMV chip and PIN system, the tipping point for a major revamp to the greater retail market likely will not occur for at least another year, despite liability dangers looming on the horizon. Samsung’s acquisition of LoopPay helps to bridge the gap by offering a system that uses Magnetic Secure Transmission (MST) technology that that functions with existing point-of-sale infrastructure, which means it can be used with some 90% of existing credit card terminals, although the system requires the purchase of either a card case or fob in addition to the download of the app – an approach similar to that of Square. As some note, while pertinent now, the migration towards EMV could mean that Samsung is providing a solution to a short-term problem with the acquisition in a market that is rapidly evolving.

No mobile payment solution to rule them all

In addition to facing off against Google Wallet and Apple Pay, Samsung will be pitted against other emerging services, like that of CurrentC. While many retailers have sought less cost-intensive mobile payment solutions through proprietary apps using QR codes, retail giants Wal-Mart, Target, CVS and others formed the Merchant Customer Exchange (MCX) in 2012 to create a merchant-owned mobile payment system. The system gained notoriety when participating companies sought to block the implementation of systems like Apple Pay and Softcard and fell victim shortly thereafter to a sizeable security breach in which the email addresses of participants of the pilot program where accessed. In addition to claims of collusion, CurrentC has been lukewarm given the multi-step payment process using QR codes versus NFC’s more streamlined contactless payment method. As a result, the mobile payment market is becoming increasingly fragmented as it has pitted consumers who are seeking convenience against retailers who want to maintain greater control over transactions without having to adopt costly point-of-sale technology.

Balancing convenience and security 

The recent and high profile security breaches that have occurred at some of America's largest brands (Anthem Healthcare, Target, and the Home Depot) demonstrated that breaches can not only be expensive (several retailers we're forced to pay some $200M each in damages in the past 12 months alone), but can harmful to brand loyalty. Consumers disclose a treasure trove of identity theft information with each transaction they consummate. This makes finding the right balance between security, privacy and convenience a key priority for mobile payment vendors. While security remains paramount, consumers won't adopt a payment solution that is cumbersome. While PCI-compliant (and sophisticated encryption) is embedded into every payment solution, moving forward, VDC sees a key challenge for vendors to work with experts (i.e., the credit card industry, as well as privacy advocates, cybersecurity experts, government agencies – following the more military-oriented path towards security forged by JP Morgan) to draft, implement and enforce rigid sets of cyber protections across a fragmented payment market with significant “co-opetition” and channel conflict. 

With Eric Klein, Senior Analyst 

How Quickly Will DYI Mobile Initiatives Give way to Mobile Managed Services?

Mobile device proliferation has IT departments reconsidering how to best deliver increasingly business-critical mobile IT services.

While business analysts are now more experienced with identifying the right use cases and design requirements for mobile applications, designing, developing, integrating, managing, and maintaining these apps remains a significant task. Mobilizing and integrating manual business processes and workflows with modern mobile platforms is not only complex but costly, particularly when considering that many legacy applications and systems are not being abandoned. Creating new mobile applications to integrate with legacy systems requires both a high degree of specialized skills and additional software. As a result, enterprises are quickly discovering that mobile enablement is not only costly and time-consuming, but that managing and maintaining their deployment environments may be best handled by an external 3rd party.

VDC sees expanded usage of mobile devices to facilitate day-to-day business as an enabler for IT to reassert the importance of its role in digital transformation initiatives. However, considering that these initiatives are (likely) already underway, selecting the right partner(s) to deliver a suite of more reliable and robust mobile IT services will become increasingly important – particularly for organizations where mobile initiatives have become business-critical. VDC's research shows that even the largest enterprises are inadequately staffed with the mobile expertise required to properly manage and maintain a rapidly growing mobile deployment environment. Professional services vendors have proved their ability to deliver strategic business impact to their customers, not just operating cost reductions. Additionally, these vendors are increasingly well equipped to help their customer implement mobile innovations with more speed and less pain.  

