RIM's BlackBerry outage: $350 million max hit, but losing enterprise

RIM's BlackBerry outage: $350 million max hit, but losing enterprise

Summary: The short term financial hit due to RIM's outage is minimal, but the company is starting to lose the enterprise. And that financial hit will really hurt.

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Research in Motion's costs related to its outage last week don't amount to much, but the longer-term sales hit is likely to be much higher.

RIM is offering free apps to customers due to its outage, but that doesn't go all that far. Jefferies analyst Peter Misek estimated that the explicit costs due to the outage will be limited to $350 million. That amount assumes that RIM refunds one month of subscriber fees to its 70 million subscribers. The average fee a month is about $5.

But here's where things get dicey for RIM. The outage comes at the worst time for RIM and hurts its reputation with the one audience keeping the company alive---CTOs, CIOs and IT departments. The contrast between RIM and Apple, which sold 4 million iPhone 4S devices over a weekend, couldn't be more stark. Misek wrote in a research note:

We believe the worldwide server disruptions caused harm to the brand's image. In our view, this opens the door to competitors as corporate CTOs and IT departments may now be more open to explore other options besides the BlackBerry standard.

Alex Gauna, an analyst at JMP Securities, said:

Infrastructure glitches occur for the Research in Motion about once a year on average; however, this snafu is particularly negative given its scale, duration, and timing coming on the heels of all the other device embarrassments that are diminishing if not outright dismantling its brand equity.

At the Gartner Symposium conference in Orlando, I've run into about six CIOs and chatted about BlackBerry. Here's a sampling that signals potential doom for RIM.

  • "I can't see buying BlackBerry enterprise server when we have ActiveSync. RIM infrastructure is playing middleman to protect margins."
  • "We're actively moving to iOS."
  • "Employees are bringing devices and they aren't bringing BlackBerrys."

Now that's a small sample, but it has only been a few hours here. Technology executives can smell it when a vendor is scrambling. And RIM is scrambling. The natural reaction for IT buyers is to wring concessions out of RIM because the company can't play the premium game anymore.

If RIM loses its enterprise cred it is done. Unlike Zack Whittaker, I think it's difficult to argue the enterprise needs RIM anymore.

Wunderlich Securities analyst Matthew Robison said:

New BlackBerry 7 products have strengthened RIM somewhat in recent weeks, but for enterprise customers the most memorable feature of this week’s outage may be that it came at a time when alternatives to RIM are increasingly in use or under study by IT departments – especially since the advent of tablets. Applications for SSL encryption, remote wiping, and other BlackBerry-like security features are increasingly being deployed with products from other ecosystems.

Meanwhile, RIM is scrambling so it can't focus on longer-term game changers. Misek continued:

Our checks indicate that the RIM has been reassigning software engineers to whatever the fire drill is for the day. In the spring it was fixing the Playbook bugs, in the summer it was OS 7, and in the fall it has been rewriting the NOC/ node code base to be compatible with QNX. While management stated that the NOC/node transition was not a cause of the outage, we believe the crisis management showcased by RIM seems to be getting a C or lower grade from the Street.

Toss in the fact that OS 7 handset sales are slowing and the axiom that no one gets fired for buying BlackBerrys goes out the window.

Related:

Across the CBS Interactive network:

Topics: Security, Mobility, Outage, BlackBerry

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25 comments
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  • +100500; RIM needs a breakthrough product to compete with iOS and Windows

    ... Phone (not now, possibly next year).
    DDERSSS
    • The winblows phone has too little market share to be a real threat

      @DeRSSS
      Android phones??? share will continue to grow though.
      Mikael_z
      • RE: RIM's BlackBerry outage: $350 million max hit, but losing enterprise

        @Mikael_z

        "Winblows"? Bahhahahahaha! Aren't you witty.
        Hallowed are the Ori
    • RIM Fading? I hope not, all others are not corporate ready.

      @DeRSSS ... the market nows it, thats why the short term financial hit due to RIM???s outage is minimal. Unless the competition brings there own to the game it'll stay the same.
      SinfoCOMAR
  • There is no competition in the smartphone market

    There is only the iPhone 3GS for free, iPhone 4 for $99 and iPhone 4S for $199.

    There is no real choice.

    The only choice is between a good iPhone or sucky creaky plasticky "other" phone that is times slower, has fewer lenses, no IR filter, no Siri, no iCloud, no AirPlay, fewer apps, no iTunes store, no multi-touch.

    It is a sick market.

    We all lose.
    toddybottom
    • Yes an thatâ??s BAD, very BAD

      @toddybottom
      It???s obviously a difficult trick, to be truly creative and had original ideas. All the alternatives are crappy copies of the brilliant iPhone and iPad.
      Mikael_z
    • RE: RIM's BlackBerry outage: $350 million max hit, but losing enterprise

      What's sick about a free iPhone 3GS? It is not selling for $199, so it is not competing in the same market as the $199 iPhone 4S. Is there any phone at the free category that can compete with the iPhone 3GS? I don't believe so.
      SonofChef
    • Dude, take some qualudes.

      @toddybottom I suspect when the Nexus Prime comes out you will be in super denial mode.
      MSFTWorshipper
  • Blackberry Messenger = Cloud = eggs in one basket

    I am genuinely surprised that people still believe in the cloud almightly, yet one can argue that Blackberry Messenger was really the first cloud application.

