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The recent sight of two of the world’s great communications behemoths – Microsoft and Vodafone – hoving into the rear view mirror of the BlackBerry juggernaut cannot have surprised executives at the wheel. They have probably been waiting for it for some time.

Research In Motion, the Canadian start-up that launched the mobile e-mail phenomenon – the BlackBerry phenomenon to all intents and purposes – have created the perfect application for the wireless data world: an essential business tool seemingly made for driving up average revenues per user from high value customers.

And in doing so it has also engineered a great marketing coup: the executive hunched over a small keyboard tapping away with both thumbs is the business image of its time and the name BlackBerry has captured that experience in a brand that transcends the device itself.and the platform that supports it

Little wonder then that so many companiesnot all of them as big as Vodafone or Microsoft by any means, are positioning themselves to grab a slice of a lucrative pie. But the glances over the shoulder at the competition from RIM executives are not of the nervous variety, and nor should they be, given that at present the company is still pulling away.

Andy Brown, analyst at IDC, believes RIM’s technology and intellectual property leadership gives it about a four year head start on rivals.

“RIM is the only company that truly provides an end-to-end solution and the onus is for other companies to prove they can compare with the device, security, server, middleware and the integration services. This is why they are more expensive but they have a dedicated operating system that is optimised and not just for e-mail,” he says.

It took RIM five years to secure its first million BlackBerry users, 10 months to find the next million and just five more to reach 3m. Momentum is on its side and the group has no intention of letting it falter now.

“What we are doing is preparing for 5m and 10m. We have been preparing the company for success for a decade and it’s about how we have architected the platform, and what we have put into it and making sure the organisation as a whole is scaled for us to be successful,” says Charmaine Eggberry, European vice president of RIM’s enterprise business.

“Frankly it takes a lot of R&D effort, 10 years worth, to give us something that’s compelling and is renowned as being simple, easy to use and addictive. So in the background an enormous amount of effort and thinking about every nuance goes into what we do and how we do it.”

The message between the lines must be clear to RIM’s competitors: competing with the BlackBerry will be far from easy, not least because the Canadian group is determined to expand and improve its own offering.

That is clearly apparent in the 7100 series of devices which have consigned the early ugly black boxes to the past and present a form that compares favourably in both style and functionality with most smartphones.

It is also working hard to extend the application set well beyond e-mail. “Our entire business has moved away from just e-mail so now 60 per cent (of users) are using these devices for other applications such as customer relationship management and SAP and others. And we have an extensive independent software vendor programme,” Ms Eggberry says.

But RIM’s 3m subscribers represent just a fraction of a potential market for mobile e-mail and smartphones that is estimated to be anything between 400m and 800m.

Microsoft has its eye firmly fixed on a hefty 120m of those who currently use its Outlook desktop e-mail facility– not to mention millions more Hotmail users – many of whom have told the group they would like to add wireless capability to their package.

“We clearly heard from customers that mobile messaging in the broader sense of rich e-mail with calendar, contact books and attachments is something they are looking at,” says Scott Horn, director of marketing at Microsoft’s mobile and embedded devices Division.

Microsoft’s strategy, unveiled earlier this month, revolves around the mobilisation of its desktop functionality through upgrades to existing packages – a messaging and security feature pack for Windows Mobile 5.0 and additional capability for Service Pack two of Exchange Server 2003. It is abundantly clear from the way Microsoft is publicising its product that it views cost as RIM’s Achilles heel.

“Something we hear from IT professionals is that they want the means to manage devices using the same systems and tools for other computing investments they ask ‘why do I have to have a special solution for a mobile device?’” Mr Horn says.

Part of the reason for RIM’s relative expense is the BES – the BlackBerry Enterprise Server and the middleware that supports it – that sits on a buyer’s shelf behind its own firewall. There will be no such expense with Microsoft’s Exchange Server.

“What we have heard from some CEOs and CIOs out there running pilot schemes is that they would like to scale this up and they are asking “how much will it cost me to manage and buy servers and what is the per user fee on a monthly basis for accessing mail on the go?’ But there’s no additional server cost and then it’s free to provide mobile messaging. There are no per user fees,” Mr Horn says.

