Legacy IT vendors transform to survive the mobile, cloud evolution
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BlackBerry could follow the path taken by a competitor to deliver the next must-have mobile device, but it's a...
long road that the company may not have the stamina for.
A year after introducing the BlackBerry 10 operating system and smartphones, the Canadian company is still in the doldrums of financial losses and sagging device sales.
Apple Inc. was in a similar position when industry watchers proclaimed the brand dead in the early 1990s. Steve Jobs reformed Apple around a "halo" product -- the iPod -- which resurrected the company and led it back to respectability and profitability.
More on BlackBerry's transformation
Blackberry device resurgence hinges on innovation, enterprise acceptance
Renewed BlackBerry enterprise focus could right its device wrongs
"[BlackBerry] is going to need their iPod," said Rob Enderle, principal analyst at Enderle Group in San Jose, Calif. "They're going to need a product that will get people to look at BlackBerry differently."
BlackBerry could get a jump on the trend of wearable device technology or find a footing in the automotive field with a device that connects drivers and their vehicles better, Enderle said.
But BlackBerry laid off members of its research and development staff as part of cost-cutting measures last year.
"There's been a brain drain, and [BlackBerry's] lost a lot of key and top people," said Eric Klein, senior mobility analyst at VDC Research Inc. in Natick, Mass. "I see it as very hard for them to do that kind of innovation."
Where industry experts and customers think BlackBerry maintains an edge over its competitors are security and systems capabilities that IT administrators crave. A transformative BlackBerry product might be right in front of the company's face, according to Chris Hazelton, director of mobile and wireless at 451 Research in New York.
"There are still thousands of companies out there who rely on BlackBerry," he said. "If they can create a fantastic enterprise software product that goes beyond email, that would help in a big way to turn around the company."
BlackBerry transformation ongoing
BlackBerry's ongoing transformation sped up in the last quarter of 2013. Fairfax Financial Holdings Ltd. of Toronto originally planned to buy the struggling company for $4.7 billion, but those plans were shelved, with Fairfax injecting a total of $1.25 billion in cash into BlackBerry instead.
CEO Thorsten Heins was ousted in favor of John Chen, who came in with a strong reputation for turnarounds after building up Sybase as CEO before its eventual sale to SAP AG. In turn, Chen cleaned house and brought in a number of new executives.
"If anyone is well-positioned to give them a fighting chance, it's that type of person with his kind of background and experience," Klein said.
Now, Chen must turn the tides for BlackBerry.
A ChangeWave Research survey of more than 1,500 enterprise IT respondents from August 2013 asked which smartphone they planned on buying for their employees. The study showed that 63% said Apple, 43% Android, 28% BlackBerry and 9% Windows Phone.
[BlackBerry] is going to need their iPod.
analyst, Enderle Group
In late December, BlackBerry's Q3 financial report showed precipitous drops in revenue in phone sales, although it still maintained $3.2 billion in cash on hand. A financial turnaround can't happen overnight, nor will BlackBerry go away that fast, according to Jack Gold, mobile analyst and founder of J. Gold Associates in Northborough, Mass.
"What they need to do in the next two to four quarters is stabilize," Gold said. "That means they've got to stabilize device sales instead of continuing to slide."
A key part of that stabilization could come from BlackBerry's five-year agreement with Foxconn, Apple's device supplier. Foxconn is expected to take on manufacturing and design for some low-end BlackBerry devices that are more successful in foreign markets.
Such a move would allow BlackBerry to focus on building "the premium product -- the BMW or Lexus for business," Gold said.
The Foxconn agreement is meant to help BlackBerry "mitigate financial risks" associated with the device market, according to John Sims, BlackBerry's president of global enterprise solutions, who was one of Chen's new hires.
"We are refocusing as a company on our core strength of secure mobile enablement for regulated industries," Sims said, adding that BlackBerry Messenger (BBM) and QNX Embedded business have been aligned with enterprise mobility trends such as IP-based messaging services and the Internet of Things.
"This approach, over time, will allow each of our teams to innovate, as well as be more accountable for performance and direction," Sims said.
Apps sunk BlackBerry devices
For years, a BlackBerry device was the default for enterprise mobility. Matt Kosht, an IT director at an Alaskan utility company, managed around 100 BlackBerrys for his company several years ago and was impressed by its security and the granular control features in BlackBerry Enterprise Service (BES).
"[Apple iOS and Google Android] didn't have any of those controls, and that was argument for people not getting off of BlackBerry," Kosht said.
What changed was BlackBerry's loss in the consumer market to iOS and Android devices. When bring your own device became the norm, employees chose Apple and Google OSes, and BlackBerry was left in the dust. Now none of Kosht's employees use BlackBerrys, he said.
"The apps are what sunk BlackBerry," he said. "Email and BBM were the core functionality. It did those things great, but people grew out of that."
IT admins still like Blackberry for its security and BES, but the company must stand tough in the face of harsh criticism, said a mobile architect at a top 50 global company who requested anonymity.
"They need to come out and say, 'Our products are just as good, if not better, than they've ever been,'" the architect said. "They need to restore that confidence. People love it when companies do that."
BlackBerry applications still need of improvement, according to the mobile architect who pointed to improved app environments such as those for Google Play and Amazon Kindle where BlackBerry may look for inspiration.
"The marketplace is coming, and the developers are coming," the mobile architect said.
In part two of this two-part story, see what Blackberry is doing to right its wrongs and win the enterprise device market back.