The yin and yang of changing tech markets

BlackBerry and Microsoft are two tech companies battered by changing markets, their similarities and differences give us some pointers of the trends in the industry.

Microsoft Office’s corporate vice president John Case recently visited Sydney to announce the launch of local cloud computing services and laying out the software giant’s vision for how it will adapt to rapidly changing market place. Microsoft’s future, declared Case, was based around a ‘mobile first, cloud first’ world where the company’s products help customers collaborate, analyse their data and protect their mobile devices. 

Case’s visit was in many respects similar to the visit paid to Gartner Symposium on the Gold Coast last month by BlackBerry’s president of global enterprise services, John Sims, where he described a similar future for the once dominant Canadian enterprise smartphone and messaging service vendor.

Recent times have been tough for BlackBerry, with their market share collapsing and the company going through a near death experience under previous chief executive Thorsten Heins who experimented with tablet computers and radically changing software in its struggles to retain deserting customers. Despite those travails, Sims is aggressive in his attitude to the marketplace and competitors in the security sector.

“There was a time a year ago when Blackberry was defensive, we’re not defensive anymore,” the BlackBerry executive declared.  “We have targets painted on all of our competitors, we’re coming after them. If I was them I’d feel us breathing down the back of our necks.”

At Microsoft, Case is a bit more circumspect as he may well be given that his main competitors are Google and Amazon, both of whom are substantially bigger than the enterprise security companies BlackBerry sees as being the competition.

Security as a selling point

Both companies’ executives though see device security as being important selling points for their products with Microsoft touting the upcoming Windows 10 as being an all one operating system that will improve security on devices ranging from desktop computers and smartphones through to small internet of things devices.

Similarly BlackBerry sees securing the IoT and smartphones through its Enterprise Services as a major opportunity with Sims citing smart vending machines as an example of the security issues facing businesses in a time when almost anything can be connected to the net.

“It used to be they shipped into the stores these containers of Diet Coke, Coke, and etcetera. Today they ship in the ingredients and that machine now contains the formula for Coke," he says. 

"You hack the formula and the crown jewels of Coca-Cola go into the public domain. Security, even in a vending machine becomes important.”

A telco quandary

For both companies selling these cloud and security services -- not to mention their smartphones --  into a crowded market is not without problems, particularly in both companies’ relations with their telecommunications partners. BlackBerry’s short term survival relies upon mobile operators being prepared to distribute the Passport and upcoming Classic handset while the BlackBerry Enterprise Service requires its 650 global telco partners to continue supporting the product.

Microsoft faces a similar problem with its handsets and in Australia has a unique problem in having made a strategic mistake in originally distributing the Office 365 product exclusively through Telstra. This week's announcement was about primarily about the company opening its cloud services to its reseller network.

Further complicating Microsoft’s selling pitch to the resellers is that many are struggling with reduced margins on cloud services, a situation not helped by the company’s vice president for Small and Medium Business telling distributors at a conference in Shanghai last month that they should be prepared to sell Office 365 as a loss leader.

That problem is now compounded by Google's offer to increase its commissions to leading resellers of the competing Google Apps products.

Rallying the loyalists

Microsoft’s Case though sees the company’s army of resellers as remaining one of its biggest strengths, telling Technology Spectator that Google’s move on commissions is “copying the Microsoft playbook” while BlackBerry’s Sims sees his business’ existing customer base as being its advantage in the endpoint security market.

“We have scale because we’ve got a global network, none of the other EMM vendors – Good Techonolgies or Mobile Iron or Airwatch --  none of these guys have a global network like we have.” Sims said, “our installed base in the enterprise just for BES managed devices is bigger than the next three guys put together.”

Despite BlackBerry’s claimed strength in the enterprise management market the entire sector is tiny compared to Microsoft’s sales therein lies the key differences between the companies; Microsoft is playing on a much bigger field. In stock market valuation alone Blackberry’s $US5 billion is tiny compared to Microsoft $US400bn.

Microsoft also runs at a profit, having posted a $US28bn return for 2014, while BlackBerry posted a net loss of $US207 million, albeit an improvement over its loss of $US965m a year earlier. While BlackBerry’s reserves of three billion dollars mean it won’t go broke in the near future, it has nowhere near the resilience of Microsoft’s balance sheet.

Despite the differences between the two companies, the similarities show the direction of where the enterprise computing markets are heading as cloud services and the internet of things heighten customers’ concerns about security and data analytics. Having a strong reseller program or established customer base may not  be enough to save a business in an evolving market.

Paul Wallbank travelled to the Gold Coast Gartner Symposium as a guest of BlackBerry.