There is a lot of talk this week about trouble at BlackBerry maker Research in Motion (RIM). The flurry of reporting was prompted by CEO Thorsten Heins’ move to retain Royal Bank of Canada and J.P. Morgan to evaluate, “strategic business model alternatives,” among other things. Might one of those alternatives be sale to a competitor? Well, yes. According to the Wall Street Journal, other advisers were hired by the board to determine, “how to salvage – or possibly sell parts of – its business.”
The causes behind these moves and rampant speculation in the tech industry are RIM’s likelihood of posting a second consecutive quarterly loss, talk of the need to cut $1 billion in cost this year, recent senior executive turnover, and the uncertainty and importance related to the upcoming BlackBerry 10 release. Even though RIM has lost over $30 billion in market capitalization over the past year, it may be even worse than it seems.
RIM Now has Challenges with CIOs
For those of you who know big company CIOs you are probably aware that many are not only allowing Apple and Android devices inside the enterprise, many are planning on phasing out BlackBerry altogether. It is not clear that RIM has acknowledged this internally but the data must be clear.
RIM’s problems started with employees wanting to use iPhones. The introduction of the iPad and its popularity among senior executives ensured that iOS based Apple devices would gain entry into the enterprise. Once that happened all options were on the table. Other devices were considered as well. Enterprises were no longer surrounded by the high wall of the BlackBerry Enterprise Server (BES). CIOs lost their one-stop-shop and now have to view BlackBerry as one of a portfolio of solutions which may be redundant.
Disassembling the BlackBerry Wall
CIOs were reluctant to break away from BlackBerry. RIM had done a wonderful job of providing centralized administration, management and security tools. It provided control, data security and peace of mind. However, the introduction of mobile Apple devices required a new solution because the BES remained closed to non-BlackBerry devices. It was the epicenter of the an enterprise ecosystem every bit as tightly integrated and even more walled off than Apple’s iDevices, App Store, iCloud and various other services. It led to an extremely profitable and entrenched business.
The new, device agnostic, solutions came out of an emerging application category, Mobile Device Management (MDM). These solutions didn’t provide administration, management and security features that matched BlackBerry, but they provided something to manage the influx of iOS and Android devices and they were adding features quickly. Some were even extending their features to enable management of BlackBerry devices.
This allowed CIOs for the first time in a decade to consider discontinuing BlackBerry altogether. And, they had cover. CIOs had senior executives insisting on allowing BYOD and they needed to find savings to offset their MDM software and additional administration costs. They were willing to wait for BlackBerry, but the wall remained up too long.
Will Enterprises Notice BlackBerry’s Exit
Enterprise IT departments will clearly feel the impact of BlackBerry’s exit as the sole source of mobile messaging. It is leading to more cost and support effort. They will also feel acute impact if there is a data breach that would have been more easily prevented when using the BES.
However, early indicators are that former BlackBerry users are not negatively impacted. In fact, many are happier and feel more productive because they now have a wide variety of smartphone apps they can utilize in a single communication device. The consumerization of IT is a juggernaut and there is a lesson for other tech companies who ignore it. Cisco faced many of the same headwinds with its Cius tablet product line.
Can BlackBerry Make a Comeback?
It is ironic that the company which introduced the killer app of mobile device messaging is struggling now that the mobile era is in full swing. However, it illustrates how fragile and short-lived technology business models are today. Apple changed the rules and everyone was forced to respond. RIM now has responded with BlackBerry Fusion which can manage Android and iOS devices and there is lot riding on the BlackBerry 10 release. The fear in the markets is these steps are too little too late.
With that said, RIM was sitting on more than $2 billion in cash and short-term investments in its March financial report. It is a global brand with deep enterprise relationships, more than $18 billion in revenue last year and cash flow from operations of more than $1 billion in its most recent quarter alone. The New CEO Thorsten Heins is only four months into his tenure, is clearly attempting an aggressive turnaround the fruits of which will take a least a year to play out. There are concerns about Apple’s refusal to customize for the enterprise and security and fragmentation risks posed by Android. This provides an opening because the market would like another choice that is enterprise-centric. The bad news is that the current assumption is Microsoft and not BlackBerry will fill that void. To make matters worse, enterprises are now getting comfortable with consumer devices.
Time is Heins’ enemy at this point. RIM’s assets appear to be eroding quickly and there are clear indications of weakness. BlackBerry handset shipments declined 21% between Q3 and Q4 of its fiscal year 2012 and revenue dropped 19% in the same period. Software as a percent of revenue is not climbing quickly enough. CIOs are letting this happen now that the BlackBerry wall is down. The very public issues faced by RIM are only accelerating this process as IT departments institute back-up plans so they won’t skip a beat if the post-BlackBerry enterprise comes to pass.
What do you think? Is BlackBerry doomed? Will enterprises feel an impact?