That said, end-to-end “as a service” mobility solutions will ultimately be the de facto choice for many enterprises going forward. Considering the early stages of true mobile enablement in enterprise, managed mobility services from managed service providers (MSPs), communication service providers (CSPs), and systems integrators (SIs) are poised to benefit from the current mobile boom. Due to limited mobile IT support capabilities, VDC expects organizations to expand their relationships with third-party solution providers that specialize in mobile solution support and integration. The services opportunity will expand well beyond traditional mobile hardware support and break-fix services that are common today. Mobility-oriented services to support expanding deployment environments, application and database integration, as well as security, asset management and logistics services will be key areas of focus for professional services firms going forward.

VDC has just released a comprehensive Report on the market opportunity for Mobile Professional Services. Vendors were profiled in this Report include:

CSPs: AT&T, Sprint, Verizon Business, and Vodafone Global Enterprise
SIs: Atos, Cognizant, HCL, IBM Global Services, and Infosys
Mobile-First Solution Providers: DMI, Enterprise Mobile, Stratix, Vox Mobile and Zebra Technologies

Click here to download the Executive Brief, or email me for more information.

VC $'s Flowing into Mobile Development Startups

More than $200M has been invested in notable vendors that are participating in mobile development platform and tools market in just the past ~12 months.

Significant venture capital investments continue to pour into the mobile development platform and tools space. More than $200M has been invested in notable vendors that are participating in this market in just the past 12 months (see below). VC's who are banking on successful exits have reason to optimistic in our view.

On the M&A front, there have been two notable (and recent) acquisitions. mBaaS vendor FeedHenry was acquired by Red Hat in September 2014 for $82M, and testing and UI framework specialist Telerik was acquired by Progress Software in October 2014 for $262.5M. These are large transactions when compared to prior acquisitions in this space, which were on the smaller end of the spectrum (RhoMobile by Motorola, Nitobi by Adobe, and Worklight by IBM).

VDC believes that M&A in the space will be on the rise in terms of the size and number of acquisitions; this is natural in a rapidly evolving space. Core engineering will play a big part in vetting the valuation of future transactions with open technology, scalability, security, and resilience leading the charge. VDC sees valuations rising, based not only on revenue and progress with customer acquisition but on innovation and the ability to tie into broader ecosystems and emerging markets.

There are several logical buckets for potential consolidators in this space. Large enterprise software/middleware (such as IBM, Microsoft, Oracle, and SAP); Cloud vendors in the PaaS space who are looking to augment their mobile capabilities (e.g., Amazon, Citrix, Salesforce, VMware etc.); application lifecycle vendors (such as Adobe, Opentext, and Progress Software); mobile solutions providers (such as Intel and Synchronous); and potentially IT professional service providers looking to integrate and assemble their own solution to service their customers. We also believe there will be consolidation among the distribution, discovery, and analytics players. In summary, we believe the mobile applications space has reached an inflection point and thus will gain increased interest on both the funding and M&A front.

For more insights into our coverage of the mobile development platforms and tools market you can download the executive brief to the recent Report that we published on this topic.

Many SMEs in Field Services are still Conservative in Employing Mobility Solutions

Despite the buzz that surrounds enterprise mobility, the fact remains that a large percentage of SMEs have yet to integrate mobile software and hardware solutions into their line of business (LOB) applications. A recent survey from Software Advice, a company that researches and reviews field service solutions, revealed a surprisingly high number of respondents continue to rely on manual documentation, including paper and whiteboards for their LOB operations. Those who use software frequently rely on basic software like Excel and Quickbooks to handle operations for which they are not optimized. Often, this can be due to a combination of factors that include budgetary constraints, a lack of awareness of available solutions, and a tendency to stay with familiar ways of operating. The latter factor belies a conservative streak in many organizations that can transcend company size and lead to mobile deployments that run on decade-old technology. This is evidenced in the uptick of upgrades following the retirement of Windows XP as a Microsoft-supported OS. 

Software Advice’s findings are consistent with findings from VDC’s research, which shows that companies with fewer than 50 employees account for less than 20% of respondents with hardware and software deployments in field service settings. Frequently, the greatest barriers to entry are budgetary, as findings from a VDC end-user survey revealed that budget remains the top obstacle to implementing mobile solutions, particularly in smaller companies.

