BlackBerry maker must diversify to survive

RIM's three million customers in the mobile email space could be enough to protect it from Microsoft's ambitions... but for how long?

Research in Motion (RIM) still has no close rival when it comes to mobile email but the Canadian company is going to face increasing competition in the near future, warn analysts.

In a published briefing released on Tuesday, John Delaney, principal analyst at Ovum, said that while the Blackberry manufacturer has achieved a huge amount with its very specific focus on enterprise email, the company is going to have to diversify its customer base to include consumers if it wants to scale up enough to stand up to Microsoft.

"We need to be realistic about the formidable challenges that lie ahead for RIM. But it would be churlish if, at the same time, we failed to acknowledge the magnitude of the company's achievement to date," he said.

The news released last week that RIM now has three million users, having tripled its subscriber base since February 2004, could help protect the company from Microsoft's ambitions in the mobile market but their are no guarantees, said Delaney.

The analyst attributed RIM's success to focusing on email, as the single most important application for enterprises to mobilise, and providing all the components for an end-to-end solution, from the handset to the server. "BlackBerry still has no close rival, in terms of either brand strength or user adoption," he said.

However in the long term, RIM's strategy of focusing solely on mobile email may actually backfire, the analyst warned. Some customers are uneasy about the proprietary solution by which RIM guarantees a working end-to-end system, while others (small companies not running the BlackBerry enterprise server in house) do not want their content running on a hosted server.

Some mobile operators are starting to see alternative vendors such as Seven as a viable way to avoid over-dependence on BlackBerry, said Delaney, pointing to a deal Vodafone made with Visto, alongside its branded BlackBerry offering (which we review here). "Server-side challengers Seven and Smartner recently merged, pushing Seven's combined subscriber base towards critical mass and strengthening its international presence," he said.

Microsoft's strategy is another potential source of trouble for RIM. Despite the fact that the company's Magneto release of Windows Mobile, launched last week, did not include a push email function that would compete with BlackBerry.

Delaney believes Microsoft intends to stick with a "managed pull" email service where the handheld device connects directly to the Exchange server, instead of to an intermediate server like BlackBerry uses. "In any case, whatever Microsoft comes out with, it is unlikely to work with Notes," he said. "All RIM's competitors have a gap of one sort or another."

Mobile operators, meanwhile, want to differentiate themselves more than BlackBerry products currently allow, says Delaney, and RIM itself needs to expand to address the vast majority of people, who it cannot reach at the moment: consumers.

RIM's responses so far look sensible, he believes. "Blackberry Connect [a programme to put BlackBerry software on other handsets] avoids making the mistake Apple made in the 1980s," he said. "RIM is not going to take that proprietary approach. They recognise that while there are a lot of people who want a BlackBerry and won't settle for anything else, there are others who want a blackberry and can't get one from their employer."

Although the most visible part of RIM's business is the handset, Delaney claimed that RIM makes more money from the back-end BlackBerry Enteprise Server. "As long as they've got a customer implementing BlackBerry solutions they're happy, whatever handset they are using."

Other handsets include the Nokia 9500 Communicator and handsets from Motorola and Siemens.