Is Research in Motion’s Momentum Fading? Short answer: Probably

I read a brief post on TechVibes about RIM that posits that RIM still has plenty of gas in the tank, in part because of the forthcoming PlayBook. Their reasons for this are specious. Their assertion is that the PlayBook will make big in-roads in the enterprise, claims that none of the tablets have much of a chance, and that because it will likely be the “best” technically, it should do well.

These assertions have some problems. First, let’s look at the enterprise. When you look at enterprise spending, they spend a lot of money on IT. However, from my own experience in IT, a large proportion of that is spent on infrastructure items, not end-user technology like desktops, laptops and smartphones. A huge amount is spent on servers, networking and telecom, and software. For a device  like PlayBook, a substantially higher chunk of revenue is available in the retail market, where there are far more buyers.

The second assertion is that the PlayBook stands an overwhelming chance in the market compared to other tablets. If this is the case, then why does it appear that a number of businesses are looking at the iPad, and having it as part of their IT environment? Do the authors seriously think that IT managers won’t be looking at Android based devices like the Galaxy Tab? Granted, RIM’s security is somewhat better than iOS or Android, but it isn’t nearly as big a difference as it was a year or so ago. All of these devices offer reasonably encryption technologies and remote wipe features, which are probably the biggest concerns.

The last issue I have is with the idea that the best device, technologically, will win. Quite frankly, most people really don’t care about processor speed, internal architecture or the runtime environment. What they care about is form-factor, the environment they use and see, and the ecosystem that the device is part of. The PlayBook is a handsome looking device, but the lack of content and apps is going to hurt it from the retail point of view. I know it drives many technologists nuts that the best device, technologically, doesn’t always win. But that’s reality. If it wasn’t, the iPod would never have taken control of the MP3-player market and the Toyota Camry wouldn’t be the best-selling family sedan in North America. It isn’t what’s hidden under the hood, it’s what the owner can see, hear and feel that counts.

This isn’t to say that RIM is dead. Far from it. But, the PlayBook isn’t the device that’s going to suddenly gain them substantial momentum in the smartphone market, which is far larger than the tablet market. It isn’t going to stop businesses from switching to iOS or Android. Unlike Apple and the Android devices, RIM still lacks a unified product picture, and is probably at least a year away from it. And when the “next generation” of BlackBerry arrives, it will mean orphaning almost their entire installed base, because if Lazaridis is correct in his assertion, none of the current devices will run the next operating system from RIM. If the people who bought devices only a few months before the newer OS see that their newly minted toys won’t run the latest OS, that will annoy some number of them, and probably push them to iOS or Android for their next purchase. Being abandoned by your vendor never feels good.

As for the assertion that RIM can’t be faltering simply because they continue to see good revenue and profits: the market is still very, very new, and if RIM couldn’t make money in an environment where even being in 3rd place still means increasing unit sales, then I would be concerned. But everyone in the smartphone market is seeing increases in their installed base, because there are still a lot of people who haven’t bought smartphones yet (one estimate I’ve seen says that only about 20% of the potential total market has moved to a smartphone). It is still a few years before the market starts to look mature and saturated, so the continued rising tide will continue to lift all the boats. But at some point, the customers will become harder to come by, and that is when the real test of the various player’s abilities to attract customers will start to show.


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