Microsoft has once again declared war on the RIM Blackberry. This is probably the third or fourth time they have done so, and like the other times the full solution from Microsoft isn't quite shipping yet. But it's closer than it was before, so this is a good time to check in on the situation.
In the early 1990s, Microsoft went through a harrowing experience with IBM over the OS/2 operating system. First they worked together on it, then Microsoft shifted its focus to Windows. There are a lot of theories on whether the cooperation between the two companies was ever sincere, but what's clear to me is that along the way Microsoft learned a lot of handy business practices from IBM. One is FUD (fear, uncertainty, and doubt), the art of tantalizing customers with your future plans while at the same time scaring them about problems with competitors.
IBM was so well known for FUD that it spawned an off-color joke in the tech industry. I'm going to repeat it here because it vividly captures the current situation. I've tried to clean it up so it won't offend anyone. My apologies in advance if you're offended anyway.
Three women were at lunch comparing notes on their husbands. The first woman said, "My husband is from France. Every evening he holds me in his arms and fulfills my wildest fantasies." The second woman smiled and said, "My husband is from Italy. Every night he comes home early and devotes himself to my needs for hours." The third woman shook her head and said, "My husband is a sales rep from IBM. Every night he sits on the edge of the bed and tells me how great it's going to be until I fall asleep."
That's basically what Microsoft has been doing with Direct Push, its RIM-like mobile e-mail solution. The Microsoft faithful have been waiting for Direct Push a long time – Microsoft has talked about mobile e-mail for years, and this particular solution was first discussed publicly about a year ago. Some people on the mobile websites have been getting mighty testy about the delays.
The surprising thing to me about this week's announcement is that Microsoft is still sitting on the edge of the bed. Devices with the software built in won't be available until later this year. Upgrades are promised for existing devices, but again there's no date for availability. Several operators announced that they will support Direct Push, including Cingular, T-Mobile, Orange, and Vodafone. But I couldn't find any firm availability dates, just target quarters.
The other thing I'm not clear on is the business model for Direct Push in the long term. Microsoft's core pitch for its mobile mail solution is that it'll be free – the features are being built into Exchange Server, so any company with the latest version of Exchange gets free mobile e-mail automatically. There's no need to buy a RIM server, and if you have an IP connection, there's no need to pay e-mail service charges either.
This is supposed to be Microsoft's killer advantage over RIM. But the operators carrying Direct Push are all talking about charging around $30 a month or more for it – about the same as you'd pay for RIM service. Reuters even quoted Pieter Knook, Microsoft's SVP of the mobile team, as saying, "they (the operators) are pricing it pretty much the same."
I can understand why the operators don't want to give away Direct Push access. Many of them just installed RIM servers and are presumably getting a cut of the service fees from RIM. They wouldn't tolerate Microsoft destroying that revenue stream. If you thought iTunes got a frosty reception from the operators because it might interfere with their potential future music stores, picture how they'd feel about Microsoft messing with their existing mobile e-mail businesses.
As a result of all this, it's hard to tell how enthusiastic the operators are about Direct Push. They're usually willing to attend a product announcement with Microsoft, just for the PR value. But if they don't like the economics of it, they may leave it on their price lists but put the aggressive marketing against other mail systems. My guess is that they don't want any single mobile mail vendor to dominate, so they would have more options and more negotiating leverage in the future.
The operators' involvement changes the market dynamics around Direct Push, and I'm not sure that all of the people predicting RIM's demise have thought it through. It looks like the free thing about Direct Push will generally be the server, not the service. That's obviously important to IT managers, but it's not very meaningful to the users and departmental managers who have been some of the most passionate supporters of RIM. They generally don't have to pay for a server installed by the corporation, or deal with the hassle of maintaining it. So for them, switching from RIM to Windows Mobile would mean retraining and lost productivity for no direct cost savings.
Rather than setting up a classic Explorer vs. Netscape conflict in which the users themselves benefited from Microsoft's giveaway, Microsoft may be creating a user and department vs. IT conflict within corporations. I don't know how that's going to play out. In general, IT hasn't been very successful at driving uniform mobile standards in corporations the way they did with PCs. Mobile devices are cheap enough that most employees buy their own, and because they're used for both personal and corporate use it's much harder for companies to dictate the choice of device.
Perhaps Microsoft is counting on a second wave of mobile e-mail deployment in which corporations will provide Windows Mobile devices to all employees. In departments where there is no RIM today, it'd be much easier to get Microsoft embraced as a standard. But I'm not convinced that mobile e-mail is ever going to be as broadly used as, for example, desktop e-mail is today. In the user research I've been involved in, some people are communication fanatics who eagerly embrace mobile mail, but a lot of others don't really want it. Even if you gave them a mobile mail device, they might not use it much – in which case the corporation would have trouble justifying $360 a year in data service charges per employee.
There's going to be more mobile mail deployment in corporations, but I think the penetration is going to vary enormously by company and by industry. Companies have personalities, just like people. I think some of them will embrace mobile mail broadly and some won't. The patchier the deployment, the better for RIM, because IT departments will have less control over the deployment decision.
Does this mean RIM is safe?
Hardly. The idea of reducing the number of servers a company supports is intensely appealing to IT managers, and Microsoft has a history of crushing competitors in similar situations. History isn't prophecy, but RIM must at least show convincingly that it can counter Microsoft's pitch.
