BlackBerry has big plans for its software business, but the big question is whether the "BlackBerry experience" will matter across multiple devices.
CEO John Chen he's hopeful the company can hit the $500 million mark in software revenue anchored by BlackBerry Enterprise Server and then building "a business putting software on other devices."
At Mobile World Congress this week, BlackBerry made a few moves to further its software strategy. To wit:
In addition, QNX as an operating system is a strong Internet of things play and already embedded in multiple verticals. And BlackBerry has been offering BBM across platforms.
To Chen, BlackBerry has a "hidden gem" in software assets, user interfaces, patents and other applications. The catch is that BlackBerry previously used its software to sell its hardware. Now that the hardware business is minimized, the software has to stand alone as a revenue generator.
"I think there's a much bigger opportunity to enable our software on other platforms," said Chen, who said iOS and Android will get the attention today, but Windows will be added at some point.
What's unclear is whether BlackBerry's software success stories were due to its hardware integration and market position or because the experience was great. BlackBerry is betting that latter. The other bet is that iOS and Android users will download BlackBerry applications and carriers will add them to devices.
For instance, BlackBerry's Experience Suite, which will land later this year, features a communication and collaboration suite that touts integrated calendars and document viewing and editing. Android and iOS already have many of those tools. In addition, Microsoft also has Office for both iOS and Android. Where does BlackBerry fit in that equation?
Productivity is a similar story. BBM is powerful, but also rode shotgun with BlackBerry devices. Security has the best bet for BlackBerry if it's going to play the cross platform overlay game.
Tim Long, a BMO Capital analyst, said in a February research report:
Blackberry is in the midst of a major transformation. Under the old model, Blackberry would give its software away for rock-bottom prices, using it as a tool to generate device and service revenues. Now that device revenues have plummeted and Service revenues are drifting to zero, management is accelerating the move to become an enterprise software company.
In other words, a lot has to start going right for BlackBerry's software business to work. Long reckoned the following parts need to line up:
In a graphic, BlackBerry's software outlook goes like this, according to Long.
And here's where things get tricky. BES12 can do well, Secusmart has a small market (how many people really need untappable voice and text messaging) and QNX is strong but needs to be proven in the Internet of things market. BBM as a consumer service that generates revenue is a wild card.
The issue is that BlackBerry will have to do better-than-expected to reach its software nirvana. Long said:
In summary, we believe that for BlackBerry to reach its goals, the company needs to gain twice the market share of MDM, slightly more than double the attach rate for enterprise bundles (or triple the absolute number of users on an absolute basis, given the larger MDM base), and double the number of consumers buying BBM content compared with our base model.
To put another way, to reach management's goals for FY2016, BlackBerry could take 7.5 million enterprise users from other MDM players (rather than 3.7 million in our base case), sell enterprise bundles to over 750,000 users (rather than 250,000), and 18 million consumers would have to become regular BBM shoppers (rather than 9 million).
Chen seems to acknowledge the hurdles, but remains confident. It will "be a while" before software revenue eclipses hardware. But Chen really has no choice but to bet big on software.