Organizations that do implement mobile solutions, though, are looking for operational gains from their workforce. VDC’s data shows that the single-greatest metric for measuring mobility solutions in field service applications is improved worker productivity, followed by improved worker communication and collaboration – findings that are consistent with Software Advice’s data, which shows that the top reason for purchasing software is to increase organization and efficiency. As a result, it does not come as a surprise that the top applications supported among VDC respondents include dispatch management and scheduling, asset management, maintenance & repair, and field sales, although there is a growing trend among respondents to flesh out the applications supported to improve customer loyalty and enhance their competitive differentiation.

As VDC has noted in previous reports, the key for vendors looking to continue the mobilization trend within field services will be in providing tactical rather than strategic support for potential clients.  Software Advice’s findings that an overwhelming majority (97%) of respondents wants an integrate suite to manage their business needs are in tune with the belief that SAP Bill McDermott underscored at this year’s SAP SapphireNOW: “In the end, the suite always wins. Always has. Always will.” We agree and see evidence of this in the M&A activity occurring within the mobile ecosystem.  However, while mobile enablement initiatives are underway in this industry vertical and others, there still is quite a way to go in terms of implementing the appropriate infrastructure and software for true mobile enablement for SMEs. 

VDC Releases Results of its Quarterly Rugged Device Tracker

This week, VDC published the results of its quarterly device tracker, which follows both quarter-on-quarter and year-on-year figures for major OEMs both globally and by region.

Notebooks on the rebound

After six consecutive quarters of contraction, the rugged notebook market is showing signs of life, growing nearly 10% year-on-year in Q2 2014, rising to over 100,000 units shipped for the quarter. This comes after a particularly difficult year, in which the continued effects of GD-Itronix’s exit from the market and budget restrictions in the wake of the government shutdown struck a market grappling with the trend of tablets being increasingly deployed in line of business applications as a notebook replacement. With a few notable exceptions, all major vendors tracked by VDC saw growth in Q2, with some companies recording growth in the double-digits over Q2 2013. This return to growth is not limited to rugged devices, as major consumer-grade manufacturers are also reporting strong YoY performance. One of the key catalysts in this return to positive figures is the replacement of legacy devices running on now-retired XP. This factor, in addition to US military contracts and state-level conditions driving enterprise opportunities, has primarily fueled notebook growth, which could continue its trend with the release of newly-announced Windows 10 in late 2014/early 2015.

Tablet growth is strong but slowing

Tablets remain one of the best-performing form factors among rugged mobile devices – the market for rugged tablets grew 16% in Q2 2014 over the previous year, with EMEA showing an uptick of 37% year-on-year. Despite a solid global performance, the blistering pace of acquisition has begun to cool to less heated rates, down from rates of nearly 40% in H2 2013 (where certain vendors recorded triple-digit YoY growth) to more sustainable levels as the market begins to mature. While organizations are finding the limits of using tablets as a notebook replacement, the benefits of the form factor remain tangible and strong. Although rugged tablets run primarily on a more traditional WinTel platform, the barriers that have prevented a more widespread adoption of Android devices, including a lack of viable applications and limited product portfolio, are being overcome and could gain momentum in H2 2014, moving into 2015.

Handheld devices remain in flux

The rugged handheld market remained weak through Q2 2014, which saw a lessening contraction of 7.9% year on year vs. -8.8% for Q1 2014. The headwinds from investment/upgrade delays, limited access to capital and competition from lower-cost smartphones continue to persist, although several notable Tier-1 deals provided some lift in Q2 and are expected to have a greater impact in the second half of the year. Much of the hesitation revolves around OS uncertainty, which has continued well into 2014 as the number of devices featuring Windows Embedded 8.1 remains low among rugged vendors, and many are hesitant to embrace Android as an alternative OS for line-of-business applications. An embedded version of Windows 10 could alleviate the situation, but the question remains as to how quickly a new embedded Windows OS could be rolled out before extended refresh cycles need to be considered.

