When push email comes to shove

BlackBerry maker RIM is top of the push email pile at the moment but for how long can it remain there?

The push email market may have plenty of room for growth, but competition is expected to grow significantly over the next few years, particularly as Microsoft sets its sights increasingly on the mobile space.

But this situation raises the question of whether current leader Research in Motion (RIM), with its BlackBerry offering, will be able to maintain its position or whether it is destined simply to become an also-ran — or acquisition target — as the sector continues to mature, expand and consolidate.

According to Rob Enderle, principal analyst at the Enderle Group, less than 10 percent of the 100 million potential subscribers worldwide are currently using push email services, with businesses currently making up the majority of purchasers.

The market, he believes, has to date been held back because "it is still too hard to set these things up and smartphones that use push are still too large and difficult to use for most".

While the BlackBerry "remains one of the most attractive devices in the segment" and is "comparatively easy to use", the advantage of going with a Microsoft Mobile 6 and Exchange 2007 combination, for example, is that there is no need to set up a separate back-end push email server, "although the settings on the phone can be daunting".

Using RIM, on the other hand, does require the installation of a separate BlackBerry Enterprise Server, which means that there is "yet one more device to set up and administer, though the phone is still harder to set up than it should be". Another issue is the cost of such services, which Enderle also reckons has to come down for the market to reach its full potential, particularly in the consumer space.

But the big test for RIM over the next two years or so will be the rising levels of competition in a market that it has more or less owned since the BlackBerry was first launched in 1999. Beyond the most dangerous of rivals in the shape of Microsoft, device manufacturers such as Motorola and Palm also have RIM solidly in their sights, as do mobile network operators such as Vodafone.

The mobile operator has, for example, just launched the Vodafone Application Service in conjunction with mobile workforce management and field service software supplier Dexterra to try and gain a larger share of the enterprise market for mobile applications access, another sector that RIM is pursuing.

But, while Microsoft may not appear to be particularly menacing at the moment, as Jeremy Green, principal analyst for mobility at Ovum, pointed out: "No-one ever got fired for buying Microsoft. It's got the weight of marketing resources behind it and excellent channels into the corporate market. If you look at Netscape versus Internet Explorer, for example, Netscape was the better browser but, when Microsoft went after the market, it got it."

As a result, although RIM is still currently the dominant player, with the biggest market share of the push email space, "whether it can hold this in the face of Microsoft is another matter. It poses a big threat." This is not least because, while RIM may have a better understanding of the mobile environment at the moment, "Microsoft is getting there".

But Charmaine Eggberry, EMEA vice president for RIM, is sanguine. She pointed out that the company now has eight million subscribers worldwide, some 70 percent of whom are no longer using their BlackBerry simply for push email. Instead they are also employing it to access corporate applications, such as SAP and Oracle, as well as lifestyle packages, such as gaming and health, while on the move.

"People buy BlackBerry because it does what it says on the tin and it's very easy to use, whether you're an individual consumer or a corporate. An underlying theme is that customers buy it because of its ease of use and because it's easy to set up," Eggberry said. "We have more than 70,000 distinct organisations using BlackBerrys to access their personal and corporate secrets 24/7 and we ensure that security is at the heart of the product. It's not about a service pack or other add-on. It's all part of the experience."

Moreover, pricing is not set by RIM itself, but by the network operators, which, in Europe, have "got very aggressive about pricing in the last while, offering things like packages for unlimited data access. So, from the European perspective, we've seen downward pressure on pricing, which bodes well for the consumer".

As for rising levels of competition, Eggberry indicated that only about two percent of the total available European market is using mobile email, which means that...

...there is still plenty of room for the company — and its rivals — to grow. In fact, she believes that rivalry is "good for the industry" because it is still a young and immature one and increased activity brings "awareness, education and marketing dollars" to the space.

In relation to the danger posed by Microsoft, meanwhile, Eggberry dismissed it as only one of three key players in the email market, along with Novell and IBM Lotus. And, she said, RIM has co-opted all of them by enabling the BlackBerry to work alongside their platforms — and every other important environment out there, ranging from Google to Yahoo. It has also just announced a virtual BlackBerry environment, due for release this autumn, that will enable users to run BlackBerry applications on some Windows Mobile 6 devices.

Nonetheless, it is the middleware layer of the mobile proposition, in the form of Exchange, that Microsoft appears to be desirous of controlling, rather than going after dominance of the client operating system element, in the shape of Mobile 6. This means that, should organisations decide to rationalise their email platforms, RIM could become vulnerable, as Exchange now has such functionality built in and can be accessed by a range of different mobile devices.

But, said Eggberry: "The competition didn't just arrive yesterday. It's been around since we got started in the market and it's not just about Microsoft Exchange. There are two other strong, dominant players and we're continuing to grow on all three platforms."

In addition, the company is in a strong position, she said, because it has about 270 mobile operators from 100 countries "lined up to sell BlackBerrys, based on customer demand".

RIM's BlackBerry Connect software licensing programme has led it to sign up 50 handset providers, including Nokia and Siemens, to enable consumers to access its back-end services using the device of their choice. And the vendor's BlackBerry Beyond Email initiative has seen it partnering with a range of independent software vendors (ISVs) and systems integrators to both support the platform and develop specific offerings based around it.

While Eggberry acknowledges that software and services still only account for about 30 percent of RIM's business, this, she said, is "because the hardware is the most expensive element". Nonetheless, she added that "we are very clearly focused on all three areas", and she sees them all as equally important in contributing to the company's growth.

But Enderle is not convinced that this will be enough. He accused RIM of holding its customers hostage during the patent dispute with NTP, by indicating that they "would be cut off if they lost the case, in effect putting their customers between themselves and the outcome". This failure to negotiate a settlement to protect US customers, he said, made them "very nervous with the company, potentially opening up its installed base to competing offerings".

Enderle is also unhappy with how the vendor dealt with a recent outage in the US. "They didn't even admit there was one until late. Partners like AT&T, which were getting massive numbers of trouble calls, were the first to point to RIM. As an enterprise vendor, if you have a problem, you have to take responsibility for it, communicate an estimate of length of outage and any workaround," he said.

This is particularly important because many of RIM's users work in government, law enforcement, healthcare and as lawyers — "groups that don't like to be disconnected and uninformed".

As a result, this suggests to him that the company's behaviour "is not consistent with an acceptable enterprise vendor. They need to be much more customer-centric and too often they are forgetting that they work for the customer and not the other way round".

To make matters worse, Enderle said, the company is "too small to sustain this fight against a large number of large players". This means that it will either need to "grow very quickly to compete effectively long-term" or, as is more likely, become an acquisition target.

But Eggberry disagrees strongly. "In the patent case, we did everything we could to protect our customers and the situation didn't affect EMEA. We listen to our customers at every move and that's made us relentless in protecting them, which is why we went through what we did. People understood our actions at the time and the whole scenario couldn't have affected us because we've continued to grow dramatically."

While she was unhappy with the subsequent outage incident, nonetheless she said that the vendor takes such issues "incredibly seriously" and resolved the matter by the following morning after "going out and communicating with customers and investigating what went wrong".

As for what the future holds, Eggberry believes that RIM still has all to play for and is building up a robust business that will carry it into the future. "To maintain our leadership position, we've got a relentless focus on innovation and listening and talking to customers to find out what they want. We're experiencing hockey-stick growth, but it's just beginning and there are enormous market opportunities for us," she concluded.

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