While it is tempting to try to predict and pontificate, I think it’s high time I stopped doing that. As entertaining as it is, predicting the future, even broadly, is something I’m beginning to see as a pointless exercise. Looking back is useful, and I want to do some of that here. But I’m more interesting in starting to talk about what’s next for me in 2017.
With less than ideal numbers for Q2, and lots of dire predictions and teeth gnashing, asking “what’s next” for RIM naturally arises. There are plenty of ideas: sell to someone else, break it up and sell off the pieces, nothing is wrong so do nothing. First, the idea that nothing is wrong is a bit optimistic. RIM has been losing marketshare for a while now, with little end to the decline in sight. The Playbook has been a dud. Some were expecting Blackberry 7 to make some difference, but so far, it hasn’t even put a scratch in the other guys. Why should it? It’s not like it is so completely new and different. It’s another evolution, and another operating system that you can only get by upgrading hardware. There are others that think that the future QNX-based devices are going to be RIM’s saviour. I’m not so sure. Those are still a long ways out, and there is a new iPhone and probably another iPad iteration coming before the middle of next year. QNX could be RIM’s swan song in the handset space.
But what are the options and alternatives? Can RIM be saved in any way at all, or is some kind of break-up and/or sale the only option?
Before discussing a possible path to the future for RIM, I think it is important to understand RIM’s problems, and where they stem from. The issues are RIM aren’t financial, at least not yet. They have a modest amount of cash in the bank, and while market share continues to slip, they do see increases in unit sales (it’s the “rising tide lifts all boats” effect of a growing overall market). RIM’s problem, fundamentally, is product. They have products that fewer and fewer people (and companies) want. This product problem stems from a “handset-first” approach to the underlying operating system, devices, ecosystem and upgrade paths, that all starts at the top, with Balsillie and Lazaridis. There is no question that these are smart guys. They got RIM to the top in smartphones in North America, and became a credible number 2 globally after Symbian. But they seem to be stuck in a mindset that people are buying handsets, and not small mobile computers. They focus too much on what the carriers want and seem to largely ignore the customers and the app developers. To improve its product, RIM needs to change its mindset and culture. That won’t happen with the current senior management in place.
So, how do you fix the product? What does RIM have that could save it? First, I don’t think that trying to sell yet-another-mobile-OS is the way to go. The market has made its choice, and that is iOS and Android. It doesn’t matter if other operating systems are technically superior. Customers don’t buy tech specs, they buy devices that they can do stuff with. Both Android and iOS have rich ecosystems, with very, very large selections of apps. It doesn’t matter that there might be enough apps on Blackberry AppWorld to meet most customer’s basic needs. People look at the numbers: AppWorld has a few thousand, Android Market and iTunes App Store have hundreds of thousands. Two have “lots”, one has “almost nothing”. A new operating system isn’t going to change those numbers for RIM. Instead, I think it is time to face reality, and face up to the fact that neither Blackberry OS nor QNX have a viable future.
What does that mean? One word: Android. It gives RIM instant access to a large suite of apps and a large body of developers who want to build them. It means RIM will need to give up on the idea of getting any revenue directly from apps, unless they want to run their own app store. I would counsel against that. It just adds to the fragmentation in Android app stores that is starting to build, and they would likely be lost in the noise.
Okay, but how does becoming yet another Android manufacturer help RIM? By giving them a popular platform on which to continue to build and grow their considerable expertise in the enterprise market. RIM has 3 powerful products that risk dying along with Blackberry and Playbook: Blackberry Enterprise Server, Blackberry Internet Service and Blackberry Messenger. RIM was able to more-or-less own the enterprise market, from small one-person shops to large multinational corporations, on the strength of the infrastructure that supported the Blackberry device and made it useful. It was what allowed Blackberry to supplant Windows Mobile and PalmOS in North America. Even with additional features in products like Microsoft Exchange, BES offers better security and tighter integration with the devices, but only with Blackberries. RIM needs to broaden the appeal of their server-side products, and using Android allows them to keep that, but widens their appeal on the consumer side by having access to apps (and lots of them) without some awkward or “it works most of the time, except…” emulation layer.
What I see is a 4-prong approach. It start with RIM-built and RIM-designed Android handsets that include built-in support for BES, BIS and BBM right out of the box, tightly integrated with the operating system for communications and security. This combination would give enterprise customers the security and control they are familiar with today. For consumers, it would give them easy access to infrastructure (through BIS and BBM) that is both secure and simple to configure.