Sluggish performance for vehicle-mounted devices

Despite modest quarter-on-quarter growth, the vehicle-mounted market contracted year-on-year for the second consecutive quarter by 1.6%. There has been considerable encroachment from tablets, particularly in areas like public safety. With the growing functionality and display size of tablet devices, many organizations are looking to tablets as a lower-cost alternative to specialized vehicle-mounted devices. As a result, vendors are increasingly looking to consolidate their reach and focus more on niche markets where they are able to have greater control; frequently, these markets are “heavy duty” applications that include mining, construction, logistics, and warehousing. Although the market is almost exclusively the domain of Window, the question remains as to which version of the OS (embedded versus full professional) will gain sway, as IT departments are increasingly looking to these devices to function more as a PC than as a mobile device or terminal emulator as the ability to multitask and improvements in connectivity continue to grow. 

For more information, click here

For a copy of the report, please email [email protected] 

Apple advances but doesn't revolutionize mobile payments, wearables

Yesterday saw the announcement of both the iPhone 6 and Apple Watch in Cupertino with considerable fanfare (and technical streaming issues).  Moving further away from Jobs’ dictate of a smaller screen, Apple has taken its cue from Samsung and the general smartphone market by offering both a 4.7” and 5.5” – marking its first foray into the phablet range. A relative late entrant to the market, the iPhone 6 will likely nevertheless help to recapture some of the market share that it has previously lost to Android which now accounts for more than 80% of the total smartphone market worldwide versus Apple’s 12%. While Apple’s market share is considerably higher in the US, it has slipped considerably in recent years as previous iPhone iterations have become increasingly incremental.

Boosting mobile payments

While the iPhone 6 boasts a host of improvements in display, battery life and thinness, the biggest enterprise news is in the inclusion of NFC and the introduction of Apple Pay.  Although NFC is not new technology, it has yet to gain mainstream traction as a means of mobile payment. NFC penetration in smartphones has begun to reach critical mass within the last generation of smartphones, with Apple being one of the last major holdouts. With the capability gaining momentum, VDC anticipates that NFC-enabled smartphone shipments are likely to reach 400-500 million in 2014. However, to date, while the technology is there, mobile payments have not taken off to a large extent, as evidenced by the relatively low take-up from Isis Wallet (now SoftCard). This has been primarily a function the trifecta of the lack of NFC-enabled payment infrastructure at checkout stations, general customer disinterest and smartphone shares that are only just reaching critical mass now. However, the sheer force of Apple’s cachet and its ability to bring partners like Target, Starbucks, McDonalds, Macy’s, and Bloomingdale’s could help to update a payment system that CEO Tim Cook noted is 50 years old. But despite the fact that the one-touch payment system shares no credit card information with the merchant and numbers are not stored on the phone, there are nevertheless concerns about the security of Apple Pay, especially in light of the recent security questions surrounding Apple and iCloud last week, in which celebrities' photos were stolen en masse. Given the sheer volume of credit card information that Apple holds and the rise in security breaches within companies like Target and, more recently, Home Depot, these are not idle concerns. With these recent breaches, retailers are on high alert and at least appear to want to do something to secure payments and are finally committing to upgrading their solutions.

The Apple Pay factor

Despite the potential of an NFC-enabled iPhone and the introduction of Apple Pay, the latter is not quite the disruptive move that many had anticipated or hoped for. Instead, Apple is largely taking on the role of enabler/facilitator and working directly with major banks and credit card issuers. While the revenue play for Apple in this scenario is limited, the option provides the greatest near-term boost to mobile payments. One outstanding question that remains is whether Apple Pay will/can directly link checking accounts as a payment option, as PIN code entry becomes an issue.

