Is RIM Blackberry the New Novell?

The big red Novell N used to control the enterprise market.

In 2010 – Blackberry is to Apple as Novell was to Microsoft circa 1994. As hard as it may be to remember back that far,  Microsoft was once an upstart that was derided for not being substantial enough to effectively serve business server and networking needs – suitable only for stand-alone PCs.  Novell was seen as the proper choice for enterprises looking to network resources together. Blackberry is in the same position today with regards to email-enabled smartphones and making many of the same mistakes that Novell made.

Research in Motion, RIM, is making the classic market leader mistake of mistaking the passion its customers have for the function of their RIM Blackberry devices – the ability to reliably get email – for actual passion about the devices themselves. Blackberry has the mindshare of the enterprise IT crowd, but Apple has the mindshare of the consumer, including those consumers in corner offices.

Blackberry may be the dominant smartphone platform for business right now, but give most consumers a choice today and they’ll pick an iPhone or an Andriod. Once the iPhone escapes the exclusive confines of AT&T’s grasp and is allowed to work on other domestic wireless carriers, you’ll see the iPhone sales growth rates explode. This isn’t solely because the iPhone is a great phone, although it really is a darn fine phone, but rather it’s because of the applications that enable customers to turn a device that they already carry in their pocket into their own personal tool chest – always at the ready to solve all of their needs and issues. No matter what those needs may be or where the users are when they need to solve them. 

The iTunes App Store is way beyond competitor's offerings.

There is an order of magnitude difference in choice and selection between  Blackberry’s App World and Apple’s App Store. Despite a 6-year head start in the smartphone market Blackberry’s App world offerings are minuscule in comparison with Apple’s larger App Store, which is just over 18-months old. Critics dismiss many of the iPhone Apps because so many of them are games – but what they don’t often mention are apps like Epocrates or MedCalc – that are essential applications for medical professionals.  The ready availability of these Apps on the Apple platform is astounding because less than 3 years ago Palm was the preferred PDA/Smartphone device of choice for medical professionals. And in less than 3 years the iPhone, and it’s cheaper to operate cousin, the iPod Touch, have overtaken Palm by a longshot with many medical schools across the country now requiring an iPod Touch or an iPhone for 1st-year medical students.

Critics also wrongly dismiss many of the most popular App Store apps because they are free –  without seemingly to realize that those free Apps function very effectively as a developer-subsidized loss-leader with almost zero incremental cost for Apple. In addition those free Apps further cement user loyalty to the iPhone platform. For example I use over 7 different free programs as part of my Mandarin Chinese studies on my iPod Touch – none of which are available  for the Blackberry.  

Yes, RIM’s Blackberry devices do one thing and they do it very well – but those devices aren’t that much better than competing devices.   As the ranks of competitor smartphone products gets ever more crowded, most recently with the various Android phones available, this is a recipe for  increasing irrelevance in the marketplace. We’ve seen it before  – look at Palm and the sales numbers for their Pre and Pixi phones.

Blackberry, unlike Apple, is essentially a single product company. Sure they have multiple devices, but they all are focused on doing the same thing: more or less functioning as a decent phone and being an almost bullet-proof mail delivery device. Apple’s strength is that is has multiple products above and beyond smartphones – and Apple has something Blackberry hasn’t had for quite some time – Apple is cool and Blackberries are well, the epitome of not-cool.

Microsoft's logo and tagline from 1994 -2002.

Apple is a savvy competitor, a result of losing battle after battle against Microsoft over the years before rediscovering its mojo with consumers and acquiring new customers who weren’t already true Apple believers drinking the Kool-aid. Apple’s share of the Consumer computer OS market has doubled in the last five years and they now sell the largest number of laptops of any hardware vendor. Something especially impressive when you consider Apple’s laptops start at $1,000 and sometimes cost twice as much as comparably equipped competitors’ offerings.

Blackberry, like Novell once was, is the dominant player beloved by enterprise corporations with much of their revenue derived by being the corporate standard, or safe choice. Blackberry’s strength is no longer in the superior usability of their devices, but instead is rooted in the ubiquity of the device and supporting software in IT departments, and in end-user habits. As Blackberry user spouses and kids acquire iPhones and iPod touches – many of those formerly stalwart Blackberry users will clamor for an iPhone – especially once they start to work on the Verizon network.