The second prong is to include Android apps from RIM for non-RIM Android devices, so that they can get some of the benefits of BIS, BES and BBM. This expands the potential customer base for BES installations, such that RIM could be making BES and in-house BBM server sales to companies, even if they don’t want RIM devices. BIS could offer a basic, free level of service, as well as a subscription-based service for more features.
The third element is to build apps for iOS, along the same lines as the general-purpose Android apps. Stop excluding Apple devices and, again, include them and make the case for BIS, BES and BBM, even if the customer wants to use iPhones or iPads. It won’t be as tightly integrated as a RIM/Android device, but some integration is better than no integration.
The money for RIM won’t necessarily be in the handsets, and it won’t be in the apps. RIM could potentially charge a premium for some of their devices (mainly those aimed at the enterprise market), and some companies might be willing to pay to gain the added security and control. Even if they don’t want the RIM devices, RIM can still provide them with secure, reliable, scalable infrastructure. Their revenue will be largely in infrastructure and services. I would still see some handset revenue, but it may not be as big as it has been in the past.
The fourth prong in this is a bit more radical, and builds on ideas others have put forward: the idea of virtual devices on a single handset. The reality is that people want to be able to keep their handsets, and use apps they’ve paid for, but still be able to use it for work. They don’t want to have to carry 2 phones, and they don’t want to have to lock-down, compromise or otherwise give up control of their handset to use it at work. There is work underway to build virtual handsets, where a single device would have multiple personas. RIM should jump on this, offering a “virtual handset” for work-related activities, that is locked down and controlled by the employer’s IT group, plus a second virtual handset that is the user’s. This would mean adding features to Android that can run on more than just RIM devices. It won’t be easy, and it will have considerable challenges. But it offers companies a way to let people keep and use their own devices for work-related activities, while maintaining the control and security that some organizations need. If RIM wants to try to keep the enterprise market, or at least maintain a reasonable presence, I think this is part of the solution to doing that.
These are radical ideas, no question. But RIM’s current plans really don’t give the company a future, as far as I can see. There are other technically competent operating systems (WebOS, Windows Phone) that are either dead or dying. The Playbook has been a complete dud (1 million units in the first year? Who cares? Apple sells more than that in iPads every 2 weeks). Developers don’t care about Blackberry, and QNX isn’t going to change that: it isn’t the platform, it’s the size of the customer base that counts, as well as the toolset and relationship with developers. Stop trying to fight the market, and instead go with it, but build on your own strengths.
I doubt these will ever come to pass, for one simple reason: it will take too long to bear fruit. Even starting today, RIM would be hard-pressed to have their first Android units available in a year. However, they could have their Android and iOS apps ready sooner, with updates to BES, BIS and BBM to work with them. That would keep RIM relevant while they worked on handsets and tablets with their own enhancements. However, shareholders and the market are growing impatient, and I expect they’ll take the easy way out: break up the company and sell off the pieces. It will probably start with Balsillie, Lazaridis and other senior management being replaced. Their replacement(s) will then start to package up the company as the talent jumps ship, and without that talent, some of the parts of the company just aren’t worth as much.
It is too bad, because there is a lot of talent at RIM. It is being held back and misused because of a commitment to failing products and no real bold or innovative initiatives. I’ll admit that “build another family of Android handsets” doesn’t sound very innovative on the surface. But, unlike the Samsungs and HTCs of the world, RIM still has a sizeable presence in the enterprise space, as well as experience running large and reasonably reliable infrastructure services. Building Android handsets, while a bit “me too” in appearance, means RIM can focus on the areas where they actually add value, and take advantage of Android’s presence in the consumer space. It solves the “we don’t have enough apps or content” problem. It widens the appeal of BES, BIS and BBM from the limited base of RIM-only devices, and would open up a lot of devices to be able to run on those servers, making them more appealing to enterprises. It’s a platform with a future and consumer interest. It’s a product people want, and that is ultimately what RIM needs.
With Google gobbling up Motorola’s mobile and set-top business, what about RIM? Would RIM have made a better buy for Google than Motorola? Will this hurt RIM?
First, I don’t think that RIM would have been the right choice for Google. Motorola doesn’t have a native operating system of any note anymore, and was doing a lot in the Android space. Buying RIM would have been messy, because it would have meant dealing with the legacy of BlackberryOS and QNX, neither of which would have survived the eventual reorganization/purge of systems. While Motorola does come with some history, and still makes feature phones, I think RIM’s history and their position the market would have been a far bigger liability. On top of that, there are people at Motorola that will have deeper experience in general consumer electronics design and manufacturing, which can help Google in other areas like laptops/notebooks and set-top boxes. RIM isn’t likely to have that same depth of experience.