The wearable people might actually want to wear

With a hint of Jobsian flair, Cook announced that Apple did in fact have one more thing – the announcement of the highly anticipated, much-discussed smartwatch, simply named the Apple Watch. Staying true to its roots in product design, the device seeks to avoid the current hurdle of smartwatches being viewed as miniaturized smartphones strapped to the wrist. Although Apple emphasized the Watch’s high degree of customization, the company remained quiet on the topics of display resolution and, more importantly, battery life. Despite the current lack of specifications, the Apple watch has integrated key features that VDC believes are central to the success of the form factor: namely, the designing of a product that has a markedly different interface and means of interaction than other mobile devices. By supplementing the capacitive touch screen with a navigation wheel/home button dubbed the “digital crown”, the Apple Watch provides a simple and elegant solution to navigation while keeping the display un-obscured. More importantly, though, Apple will be making the API available to developers to create a host of applications that are specific to the form factor. As VDC will be discussing in depth in its report on wearable devices later this month, it is the combination of a rich application development ecosystem and relaying of contextual information in a format optimized for mini-interactions that will be the key to success not just for the Apple Watch, but for wearables as a whole. What remains to be seen, though, is the extent the Apple Watch will succeed as a wearable, given that the device – like other smartwatches with the notable exception of the Samsung Gear S – remains tethered to the smartphone and does not function as a standalone product. Although Apple has engineered and designed a strong product, the market has yet to see a true killer app emerge to solidify the form factor.  Nevertheless, the integration of NFC also adds potential to the device that, along with the other aforementioned capabilities, could help make smartwatches finally gain the traction needed to transition to fad to mainstream form factor with far-reaching opportunities within an enterprise setting.  

(with David Krebs, Executive Vice President)

Smaller Mobile Form Factors on the Rise for Line-of-Business Workers

The market is there, but headwinds remain

VDC Research has released its annual enterprise mobility report for smartphones and handheld devices, showing  that  the use of mobile devices to support line-of-business workers across numerous sectors continues to grow as organizations benefit from an increasingly connected and productive workforce. Industries continue to internalize the benefits of a mobilized workforce, as data from VDC shows an anticipated average increase of mobility-based budgets for 2014 of 10.6%. Smaller form factor devices – namely rugged handheld computers and smartphones – are among the most common devices being leveraged. VDC anticipates that a total of 3.3 million rugged handheld devices and 34 million smartphones will be deployed in 2014, growing the installed base to almost 70 million units.

However, increasing budget pressures and uncertainty in OS direction with rugged handheld devices are driving organizations to deploy greater numbers of smartphones for line-of-business applications. This trend has been aided by an expanding portfolio of third-party peripherals and accessories to bridge the gaps in data collection. The shift has been greatest in customer-facing industry verticals that are less centered on data collection and have fewer environmental requirements. This has primarily been the case in areas such as hospitality and retail, although there is interest in DSD and field services to adopt consumer devices and a growing desire to find a way to make BYOD work for frontline workers.

OEMs are evolving their designs

In response to the trend toward BYOD and enterprise-issued consumer devices, OEMs have evolved their product portfolio, taking design and user experience cues from their consumer counterparts. The rugged market, which traditionally has been divided primarily between data collection-centric “brick-style” devices and more portable PDAs, has expanded to include the rugged smartphone – touch-centric devices with no physical keyboards running on Android, but with fully rugged environmental specifications. This sub-category of smartphones represents one of the fastest-growing categories of small form factor devices for enterprise mobility, and VDC forecasts that the market will reach $3.8B by 2018.

OS uncertainty remains the largest obstacle to growth

Refresh cycles, which have become extended in recent years, are beginning to return in force among tier-1 companies. In the Americas, Home Depot, UPS, and the USPS are leading the charge with upgrade cycles that remain firmly rooted with rugged devices. Other organizations are returning to rugged devices after having experimented with smartphones in a line-of-business setting, which will also help to boost figures. However, the greatest obstacle for rugged OEMs will be OS direction. The majority of rugged devices on the market feature Windows Mobile or Embedded platforms that are rapidly approaching end-of-life, and the transition to Windows Embedded Handheld 8 has proven to be far from smooth, with mixed support from the OEM community. This has provided an opportunity for Android to enter the rugged market, but the OS faces its own issues of enterprise support and security, leading to muted demand from end users. This has led to considerable hesitation, as end users aren’t fully comfortable. As a result, VDC is seeing companies taking more of a ‘wait and see’ approach while maintaining their installed base.

