BlackBerry's acquisition of Secusmart, a secure communications specialist, gives BlackBerry a fighting chance to hold onto its government customers.
Earlier this week, BlackBerry announced that its acquisition of privately held German firm Secusmart as part of its drive to become the handset OEM of choice for security-conscious clients in federal markets and in enterprise. While Secusmart's technology has powered BlackBerry's encrypted emails and texts, secure browsing and encrypted file system since 2009, BlackBerry will now integrate going forward through this acquisition Secusmart's Security Card technology. The solution is dependent on the usage of a micro-SD card which features a crypto-controller with a PKI coprocessor for authentication. An additional high-speed coprocessor encrypts voice and data communication using 128 bit AES. Considering BlackBerry’s shrinking device sales, the company must continue to innovate specifically on its platforms embedded security in order to remain relevant as a handset OEM.
Although BlackBerry's footprint in federal markets and in regulated environments is significant, when compared to the overall enterprise market opportunity, they are a niche market. However, what works in BlackBerry’s favor is the fact that companies in these market segments are as reliable as a vendor can hope for in terms of repeat business and year-over-year growth potential due to their reliance on mobile technologies. Indeed, BlackBerry's CEO John Chen sees "these markets as equating to half of IT spending in mobile technologies"; while this is a bit of an overstatement in our view, the opportunity is significant. Under Chen, the company has been very clear in its aim to reinforce BlackBerry as the best platform for secure communications in enterprise settings, and particularly in regulated industries. However, as has been well documented, BlackBerry continues to lose customers to EMM vendors like AirWatch, Good and MobileIron, who have all initiated marketing campaigns focused on painless switching to their respective platforms. While these campaigns in aggregate have had varying success, there is no question that there has been attrition. Although BlackBerry has “opened up” its platform and now allows competing EMM vendor to manage its devices, VDC saw this move as signaling that the company recognizes its position as the incumbent has waned and needed to move with the mobile ecosystem.
The acquisition of Secusmart does bring new high profile reference customer for BlackBerry to tout (in addition to President Barack Obama) with German Chancellor Angela Merkel who found herself the victim of a major security breach (click here, and here) when her iPhone was hacked this past November.
Encrypted Voice is a Super Competitive Market
Moving forward, BlackBerry’s Security will remain as the company’s key differentiator, and is why the company’s best shot for a turnaround rests on its ability to retain and grow its market share in the enterprise. However, the market that the Secusmart acquisition signals that the company plans to participate in is a crowded one. Organizations such as Motorola Solutions whose bread and butter is in government and regulated markets have had competing products on the market for some time. Motorola Solutions AME2000 product provides end-to-end encrypted voice and data communications on public and private data networks. The solution targets public safety and federal markets which are core target markets for the company. AME200 also features sophisticated hardware-based encryption and key management via a proprietary microSD component of the solution (called CRYPTR micro), to support Federal Information Processing Standard (FIPS) 140-2 Level 3 and Full NSA Suite B Cipher Suites. Motorola isn’t the only vendor either: Silent Circle emerged earlier this year (whose “surveillance proof” Blackphone, started shipping just last month) which can encrypt voice calls, Boeing’s Black phone features an embedded “self destruct” security feature along with the ability to communicate via satellite transceivers for secure voice communications, and FreedomPop’s privacy phone (which runs on Samsung hardware) key feature is voice encryption, and it can even be purchased via Bitcoin for “anonymity”. Suffice it to say that the secure voice and messaging market has quickly become crowded. Not to mention that vendors such as Open Whisper Systems and Silent Circle offer apps (no hardware required) to bring encrypted voice capabilities to the Android and iOS platforms.
A Niche but Valuable Market
While the confidentiality of private telephone calls has come under attack, the need for voice encryption for enterprises and private individuals is not apparent. There is no question that our privacy is being threatened by increasingly sophisticated adversaries and that certain executives and government personnel that routinely engaging in the exchange of private information or who conduct sensitive business transactions from abroad may be targeted. Large global organization do face the challenge of securing a global network of branch offices, subsidiaries, partners and project teams around the world and having the confidence that sensitive information and trade secrets remain confidential is important but the overall market is limited in scope and remains firmly as a niche. Nevertheless, as BlackBerry’s enterprise presence is becoming increasingly relegated to federal and regulated environments, embracing its niche position is, in VDC’s view, the firm’s best option for long-term viability. Acquiring Secusmart could give BlackBerry the security boost it needs to retain its current customer base and provide meaningful differentiation.