So far its performance is not at all encouraging. Some publications reported that RIM was not available to comment on the Microsoft announcement, which was pretty surprising to me considering the importance of the issue. RIM should have made sure everyone had its perspective. Other stories quoted RIM CEO Jim Balsillie as saying that RIM's solution is still better than Microsoft because it's more secure and uses less network bandwidth. That may or may not be true, but by making that sort of detailed argument its main pitch, RIM loses automatically. Essentially, RIM is acknowledging that Microsoft has copied most of its functionality, and we're now reduced to arguing minutiae. I tried that personally at both Apple and Palm, and it doesn't work. Once Microsoft has copied 90% of your solution, and especially if its product is free, most customers will either default to Microsoft because it's less of a hassle, or wait patiently for Microsoft to deliver the remaining 10% functionality.
I think RIM would be much better served if it went on the offensive, to convince its current customers that they'd be fools to remove their RIM servers, and to persuade new customers that there's a compelling, positive reason to buy. Communication fanatics care about all forms of communication, not just e-mail. It would be nice to see RIM try to add other types of communication to its solutions. Also, RIM has been working for years on other services, many of them enterprise apps, that can run on its servers. Now's the time to publicize those. (Or, if the additional services aren't compelling enough to give the company an edge, now is the time to ask what RIM's engineers have been doing for the last three years.)
The time may finally be approaching when RIM will need to choose between its device business and its server business. For a couple of years the story inside the industry has been that RIM knows it's a server company; that's why it was willing to license its client software to other firms. But that client software has been agonizingly slow to appear, and now RIM may face a stark choice. If it wants to preserve its device sales, it should make Blackberries work with Microsoft's e-mail system in addition to its own servers. Then there would be no reason to remove Blackberry from corporations. But that could hurt RIM server sales. On the other hand, RIM could keep its devices tied to the RIM servers, but in that case it might lose the whole company.
If I were running the place, I'd allow Blackberry devices to connect directly to Direct Push. If the RIM server is truly superior, customers will continue to buy it no matter what other options are on the devices. If the server's not superior, tying the devices to it won't save the company. I think RIM's not big enough to win by holding its customers prisoner.
Now the damage caused by RIM's legal situation with NTP becomes visible. For the last year or more, when RIM should have been preparing for the Microsoft assault, it has been distracted by the patent lawsuit. I don't know how big the distraction was for RIM's execs; maybe they were able to compartmentalize their thinking and focus on Microsoft anyway. But that would require amazing mental discipline. I don't think most managers could do it.
For a long time I've been puzzling over why RIM has fought the NTP case so vigorously. I even asked a friend who's an attorney and has worked a lot of major corporate and government cases. We agreed that most companies would have settled long ago, just to get the thing out of the way. Why didn't RIM do it? I believe pride is a factor. RIM is still controlled by its founders, and sometimes the people who built a company are violently opposed to letting anyone else benefit from what they see as their work. One of the angriest business documents I've ever seen is the public commentary that Jim Balsillie wrote for the Wall Street Journal. A sample: "Unlike NTP, RIM actually created something -- a company and a new market segment through over 20 years of innovation, risk-taking, partnering, customer service, growth and re-investment."
I think it's also possible that as the case has progressed, RIM's management has started to worry about shareholder liability if they settle before the last possible instant. Suppose RIM settled and the next day the patent office invalidated NTP's patents. Could shareholders sue RIM for settling too soon? I don't know, but it's the sort of thing management teams worry about these days.
I should add that I'd feel a lot more sympathetic toward RIM's managers if they hadn't been so quick to sue competitors who violated their patents in the past.
Regardless of the internal distractions, the biggest damage caused by the case is distraction to RIM's customers. RIM needs customer loyalty more than anything else right now, and rather than rallying the troops it has to answer things like a Gartner brief recommending that companies stop Blackberry deployment because of the lawsuit. It's also spending precious time explaining its workaround to avoid the NTP patent, which is creating its own set of uncertainties. Inconvenience and uncertainty are deadly when you're selling against Microsoft to IT managers. At some point, the managers will just throw up their hands and say, "forget it, we're moving to Microsoft's solution." And once that happens, there's no getting those customers back.
I think this is exactly what Microsoft is counting on, and it's a reason why they once again pre-announced their mobile e-mail solution even though it's not actually available. Microsoft probably hopes to stall RIM sales for now, and eventually to win the IT managers over to its side, exsanguinating RIM in the process. That would leave the operators with no choice but to support Microsoft's solution, even if they feel ambivalent about it.
I'm not saying that RIM is in danger of being wiped out overnight. But unless they elevate their marketing game, and get rid of the distractions quickly, I think their growth may be capped and they'll gradually be turned into the Lotus Notes of mobile e-mail.
Watch your back
The other interesting side effect of the Microsoft-RIM conflict is its impact on other companies. The other e-mail server companies, like Visto and Good, are obviously in danger of being squeezed between the titans. I don't think they're necessarily dead, but they'll need to be very crisp about their advantages.
The mobile operating system situation is more tantalizing. In the process of defending Exchange server from Blackberry server, Microsoft is opening some interesting opportunities to attack Windows Mobile. Microsoft is licensing other companies to sync directly to Exchange. There's already a client for some Symbian devices, and you've got to believe that Access would do one for Palm OS. If you really can push mail from Exchange on a level playing field to any device, one of the most potent arguments for Windows Mobile has been undercut. Microsoft might win on the server side only to lose the mobile device battle.
I'm sure Exchange is the more important franchise in their minds. But I bet they're trying to come up with ways to win in both.
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