A piece on Forbes posits that RIM can survive if it does two basic things: take on Microsoft or focus on being a niche player. Taking on Microsoft would seem to be a pointless exercise. The idea of a niche product, depending on the niche, could be intriguing.
Small + Small = Small
Thinking back to a first-year calculus course at university, where we were learning about math with infinity (∞), one precept is that “small + small = small”. That would seem to apply to the strategy of “take on Microsoft, not Apple”. I’m not sure how taking on Microsoft would matter. Microsoft and RIM now have minuscule shares of new device sales. Globally, both are somewhere between 2% and 4% of new devices. They share a sliver of the marketshare pie labeled “other platforms”, which represents about 10%of all new sales. Together, iOS and Android now own about 90% of all new smartphone sales.
So how does taking on Microsoft’s shrinking slice of the pie help? Barring a miracle, Windows Phone and Blackberry will probably slip below 2% of the market each by the end of 2012. Sure, somehow eliminating WP would double RIM’s marketshare of new phones. But (to paraphrase Cyrano Jones from The Trouble With Tribbles) twice almost nothing is still almost nothing. It isn’t a solid base for recovery. It is a shrinking and unstable base. This isn’t moving from strength to strength.
Besides, taking on Microsoft isn’t going to be easy. While Microsoft marketing isn’t exactly brilliant, it is certainly far more capable than RIM’s sad efforts. And Windows Phone does have a more compelling ecosystem (such as it is) compared to RIM. They have more developers, more apps, and are continuing to try to appeal to the massive base of Windows developers. They have more and better access to content, and some history in building general-purpose computing platforms. These are not checkmarks we can put in RIM’s column of skills and assets.
But As A Niche Player?
The article also presents the idea that RIM can somehow continue exist as a niche player in the smartphone space. They specifically mention RIM’s superior security features, and it is one area where RIM still holds a lead over iOS, Android and Windows Phone. RIM does have a strong grasp on mobile device security. But the lead RIM has in this area isn’t nearly as big as it was every a year ago, and it is shrinking. Android is still the weakest of the 4 main platforms, but that is only a temporary situation. Android has come too far, and has grown too much, for security to continue on as it is. RIM has a lot of smart people when it comes to mobile security, but they don’t hold the monopoly on that talent.
RIM could refocus their efforts on integration, security and infrastructure, and could potentially become a niche player in ultra-high-security/ultra-high-reliability mobile devices. These would appeal to organizations for which Bring Your Own Device is simply not an option. Municipal protection services (fire, police, ems/ambulance) need devices that are both very secure, very durable and highly reliable. Military and intelligence organizations have a need for devices that will keep secrets and take a beating.
But even with the inflated prices government organizations typically pay for products, would it be enough to keep a company like RIM going? Basic R&D is expensive enough. Having to explore exotic materials, and pay high-priced talent to explore a niche like this is going to get very, very expensive. RIM’s current R&D costs are somewhere around $2 billion per year. Moving into the high-security/high-reliability niche won’t reduce that cost. It will probably drive it up (and possibly double it). It will also drive more costs on the infrastructure that RIM provides. The focus will shift from scaling to reliability and increased security, and given RIM’s recent round of outages (4 now in the last 3 years, although only one was global in nature), RIM needs to spend some serious time and money revisiting how their infrastructure is deployed, updated and run.
RIM appears to be on their way down to being a company with $12 billion or so in revenue (possibly less). Yes, a family of devices aimed at government organizations and companies that demand ultra-high-security should be able to command a premium. But will it be enough to fund the $2-4 billion a year they will need in R&D, as well as the billions it will cost to run and maintain the global infrastructure needed to support these devices? That remains an unanswered question.
But What Else Can They Do?
Of course, this could be a case of RIM having nothing left to lose. They still have a footprint in the enterprise and government agency market, and it is far larger than their consumer presence. This isn’t to say that RIM couldn’t continue to sell niche devices through the carriers for general use. Some individuals will also find a device that is durable, secure and reliable useful. Taking this approach would play to the strengths of RIM and their talented team of people. It also doesn’t require spending enormous money on marketing and branding, because much of the sales cycle is more one-on-one with prospective buyers.
RIM’s chances of becoming a meaningful player in the consumer market appear to be done. The odds of them gaining back any share in the mainstream enterprise market appear to be close to zero. But maybe there is a chance they can make a go of it as a niche player in the high-security market. I would say that it will take more than just being highly secure. I think their products and supporting services would have to have 3 key elements: highly secure, highly reliable and highly durable. That will mean rethinking product design and materials, revisiting the infrastructure they offer today, and taking their already capable security and going further with it.
Doing this will effectively end any appeal the Blackberry might have held for the larger developer community. Instead, RIM will need to court developers who will build apps for a more focused market. It will be a smaller community of developers, and they will need RIM’s help in selling their apps through RIM’s channels. These aren’t going to be $0.99 games or $4.99 productivity apps. We are talking about something that will need to be substantially more expensive to justify building them for a small user community.
This won’t be an easy road to travel, but at least RIM is familiar with the territory. It is one space where they have a substantial head start on the other platforms. It means RIM may disappear from the social consciousness, at least as a general purpose platform. But perhaps it is one that allows RIM to continue to carry on.