http://economist.com/printedition/displayStory.cfm?Story_ID=3D3775141
From The Economist print edition
The seemingly ubiquitous e-mail device faces growing competition.
WHAT Apple's iPod music-player is to teenagers, the BlackBerry e-mail
hand-held is to executives: the gizmo they cannot be seen without, and
often cannot live without. But you probably knew that already: readers of
The Economist are smack in the middle of the BlackBerry demographic. At
conferences, in boardrooms and on commuter planes and trains, they are
everywhere. The BlackBerry has spawned designer accessories; earned a
nickname ( CrackBerry ) that reflects its addictive nature; and even has a
malady ( BlackBerry Thumb ) associated with over-use. But its success means
that the Canadian firm that makes it, Research in Motion (RIM), now faces a
growing throng of competitors.
Most complex technologies start out in industry, then hit mass
scale. We've crossed over now, says Mike Lazaridis, who founded RIM in
1984 while a student at the University of Waterloo in Ontario. RIM
hopes to benefit as wireless e-mail, like the mobile phone before it,
goes from being an executive toy to a technology with mass appeal. But
so do its many rivals.
As a result, warns Brian Modoff, an analyst at Deutsche Bank, RIM has
reached a turning point, as the potential reward of a far wider market
is balanced with the risk of much greater competition.
At the moment, 70% of RIM's revenue comes from the sale of BlackBerry
devices, and the rest from software and services. To broaden its
reach, RIM has licensed the BlackBerry software to big handset-makers
such as Nokia, Motorola and Samsung, while continuing to sell its own
devices. It is therefore both co-operating and competing with some
much larger companies, as it navigates the transition to a more
software-and services-based business. Business-model transitions are
always fraught with challenges, says Mr Modoff.
Other firms sense an opportunity to offer handset-makers their own
BlackBerry-like software instead. This segment is switching from
proprietary innovation to standards-based mainstream growth, says
Danny Shader of Good Technology, a maker of wireless e-mail software
that runs on a wide range of hand-held computers and
smartphones. Without a hardware business, Good is not competing with
the handset-makers (such as Nokia) that license its programs. Its
software, running on Treo and PocketPC hand-helds, is already in use
at nearly 5,000 companies, including seven of America's top ten firms.
Brian Bogosian of Visto, another software firm that hopes to dethrone RIM,
claims that mobile operators, like handset-makers, are also ambivalent
about the BlackBerry. Many operators that resell the BlackBerry co-branded
with their own logos would prefer not to dilute their own brands, he says.
Visto offers white label software that runs on almost any device, and
can be offered by operators under their own brands. So far, Visto has
signed up ten operators, and will announce a deal with one of the
world's biggest operators next month, says Mr Bogosian. Other firms
pursuing a similar strategy include Intellisync, Seven and
Smartner. Patent-infringement claims abound, underlining the intensity
of competition. This week RIM paid $450m to settle a long-running suit
with NTP, based in Virginia. Visto has filed suits against Seven and
Smartner.
If all this were not enough, another threat looms on the horizon:
Microsoft, the world's largest software company. These guys exist
because Microsoft is bad at mobile e-mail, says Mr Modoff. But the
next versions of Microsoft's mail-server and PocketPC software, due in
a few months, will include support for BlackBerry-style push e-mail,
whereby new messages simply appear in the in-box. Anyone who ignores
Microsoft needs to take a history lesson, says Mr Shader, who once
worked at Netscape, a software-maker crushed by Microsoft because its
web browser posed a competitive threat. RIM is risking the same fate,
says Mr Shader, by promoting the BlackBerry as a platform.
Mr Lazaridis is unfazed. Getting mobile e-mail to work is far harder than
it looks, he says, and RIM has over a decade of experience. The complexity
is masked by this very simple, user-friendly device, he says of the
BlackBerry. This is a solution that has evolved and developed, and gone
through trial by fire. Any competitor is going to have to go through that.
We've done it right, we have the brand, we know how to make these
devices. It's a very high standard to try to match. RIM continues to
improve its hardware and software to maintain its lead, he says.
Yet while RIM will continue to grow at an impressive rate, it will
probably do so more slowly than the overall market as competitors
start to muscle in. One possible outcome is that RIM and Good will end
up fighting over the lucrative corporate market, while the
less-demanding consumer market becomes commoditised. But with hundreds
of millions of e-mail users worldwide and, despite their apparent
ubiquity, only 2.5m BlackBerry devices in circulation, it is still
early days for the mobile e-mail business.
Copyright 2005 The Economist Newspaper and The Economist Group.
NOTE: For more telecom/internet/networking/computer news from the daily
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