RIM and Apple Battle for the $79 PC Market

Interesting article in the Times today about the battle between Research In Motion (RIM) and Apple for dominance of the smartphone market. Smartphones are becoming so capable these days I call them $79 personal computers. As the article notes, until the introduction of the iPhone the market was focused on the enterprise, not on consumers. The success of the iPhone has changed that, and the dominant player RIM is trying to adapt.

Brad Stone lays out a compelling simple narrative, as he should for a horizontal publication like the Times. However a few things get missed or glossed over in his straight-forward RIM vs. Apple telling of this story. The focus is totally North American -- it goes unmentioned that Symbian is the most popular OS for smartphones globally by a wide margin, but has very small presence in NA. Here's the link:

http://www.nytimes.com/2008/04/27/technology/27rim.html?_r=1&th=&emc=th&pagewanted=print"

First off, he seems to give RIM an unquestioned advantage in the area of security, and giving enterprise IT departments what they need. Seemed strange to me that he made no mention of the service outages that have plagued RIM as recently as last month. That's a security concern right there to companies that can't afford to lose access. Post from engadget on March outage questioning RIM's explanation:

http://www.engadget.com/2008/02/13/blackberry-outage-shows-that-rim-learned-nothing-in-2007/"

Second, I know from personal experience that some potential customers, primarily government, see RIM's operation of its own Network Operating Center (NOC) as a deal killer for any adoption. Defense agencies in particular need to control their communications, and will not work with a solution that depends on an external, third party network.

Finally, there are new entrants into the market that give enterprises strong and effective security solutions for their distributed workforces, no matter what operating system drives the devices. For all these reasons, better security IMO isn't the strongest factor supporting Blackberry's market leadership here in North America.

Two factors are more important than security to maintaining RIM's lead. One is the exclusive focus on the smartphone market the article mentions - unlike their competitors this is all RIM does. Second and even more important is their strategic decision to work with the major carriers in NA, rather than try to go around them. Of course RIM really has no other choice. But I give their co-ceo Jim Balsillie kudos for being so honest on this point:

<em>R.I.M. makes its alliances clear. “We are sort of polite and amiable and we gently interrelate with the carriers and try to find compatibility,” Mr. Balsillie said. “It may be a better strategy to fight the carrier. We may be wrong. The carrier may get disintermediated, in which case we fade with them.”</em>

Pretty clear-cut! RIM is betting on the carriers and the business model that has been constructed in NA over the past 12 years or so. As long as RIM continues to innovate its offerings to enterprises and provide more features consumers want in their devices (a big caveat I realize), they either dominate or stay a very strong presence.

If Apple and Google succeed with their open network push and disintermediate (big word for go around) the carriers and appeal to consumers directly, RIM becomes a niche player fast.

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