Rivals Take Aim at RIM

By focusing on e-mail devices for corporate clients, Research In Motion (RIM) has been able to carve out a small but lucrative niche in the wireless handset market. As competition among wireless device suppliers intensifies, large companies such as Nokia, Motorola and Microsoft have set their sights on loosening RIM’s grip. “The handheld device manufacturers have been seeing their revenue and profit margins get squeezed, so they are looking for new opportunities,” said Bob Egan, service director, emerging technologies at market research firm The Tower Group.

These vendors are now eyeing RIM, which has been a successful story for a variety of reasons, starting with its keen focus. While other suppliers spent their time trying to build voice products for the consumer market, the company used its resources to build a strong corporate e-mail system. “The BlackBerry is a closed system, an unappealing trait in most markets but one that has proven successful in the corporate space,” noted Ben Wood, a research vice president at Gartner Group.

Because RIM provides all of the pieces (hardware, applications, synchronization software) along a connection, it can offer higher availability and stronger security than other handheld products. Since RIM has focused on making sure that BlackBerry connections stay up, users have come to expect 99.95 percent availability with these systems.

Unlike general purpose operating systems, like Microsoft’s PocketPC and Symbian, the BlackBerry has not attracted a lot of attention from hackers; there have been few instances when its system has been compromised. Consequently, the BlackBerry has become a widely used and widely trusted technology among executives, lawyers, doctors and stockbrokers.

Controlling All the Pieces

Also because RIM controls all of the pieces, putting a BlackBerry network in place and maintaining it has been easier to put together than alternatives. While the initial cost of a BlackBerry may be higher than alternatives, it often does not require as much ongoing maintenance as other products.

Now, competitors are mimicking RIM. In July 2005, Motorola unveiled its BlackBerry competitor, the Moto QWERTY phone, which supports Microsoft’s Exchange 2003 e-mail server as well as a variety of third party e-mail solutions. As evidence of its interest in the business e-mail market, earlier this month, Nokia completed the acquisition of Intellisync, a company that makes wireless messaging and application software that enables mobile devices to exchange information more easily.

Microsoft has taken a few steps to make its products more attractive to corporate customers. The firm enhanced Exchange Server 2003 by adding support for more mobile devices. In addition, the company improved its support for the ActiveSync protocol so Exchange can synchronize e-mail from other mobile phone vendors. A free upgrade for its Windows Mobile 5.0 software, called the Messaging and Security Feature Pack, enacts push e-mail software where messages are automatically forwarded to interested parties rather than require human intervention.

Still Perched in the Top Spot

Despite all this, competitors lag RIM still, at least for now. “I have been working with the latest Microsoft software and even though this is the company’s fourth major release, it still is not as easy to work with as my BlackBerry,” Tower Group’s Egan told TechNewsWorld. While most handhelds can handle a small volume of e-mail messages, the BlackBerry includes features so executives who receive hundreds of messages can find and respond to the most important ones.

In addition to enhancing its system, RIM has taken another step to protect its market position: the company is licensing its software to competitors. A few have taken advantage of that offer. Siemens delivered the SK65, a tri-band phone that features a full suite of BlackBerry applications, including e-mail, calendar and browsing. In its attempts to break into the executive e-mail market, Nokia incorporated Blackberry software in its 6800 phone, which includes a keyboard so users can input text and supports e-mail, text, instant messaging, and picture messaging.

Even though the BlackBerry remains appealing, RIM faces some major challenges. Most notably, the company has been involved in a messy licensing battle with NTP that has spilled into court. “Because of the lawsuit, enterprises are much more willing to take a look at BlackBerry alternatives now than they were in the past,” said Neil Strother, an industry analyst with The NPD Group.

A Big Fish in a Small Pond

RIM also has a relatively small market. The mobile e-mail niche is small, around 10 million users worldwide, compared to the cell phone marketplace, where manufacturers are expected to sell more than 1 billion devices in 2006. Companies such as Motorola, Nokia, and Microsoft have large, installed bases that can be used to gain more market share. For instance, Microsoft has about 130 million Exchange customers worldwide.

Consequently, RIM is approaching an important intersection. “Eventually, RIM will be forced to decide whether it is a hardware or a software company,” noted Tower Group’s Egan.

This type of transition has been seen before. Palm faced a similar problem with its Personal Digital Assistants. The firm split its hardware and software businesses in two but has struggled since then to maintain a dominant market position. Similar questions surround RIM. “In the short term — the rest of this year — RIM should be in a strong position,” concluded The NPD Group’s Strother. “What happens after that is anybody’s guess.”

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