BlackBerry invited more than 100 technology and financial analysts to San Ramon last week and shared details on its progress transitioning from a hardware-centric vendor to a software and services company. I was one of three VDC analysts that made this trip ― here are some of my quick takeaways.
"I have done this before and seen the same movie before."
John Chen, November 2013
John Chen’s reputation as a fixer precedes him: while he inherited a strong mobile brand with security bona fides in BlackBerry, the company needed to move quickly and pivot towards software and services and expand its addressable market by attacking new vertical markets. With just over 3 years at the helm, Mr. Chen and his team took the opportunity to demonstrate to their captive audience how they have righted the ship and turned BlackBerry around. One could not help but to analogize BlackBerry’s evolution with what Mr. Chen accomplished while at Sybase (Mr. Chen became the CEO of Sybase in 1998. The company was acquired by SAP for $5.8B in 2010).
BlackBerry announced a partnership with Chinese handset manufacturer TCL this past January, whereby the OEM would: “design, manufacture, sell, and provide customer support for BlackBerry-branded mobile devices”. This arrangement is smart and is enabling BlackBerry to continue to earn handset revenues in regions where it maintains popularity. (For example, BlackBerry’s brand is very popular in Southeast Asian countries; the vendor maintains 6M+ customers in Indonesia alone.)
Mr. Chen fully admitted that while it was obvious that the company needed to transition its hardware business, the decision was still an emotional and difficult one. However, BlackBerry was already on its path to becoming a software company: Mr. Chen joined BlackBerry shortly after it had changed its name from RIM, and the company had already begun positioning itself towards software, The IoT, and autonomous vehicle markets. BlackBerry acquired crypto specialist Certicom, and real-time operating system vendor QNX – both acquisitions have become foundational to the vendor’s IoT and security strategies. But Mr. Chen wasn’t done ― he kept BlackBerry on its acquisitive course by acquiring three more companies in 2015. BlackBerry absorbed EMM specialist Good Technology, crisis communications vendor AtHoc, as well as enterprise file synchronization and sharing (EFS&S) specialist WatchDox. Finally, BlackBerry also acquired Encription Ltd., a cybersecurity vendor specializing in digital forensics, penetration testing, and IT security training. While small, the firm has helped to bolster BlackBerry’s emerging cybersecurity professional services and consultancy business. Despite the flurry of acquisitions, BlackBerry still has $1.6B in cash on hand.
BlackBerry revealed that it was sunsetting the Good and WatchDox names from its mobility suite; the vendor is rebranding its EMM suite to BlackBerry UEM (unified endpoint management) and dropping the Good and WatchDox names from their associated EMM solution components. Similar to other EMM vendors it competes with, BlackBerry’s UEM strategy is predicated around expanded Microsoft and Apple support, aggressively pursuing The IoT, and connected car markets.
While BlackBerry’s BBM messaging business is mature, the vendor has been making enhancements to better position the solution for core markets in which it has historically performed well: specifically, mobile deployments in state and local government, financial services, and health care markets. BlackBerry’s NOC-based architecture offers differentiated embedded security and makes its HIPAA-compliant and social-oriented messaging solution a compelling choice for the health care industry. Integrating natural language processing chatbots is a logical next step, vendors such as TigerText have taken this approach: chatbots are compelling, as they will enable patients to schedule appointments, research medical information, or receive medication reminders using their voice. While the enterprise messaging market is very competitive, BlackBerry should see its revenues increase – I have based this on the vendors’ progress with its channel partnerships and distribution strategies.
BlackBerry showcased its secure WatchDox-based communications and collaboration platform (now branded as BlackBerry Workspaces) for the legal and financial services industry, the QNX connected car platform, and a new hardware and cloud-powered solution called Radar.
BlackBerry’s strategic focus on what it refers to as the Enterprise of Things (EoT) is not unique, but is demonstrative of the vendor’s evolution to a software and services company. Like most of the large technology vendors it competes against, BlackBerry must ensure it is prepared to compete once enterprises begin expanding their digital transformation initiatives and start leveraging the IoT. BlackBerry describes its EoT opportunity as being the enabler of a distributed business network where customers can externalize business workflows by extending their in-house and third-party infrastructures with a cohesive UX and embedded security. The vision is a good one, and BlackBerry has plenty of EMM (now UEM) customers to help them move in this direction.
While BlackBerry remains strong in its core markets (state and local government, financial services, and health care) it has wisely focused on expanding its non-regulated customer base for revenue growth. Expanding its footprint in markets such as education, retail, manufacturing, and transportation is a high priority for FY ‘17. We certainly expect BlackBerry’s UEM footprint to grow in these markets, but additional revenue opportunities from its BBM and crisis alerting solutions should be adding more to their bottom line.
While the crisis alerting solution caters to niche deployment scenarios (public safety, mining, oil, and gas, etc.), it is a revenue stream that definitely has plenty of room to grow. The solution is increasingly attractive, given the current spate of police shootings and emergency lockdowns – in this vein, expect BlackBerry to expand its crisis alerting solutions in the education market. UCLA is a great reference customer in this regard.
Many technology companies target the transportation and logistics market due to its size and for the opportunity to offer modern technologies to its widely dispersed and inherently mobile workforce. From forklift operators loading crates onto trucks, delivery drivers navigating multiple pickups and deliveries to airline baggage handlers, and the technicians servicing assets, the workflows supported are all critical to the operation of these intricate businesses.
The purpose-built hardware solution that BlackBerry has developed (named Radar) is notable, and is aimed squarely at transportation and third-party logistics (3PL) organizations. The product will enable organizations to monitor their cargo in real-time, tracking everything from vehicle location and route data to temperature, humidity, and contents. While BlackBerry isn’t alone with a solution specific for this market (Zebra Technologies has productized a similar solution), the market opportunity is a large one.
The transportation industry’s 24/7 dynamics lend themselves to the anytime-anywhere paradigm that modern technology solutions like Radar can offer. Tracking goods in transit is particularly compelling when paired with analytics. When considering that the transportation market is a highly competitive environment where customer responsiveness, cost optimization, and workforce productivity are key determinants of success a solution that can enhance real-time visibility into the movements of their fleets will be desirable. BlackBerry has positioned its Radar solution to offer transportation organizations with opportunities for faster decision-making, more efficient use of their trucking assets, and an overall increase in revenue per trailer. We look forward to tracking BlackBerry’s progress with Radar and how it partners as it attacks the market. Forging a partnership with an ISV like SAP or Oracle that has a mature transportation management offering would be a great next step for BlackBerry.
Market trends led BlackBerry down its path of abandoning its hardware business ― the move was definitely painful, but necessary. While the company’s EoT vision is certainly not unique, it is the correct one. In this vein, considering that BlackBerry has $1.6B of cash and has proven it can expand its solution range through acquisitions, we expect to see additional tuck-in acquisitions to complement its EoT strategy in the coming months.
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