    This is what happens when the cloud fails. Enjoy.
    croberts
    • RE: RIM's BlackBerry outage: $350 million max hit, but losing enterprise

      @croberts

      This is what happens when you are the only provider for all the major services in your ecosystem (or mobile-system). Even the third party apps have to connect to the RIM network to get access to their content.
      RenzoAC
  • ActiveSync is not a MDM

    Any CIO who believes ActiveSync is somehow going to provide the security and management BES does has been sold some great marketing. Considering Apple and Android hardly even support most of the EAS policies.

    http://social.technet.microsoft.com/wiki/contents/articles/exchange-activesync-client-comparison-table.aspx

    Lot of red on there. So your back in 2003 and have basic password controls. In 2011. Enterprise mobility needs are more then EAS thus companies like Mobile Iron and Good Technology are seeing record adopition. We choose Good Technology as we require encryption across all devices. You know what Good is 3x the cost as BES and uses a NOC just like. It didn't make headlines but the Good NOC has had multiple outages this year also.

    I don't buy the whole RIM is too expensive crap. BES Express is 100% free. No CAL, no special server. EAS is great for what it is, but anyone making it seem like it can replace BES/MDM have not supported mobile devices at the enterprise level.
    MobileAdmin
    • RE: RIM's BlackBerry outage: $350 million max hit, but losing enterprise

      @MobileAdmin : We completed a study on this exact issue and found the market to be exactly as you found. Good Server was our only option and it still has issues with killing battery life. ActiveSync is horrifying but it has potential; I just wish M$ would recognize the potential and understand that not all companies want to "own and manage" their employee's complete phone. Then need to follow the tenant of "we have an app for that" and just manage the app. IMHO, of course.
      No Thanks, Just Lurking
    • So just use EAS for messaging and a real MDM for everything else

      @MobileAdmin: No need to rely exclusively on EAS for all your mobile device control needs. Mobile Iron, Tangoe, Zenprise, and soon LANDesk have good agents with varying levels of support for Android, WinMobile and IOS. If the Zenprise NOC has an outage, all you lose is some policy controls. Messaging isn't interrupted and you can still remote wipe via EAS.
      scripter
      • RE: RIM's BlackBerry outage: $350 million max hit, but losing enterprise

        @scripter

        Understand but your then in a +1 model and all listed have a CAL per device. So where is your savings? What is the benefit over a MDM that already provides all this control. The issue is people are chasing the latest gadget and not enterprise functionality.
        MobileAdmin
  • RE: RIM's BlackBerry outage: $350 million max hit, but losing enterprise

    Maybe some years ago was ideal to have one company (RIM) to centralize all the content and services for their phones, but the times have changed and the monolithic business model of RIM it's getting weak, the outage was the proof that if RIM falls, everyone that have a BlackBerry will fall with them.

    Most of us, knowing the situation of RIM, wouldn't consider usin RIM in an enterprise enviroment for the simple reason that probably in one or two years it will go out of business leaving us with dead phones.
    RenzoAC
  • RE: RIM's BlackBerry outage: $350 million max hit, but losing enterprise

    Although RIM are a buch of clueless headless chickens, and they made a mess of recovering this situation, the volume on the god-awful arse up Apple have made on the IOS5 updates needs turned up.

    Apple will get their strapline of "It just works" back in their face. Bollocks it does. Wiped out App's and factory reset and upgraded/restored devised 2 hours later...

    It reminded me of the huge over embellishment the much missed Steve Jobs made over the wonderful Antenna in the iPhone 4 - 'just beautuiful engineeering'
    neil.postlethwaite
  • RE: RIM's BlackBerry outage: $350 million max hit, but losing enterprise

    Our Enterprise is moving away from RIM as fast as possible. Will use Exchange 2010 and System Center for MDM. And users can bring whatever they want as long as they understand the rules and sign the consent to wipe form.
    Skippy99
    • RE: RIM's BlackBerry outage: $350 million max hit, but losing enterprise

      @Skippy99

      Thats not really going to work that well as SCCM doesn't support many devices outside of legacy Windows Mobile and iPhone. So users will not be "Bringing whatever they want".

      There is no MDM that will provide a consistent management set (even from a basic security) perspective across every mobile OS. Thats the sad reality.
      MobileAdmin
  • RE: RIM's BlackBerry outage: $350 million max hit, but losing enterprise

    One must understand that the so called outage affected those relying on the Carriers BES server. In our case our BES connected to our Exchange server, did not suffer any outage as the same 3G/4G wireless network supports all phones, and it did not go down. I will still take the security of the Blackberry secure push encrypted approach over any iOS or Android approach. Let the kids continue to play with the over priced Apples, or cut their costs with the generic androids. As for RIM's offer of free app compensation, good start. Now RIM tell the world where you work best. Stop keeping it a secret why your in every goverment hand.
    calwoosnam@...
  • RE: RIM's BlackBerry outage: $350 million max hit, but losing enterprise

    I'm going to guess:
    1- Rim users are Rim users after trying other things that either didn't work or didn't work like Rim.
    2- A hit on their network got fixed so why would they buy new stuff and go to another network that's just as likely to have a hit or may already have bad memories?
    trm1945