For more information on the report, click here

BlackBerry Looks to Voice Encryption to Retain Customers

BlackBerry's acquisition of Secusmart, a secure communications specialist, gives BlackBerry a fighting chance to hold onto its government customers.

Earlier this week, BlackBerry announced that its acquisition of privately held German firm Secusmart as part of its drive to become the handset OEM of choice for security-conscious clients in federal markets and in enterprise. While Secusmart's technology has powered BlackBerry's encrypted emails and texts, secure browsing and encrypted file system since 2009, BlackBerry will now integrate going forward through this acquisition Secusmart's Security Card technology. The solution is dependent on the usage of a micro-SD card which features a crypto-controller with a PKI coprocessor for authentication. An additional high-speed coprocessor encrypts voice and data communication using 128 bit AES. Considering BlackBerry’s shrinking device sales, the company must continue to innovate specifically on its platforms embedded security in order to remain relevant as a handset OEM.

Although BlackBerry's footprint in federal markets and in regulated environments is significant, when compared to the overall enterprise market opportunity, they are a niche market. However, what works in BlackBerry’s favor is the fact that companies in these market segments are as reliable as a vendor can hope for in terms of repeat business and year-over-year growth potential due to their reliance on mobile technologies. Indeed, BlackBerry's CEO John Chen sees "these markets as equating to half of IT spending in mobile technologies"; while this is a bit of an overstatement in our view, the opportunity is significant. Under Chen, the company has been very clear in its aim to reinforce BlackBerry as the best platform for secure communications in enterprise settings, and particularly in regulated industries. However, as has been well documented, BlackBerry continues to lose customers to EMM vendors like AirWatch, Good and MobileIron, who have all initiated marketing campaigns focused on painless switching to their respective platforms. While these campaigns in aggregate have had varying success, there is no question that there has been attrition. Although BlackBerry has “opened up” its platform and now allows competing EMM vendor to manage its devices, VDC saw this move as signaling that the company recognizes its position as the incumbent has waned and needed to move with the mobile ecosystem.

The acquisition of Secusmart does bring new high profile reference customer for BlackBerry to tout (in addition to President Barack Obama) with German Chancellor Angela Merkel who found herself the victim of a major security breach (click here, and here) when her iPhone was hacked this past November.

Encrypted Voice is a Super Competitive Market

Moving forward, BlackBerry’s Security will remain as the company’s key differentiator, and is why the company’s best shot for a turnaround rests on its ability to retain and grow its market share in the enterprise.  However, the market that the Secusmart acquisition signals that the company plans to participate in is a crowded one. Organizations such as Motorola Solutions whose bread and butter is in government and regulated markets have had competing products on the market for some time. Motorola Solutions AME2000 product provides end-to-end encrypted voice and data communications on public and private data networks. The solution targets public safety and federal markets which are core target markets for the company. AME200 also features sophisticated hardware-based encryption and key management via a proprietary microSD component of the solution (called CRYPTR micro), to support Federal Information Processing Standard (FIPS) 140-2 Level 3 and Full NSA Suite B Cipher Suites. Motorola isn’t the only vendor either: Silent Circle emerged earlier this year (whose “surveillance proof” Blackphone, started shipping just last month) which can encrypt voice calls, Boeing’s Black phone features an embedded “self destruct” security feature along with the ability to communicate via satellite transceivers for secure voice communications, and FreedomPop’s privacy phone (which runs on Samsung hardware) key feature is voice encryption, and it can even be purchased via Bitcoin for “anonymity”. Suffice it to say that the secure voice and messaging market has quickly become crowded. Not to mention that vendors such as Open Whisper Systems and Silent Circle offer apps (no hardware required) to bring encrypted voice capabilities to the Android and iOS platforms.