There are a few things that RIM will now be up against. First is a second, determined competitor that can offer an integrated product. This shouldn’t be just about Apple now, it will be Apple vs. Google going head to head. The only other 2 integrated manufacturers are RIM and HP, and HP is largely non-existent in the market. HP’s share ,with WebOS, barely qualifies as “other operating systems” in the various pie charts. RIM still has a noticeable presence, albeit one that is shrinking over time. This deal won’t make it easier. While RIM’s hardware is generally well made, the designs are generally clunky or just plain dull. There’s nothing wrong with that: Toyota has made a pretty good name for itself building cars with rather plain designs. But what RIM doesn’t have, and that a company like Toyota did have, is a reputation for a level of quality and service that commands people’s attention, and at one time commanded a premium. One piece of the Android puzzle that has had rather light treatment is enterprise integration. Apple started to pay attention, and that has opened up the enterprise market despite Apple not targeting it explicitly. Google, with their own extensive experience with enterprise operations, will likely address that issue, and start to look at filling the gaps for Android and make it more attractive to enterprise customers. This hits RIM right where they live. The enterprise market is the only place where RIM has a significant presence, and they are losing ground to Apple. Google just makes this harder.
The second thing RIM will have to deal with is the absence of a strong potential partner or buyer. HP has invested too much in WebOS to try to add Blackberry and Playbook to the mix. IBM has shown absolutely no interest in the mobile space, beyond enabling technologies. Nokia is in tight with Microsoft. Google was the last big “free agent”, and they’ve made their bet with Motorola. RIM’s best hope might be a deal with someone like HTC or Samsung. Both are big players in Android, and currently offer Windows Mobile devices. However, Google could end up pushing them to the margins, forcing them to scrap over the bargain shoppers as it targets the sweet spots of the market. Moving further to Windows Mobile may be an option for HTC, Samsung, etc, but the Microsoft/Nokia deal may end up like Google/Motorola, freezing everyone else (although in a much smaller space. I don’t see WinPhone gaining a lot, given they’ve gone virtually nowhere in a year, and WinPhone 8 really won’t matter). There are some “way out there” possibilities like Oracle or Lenovo, but I really don’t see those as something to bet on.
A wildcard for anyone wanting to buy RIM: the Canadian government. The collapse of Nortel was a blow to Canada, since it took a major player in telecommunications off the landscape and one made in Canada. Our most visible technology crown jewel is RIM, and you can expect that any foreign purchaser will get the attention of Canadian politicians. I’m not sure that a deal could be stopped, not without new legislation, but it could be enough of a deterrent that keeps RIM unattractive as a purchase by someone else.
Another challenge for RIM will be to continue to attract developers and content. Why? On content, RIM simply doesn’t have the clout or cash to convince lots of labels, studios and publishers to jump on board to try to improve the RIM ecosystem. Apple carries a lot of weight in the entertainment industry, and Google could be expected to carry similar influence. The success of the iPhone is as much about the ecosystem as it is the device itself: lots of apps for information, productivity and entertainment, lots of music, movies, TV, books, magazines, newspapers. I would expect Google to figure this out, and start to use it’s large installed base (and eventual fully-integrated products) to act as a counterweight to Apple, allowing the studios and labels some latitude that they don’t have right now. RIM, with their smaller and shrinking installed base, will have a hard time playing in that space.
As for developers, RIM hasn’t exactly been a favourite destination. Sure, there are generally instances of all the apps you “need”, but customers don’t care about “need”, its about want. Given a choice between an app store with “tens of thousands” and one with “half a million”, they’ll gravitate to the bigger store. It won’t matter to them that many may be of dubious quality or value. It’s not like the smaller store offers higher quality apps: most are simply Blackberry versions of an iOS or Android app anyways. RIM’s store isn’t a boutique of higher-quality, highly-exclusive apps. It’s just a smaller store with less to choose from. It’s not like they can claim some special access to something like business users, because lots of business customers are choosing iPhone and Android: the “grown up” apps have an audience on iPhone, too.
In short, it does not bode well for RIM, and the Google/Motorola deal hasn’t made it easier for them. Even if Google was an long-odds potential buyer, the odds are now zero. You can expect some consolidation and reduction in fragmentation in the Android space, making Android all that much harder to compete against. A second company with smart and creative people, who I expect will find ways to bolster on industrial design, is all that more formidable. RIM’s road just got rougher and the hills just got steeper.