BlackBerry’s service ambitions

Struggling smartphone maker BlackBerry is trying to reinvent itself but does CEO Thorsten Heins have time to turn things around?

Five years ago Blackberry ruled the roost in corporate communications with every executive sporting one in their pocket. But after being overtaken by a new generation of smartphones and the Bring Your Own Device (BYOD) revolution, can it recapture its place in the market?

The man at the helm of reviving BlackBerry’s fortunes, Thorsten Heins, is under no illusions about the enormity of the task and he certainly put on a brave face at the Z10 launch in Sydney this week. But if you can look past his bluster, you have to wonder whether Heins’ ambition to reinvent BlackBerry will remain unrequited.

BlackBerry is hoping that its new software platform and the long awaited Z10 smartphone will help the one-time corporate darling regain its mojo, in a new age of services. After a tough five years which has seen its global market share slip to 4.6 per cent, a tenth of what it had in 2008, BlackBerry is in desperate need for a makeover. That makeover isn’t just about changing the name from Research In Motion (RIM) to BlackBerry but also rebranding itself as a services company.

That’s a message Heins is keen to spread and when a journalist yesterday suggested his organisation was a phone company, Heins response was swift and his disapproval was noteworthy.  

Heins was adamant, “I violently disagree with you. We make phones but we also run the largest private network on this planet”.

“We are an end-to-end solution and the phone is part of that solution. We are not just a phone maker.”

Buying time and corporate faith

The problem for Heins is that 60 per cent of BlackBerry’s revenues come from handsets and just over a third from services like the BlackBerry Messaging service (BBM) with its 16 million-strong user base.

If Heins wants to execute on his strategy of Blackberry becoming an online services company, he has to buy time and get the company back into profit – losses last quarter were $114 million – by improving handset sales.

Much of Blackberry’s success last decade was through organisations issuing their devices as company phones. This was mainly because the Blackberry Enterprise Server offered secure email communications and gave IT department’s greater control over handsets.

The arrival of the iPad in 2010 turned this dynamic on its head and as senior executives embraced BYOD the Blackberry quickly found itself wanting in a marketplace driven by user preferences rather than corporate IT requirements.

“We needed to catch the wave of BYOD,” said Heins. “It took us a bit of time to understand it’s not a threat but an opportunity.”

Presumably BlackBerry has had enough time to digest this lesson because Heins pitch is squarely focused on the trend. Heins sees the historical strength of Blackberry providing secure services as one of those opportunities with its Secure Workplace software managing iPhone and Android devices along with their own handsets.

The struggle now for Blackberry is to woo both the phone users and the corporate IT manager back to their services in a market now dominated by Google, Apple and cloud service providers.

The Z10 equation

As a smartphone the Blackberry Z10 isn’t bad. Comfortable to hold with slightly bigger dimensions to the iPhone 5, it seems to work smoothly and well. The major difference from earlier versions is in the software with Blackberry 10 offering a centralised communication hub as the ‘home screen’ of the system. Key to the success of any smartphone system is the size of the app store and Blackberry claim 70,000 applications are available for the system with the ability to run Android programs as well.

However, as good as the phone is, it’s hard to find anything compelling to draw users away from Apple, Android or Windows phones. Heins will be hoping that the Z10 may still prove to be attractive enough to keep corporate buyers happy and recent news of a million device order from a mystery buyer is a rare bright spot for a company that has had a gutful of negativity.

A new direction

But listening to Heins and his management team it’s hard not to get the impression that the new Blackberry is designed to hold the short term line as they execute their long term view for the company. That view sees Blackberry as a services company profiting from the ‘Internet of Machines’ trend where devices talk to each other.

Heins sees areas such as medical services and the motor industries as two areas of opportunity. It’s not all just aspirational musings either because BlackBerry does have the raw ingredients to make this work, especially after it bought automotive software company QNX in 2010 to get a foothold in that sector.

The internet of machines may well be where Blackberry’s future lies, but it’s going to be a crowded market with Cisco, Ericsson and the major telcos outlining their intentions in that market in the last few weeks. In reinventing Blackberry, Thorsten Heins and his team have a big task ahead of them. Wooing the corporate user back is just the starting point.