With finance directors watching costs like hawks, this will appeal to many CIOs.

But IDC’s Mr Brown says that Microsoft’s major challenge is proving it can be better than RIM, or at least good enough to offer a viable alternative.

“Their argument is that you can cut out the middleware and simply hook the Exchange Server up to the communication routes to access e-mail on the move, but in reality it’s more complicated than that. The middleware does a huge amount of work, including security work,” he says.

Another element of the Microsoft proposition that may be attractive is a bigger range of handsets and smartphones.

Indeed it could be that the greatest market opportunity lies in delivering push email to the millions of business people who already own a smart phone but who have, so far, not opted to buy a Blackberry device. This is the area that many smaller vendors will target.

Following Seven’s acquisition of Smartner earlier this year, the market for alternatives to Blackberry and Microsoft is smaller, but possibly stronger. Seven, along with Visto and Good Technology, claims to offer a lower total cost of ownership than the Blackberry, as well as support for more devices.

RIM’s rivals are targeting this market by providing software for existing mobile phones. Good Technology supports Palm OS and Pocket PC handhelds. Seven supports both smartphones and mobile handsets running Java and Qualcomm’s Brew, as well as PDAs. Visto supports a similar range of hardware, including Symbian phones. To reach markets on this scale, Visto and Seven in particular are forging deals with carriers.

Visto landed the biggest fish in that ocean when it signed a contract with Vodafone last month. Vodafone already offers push e-mail to enterprise customers through BlackBerry, but insists its own service does not mean the end of that relationship.

“We felt we needed an additional option that extends into other devices that users are looking for,” says Stephen Noakes, Vodafone’s director of business propositions.

Vodafone believes its partnership with Visto – which takes much of the cost out for business by hosting servers itself removing the need for expensive initial investment - offers it an option for smaller businesses and even consumers.

“Price is a factor,” says Mr Noakes. “With Rim we have the 7100b and have had some success with that at a reduced price, but there’s room beneath that.”

As well as a global deal with Vodafone, Visto has contracts with Nextel in the US, Rogers Wireless in Canada, SmarTone in Hong Kong and KPN in the Netherlands. Seven’s contracts include deals with Japan’s KDDI and NTT DoCoMo, Cingular and Sprint in the US and Orange and O2 in the UK.

Kent Thexton, chief executive of Seven, believes that mobile e-mail will be an add-on or come bundled with mobile data plans and be available on any device.

Visto chief executive Brian Bogosian takes a similar view of the market. He describes the Visto proposition as being about “freedom of choice”.

But that freedom comes at a cost and that is a greater tie to a specific mobile operator. One reason RIM has grown quickly is because, by and large, the company has shied away from operator-exclusive deals.

The wide availability of BlackBerry means that companies can deploy its e-mail system across multiple mobile operators and still maintain a consistent device and user interface. This is an important advantage for companies that need multiple operators, in order to ensure full geographical coverage.

The use of a Blackberry e-mail server – rather than an operator-hosted system – also gives companies more control.

With Visto and Seven signing deals with competing operators, enterprises face the prospect of deploying two, incompatible technologies for push e-mail.

“If you only use one operator, it is not a problem,” says Ken Dulaney, a vice president at market researchers Gartner. “If you need to have multiple carriers, for coverage reasons, it will be flaky.” Mr Dulaney points out that Microsoft’s model for push e-mail, based around eliminating the need for a Blackberry-style gateway server, will also work best with single carriers.

This is not an area that RIM has neglected, offering its BlackBerry Connect service, which is device and operating system agnostic, allowing carriers to provide BlackBerry functionality on a variety of handsets under its own brand.

But Mr Brown of IDC says this has not yet been a great success for RIM. “They have a lot to prove there. It’s about educating the market and letting it know that BlackBerry will not be the same with Connect and having a solution that perhaps proves a migration path to a high end built-in product,” he says.

Whatever the impact of the growing competition on RIM there can be little doubt that for business users of mobile email, however, a crowded marketplace is likely to safeguard rather than threaten their investment.