I used to work with a wireless company whose data  plan sales reps would say again and again that “no one wants a touch screen device”. Needless to say these same reps only had eyes for Blackberry with its excellent physical keyboard.  Of course now that Blackberry offers a touch-screen device – they think typing on a touch screen is just fine. As the saying goes “you’ve got to dance with who brung ya”.  And Blackberries, and their data plans, have been driving revenue for cell phone carriers for a long time. It’s the safe choice. Much like Windows XP was in 2003, or Novell was in 1994.

However in 2010 choosing Novell over Microsoft is something very, very few people do – just look at the revenue delta between the two. And soon people will look at choosing Blackberry over Apple or Android the same way. Recently Apple’s market share as a percentage of sales in the US smartphone market has gone from 0% to over 17%  in less than 3 years with RIM just breaking the 20% barrier.

In 2010 expect  Apple and Google Android phones to see the largest sales growth with the new Windows Phone 7 platform delighting consumers once it’s released. Microsoft was the only cell phone OS to see declining sales numbers in 2009, and Windows Phone 7 will reverse those sales declines, especially since with HTC, Samsung and Dell produces such great mobile devices. This along with the predicted availability of the iPhone on Verizon will create more than a few problems for RIM.

Some additional data points to wrap your head around – Apple is the #1 brand of computer bought among college freshman with over 40% of all freshman buying an Apple. Apple’s presence in business schools is growing – expect Apple to gain traction on both corporate desks and airplane seat-back trays especially when it compete with older Microsoft hardware. As Apple gains laptop traction in the enterprise – expect to see their iPhone sales accelerate even faster, .

But it’s not all rosy-posy. Don’t get me wrong, I’m not an Apple fan-boy ready to enthusiastically embrace every new thing Cupertino offers. Although to be fair, the iPod Classic changed the way I travel and the iPod Touch helps me learn Chinese as well keeping me up-to-date with the NYT and WSJ while I’m on the go. Not to mention that the iPod Touch also plays a mean game of Chess which helps pass the time during those inevitable flight delays. And yea, my household has iPod docking stations on every floor so you can always charge and listen to your iPod – no matter where you are. So while I’m not a fan-boy per se, I’ve been a darn good customer in the past.

It’s true Apple’s iPhone’s aren’t cheap and they are also a tightly closed eco-system. This contrasts with the chaos of Android’s open ecosystem of multiple vendors, open app store and forked device choices. Long-term it will be interesting to know if Microsoft’s Windows Phone 7 middle road is just right – balancing the device choice of Android but with a standard minimum hardware configuration and with the regulated app store of Apple. 

We’ll see what happens in the next few years, but when Apple overtakes RIM – you can say you read it here first. So do you agree with this brilliant forecast? Or do you disagree and think I”m daft or worse? Let me know either way. -t

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  1. #1 by John Refford on 2010/01/19 - 17:02

    Nice article Thom. You raise some nice questions about RIM and draw interesting parallels to Palm. We run a BES server and it has not been supplanted by Apple (yet) although it is banging on the door and wants to come inside the data center. As a Droid owner, I think the battle for the consumer market is just starting and Google’s open platform is going to give Apple a run for it. But who will step into the enterprise, or will RIM respond?
    -John [@] refford [dot] com

  2. #2 by Thom on 2010/04/28 - 10:49

    John, thanks for your comment. I think Microsoft will step into the gap – seriously. After seeing some of the changes that Win7 Mobile brings to play I think that Microsoft will finally start getting things right. Just as it took time for the XBox platform to take hold and is now a very strong gaming platform so too will the Win7 Phone start right the ship. I’ve been a Windows Mobile user for a long time and I think Microsoft’s Three Screens (PC, Phone, Browser) and the Cloud strategy will pay significant dividends in the long run.
    Full Disclosure: I recently accepted a job with Microsoft and I’ve already seen some cool things that will soon be coming out.

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