A Niche but Valuable Market

While the confidentiality of private telephone calls has come under attack, the need for voice encryption for enterprises and private individuals is not apparent. There is no question that our privacy is being threatened by increasingly sophisticated adversaries and that certain executives and government personnel that routinely engaging in the exchange of private information or who conduct sensitive business transactions from abroad may be targeted. Large global organization do face the challenge of securing a global network of branch offices, subsidiaries, partners and project teams around the world and having the confidence that sensitive information and trade secrets remain confidential is important but the overall market is limited in scope and remains firmly as a niche. Nevertheless, as BlackBerry’s enterprise presence is becoming increasingly relegated to federal and regulated environments, embracing its niche position is, in VDC’s view, the firm’s best option for long-term viability. Acquiring Secusmart could give BlackBerry the security boost it needs to retain its current customer base and provide meaningful differentiation.

Apple Welcomes IBM. Seriously.

Tuesday saw the landmark announcement of an exclusive partnership between Apple and IBM in which IBM will bring its MobileFirst solutions to iOS and allow the former rival to sell iPhones and iPads with industry-specific solutions. With the impending release of the more enterprise-friendly iOS8 later this month, the announcement represents the culmination of Apple’s transition from consumer trendsetter to enterprise powerhouse.  

A decisive break from the Jobs Era

The move firmly cements Tim Cook’s vision for Apple as a clear departure from the Jobs era, which saw much of the company’s history defined as a direct rivalry between the two firms, in which Jobs saw IBM as the Goliath to be defeated by his underdog David of a company. At its peak in the 1980s, the rivalry indeed took on near-biblical proportions in the form of full-page taunts to IBM in the Wall Street Journal and the now-legendary Super Bowl ad. Now, Apple has become the hardware giant and IBM has transitioned towards the cloud, big data and enterprise mobility, having moved away from the personal computing hardware in the last decade and making key acquisitions in analytics, security cloud computing infrastructure to position itself accordingly.

Apple’s shot across the bow to Android

The announcement comes on the heels of Google’s I/O conference, where it revealed not only the upcoming Android L, but a closer partnership with Samsung to integrate KNOX into the next version of Android. Dubbed Android for Work, the collaboration aims to place Google and Samsung at the forefront of enterprise mobility and overcome the shortcomings Android faces by the variety of handsets and versions of the OS on the market that all vie to compete against Apple’s iOS products. By teaming up with IBM, with its enterprise IT credibility, Apple has its presence in enterprise even more daunting. Although much of the company’s success in the past has hinged on its massive consumer popularity, but this was hindered by a lack of professional services, support and distribution channels geared towards enterprise. In addition to the engineering of native, industry-specific applications for iOS Apple seeks to overcome this with the combination of AppleCare for enterprise that is supplemented with on-site technical support and service that will hold considerable appeal for CIOs worldwide. By offering support service capabilities ranging from break/fix support and onboarding to asset and application management and security services, Apple has laid down the gauntlet and, at the very least, stolen much of Google’s recent enterprise thunder.

Crunch time for the competition

News of Apple and IBM’s new partnership will have a profound effect on other OEMs, particularly Samsung and Microsoft. For the former, this will likely mean forging and even closer relationship with Google, where the company has hesitated in the past. Despite their collaboration to integrate KNOX on Android, Samsung has shown a certain level of ambiguity in its relationship to Google, namely in the release of the Samsung Z in Russia and India featuring the manufacturer’s proprietary Tizen OS. At the heart of it, VDC sees two non-enterprise focused companies that have made decided enterprise overtures. While Google has made inroads to diminish Apple’s lead, this relationship could propel Apple back towards a considerable lead.

Meanwhile, Microsoft is in the midst of its own re-positioning as it is poised to announce the largest round of layoffs in the company’s history. Microsoft has struggled in bringing its devices into the era of mobility, and only made its Office suite available for the iPad in March of this year. Apple’s announcement could very well move the company further from hardware and increasingly into the cloud. As recently as last week, new CEO Satya Nadella published a company-wide memo outlining Microsoft’s intention to redefine what the company views as its core in a world that he defines as “mobile-first and cloud-first.” With Apple and IBM’s exclusive new partnership, Microsoft will have its work cut out for it in preparation for next week’s MGX and beyond.