Roger Bamforth, mobile analyst at Quocirca, notes that deals such as that between Visto and Vodafone will provide competition to RIM, forcing it to continue to innovate.

Competition appearing behind, however distantly, should ensure that RIM retains a sharp focus on the road ahead.

Push comes to shove for share of mobile e-mail market

If analysts are correct that push e-mail has the potential to address a global market of 400m users, then it represents both a challenge and an opportunity to the wireless handset manufacturing world.

The opportunity is to sell the kind of high-end multimedia devices that deliver attractive margins, while the challenge is presented by Research in Motion (RIM) models with ever-improving voice functionality threatening to steal a large chunk of a lucrative market.

Although it has not been a priority, handset manufacturers have flirted with the wireless e-mail market for a number of years. But technologies such as Wap and SMS, used in initiatives such as Nokia One, failed to deliver the same compelling experience as RIM’s BlackBerry and never captured the user’s imagination.

The growing confidence that push e-mail is set to capture a mass market, combined with an increased technological maturity is changing the outlook for handset manufacturers who need no longer look at expensive propietary solutions.

Indeed one avenue for them is to deal with RIM, not all of whose 3m customers are actually using the familiar BlackBerry PDA-style devices, with their large screen and a Qwerty keyboard, which tend to be restricted to senior executives.

A growing number are using devices supplied by other manufacturers but which run on the BlackBerry platform because these vendors have licensed part of the BlackBerry solution. Dave Grannan, general manager for Mobility Solutions at Nokia Enterprise Solutions, says that Nokia was the first to launch such a product, the 6820 messaging phone, in February 2004.

It now offers the facility on a number of other devices, including the 9300 and 9500 Communicator series. All the other major manufacturers are also BlackBerry licensees and most of them have launched BlackBerry-enabled products – such as the Siemens SK65, the Sony Ericsson P910 and the Motorola MPx220. And they are also licensing alternative solutions from RIM’s rivals.

Charmaine Eggberry, European vice-president of RIM’s enterprise business, says that most of these companies have licensed the push capability of the BlackBerry platform but not the applications.

Telstra of Australia was the first operator to offer its customers the BlackBerry solution on a non-BlackBerry device, launching the Nokia 6820 in April 2004. Starhub of Singapore started offering the same product in May 2004. But it has taken a long time for European operators to follow suit.

Carolyn Nguyen, director of mobility strategy at Avaya, notes that one of the reasons for the BlackBerry’s success in the mobile e-mail market is that it has been designed to perform this one function very well. Elements such as the form factor, keyboard and battery, as well as associated features such as security and charging structure, have all been optimised with e-mail in mind.

The big manufacturers are hoping that their hybrid devices will be able to tap into a much bigger market than BlackBerry has done, because they will eliminate the additional costs and inconveniences associated with duplicate handsets.

Most admit that their devices are unlikely to provide as good a mobile e-mail experience as the BlackBerry, but argue that they are still good enough to be used productively.

Another development has been Vodafone’s recent decision to launch a worldwide own-brand push mobile e-mail service, using device-agnostic technology developed by Visto Corporation, thus becoming the first global operator to make a major move to take control of the mobile e-mail space.

Brian Bogosian, Visto’s chairman, president and CEO, claims that this is the most significant development in the mobile e-mail market since RIM launched the first BlackBerry six years ago. Mike Short, vice president of research and development at the O2 group, adds that the Vodafone move has been followed by similar announcements from the US operators Cingular Wireless and Verizon Wireless, which plan to offer services using the products of Good Technology and Intellisync respectively.

Andrew Hill, Motorola’s director of strategy for mobile devices in Europe, predicts that that such developments will lead to a rapid expansion of mobile e-mail in those parts of the enterprise market where growth has been held back by the cost of using a high-end solution such as BlackBerry. When the mobile e-mail market does reach 400m, he says, more than 97 per cent of users will be using other sorts of service.

Neil McCartney
Copyright The Financial Times Limited 2017. All rights reserved.
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