Last week, BlackBerry made headlines with the announcement of its intent to acquire Good Technology for $425M in cash. The move follows a string of mobile-first EMM acquisitions that began with Citrix acquiring Zenprise in late 2012, followed by IBM’s acquisition of Fiberlink in November 2013, and VMware acquiring AirWatch a mere two months later. BlackBerry’s move will undoubtedly help the beleaguered company continue its transition from hardware to software, help them reach their stated SW revenue targets and address some of BlackBerry’s more glaring EMM portfolio gaps. BlackBerry will also inherit Good’s 6,000+ customers, 2,000+ Good secured applications and over 16,000 Good Dynamics developers. In many ways the transaction is complementary in that it consolidates similar target customer segments and enhances the combined solution portfolio. However, beyond the surface level alignment, several key considerations emerge.
Security is Great, but at What Price?
BlackBerry and Good have both built businesses focused on developing best in class mobile security solutions. This has translated into leadership positions in segments where security is a premium, especially regulated industries such as healthcare, financial services and insurance and government sectors. From Good’s EAL4+ certification for both iOS and Android and BlackBerry’s footprint among 16 of the G20, their combined credentials are equaled by none.
However, targeting these “regulated” sectors also limits your target market to 30-35% of today’s workforce (according to US Census data). That said, demand for robust mobile security extends well beyond the so-called tightly regulated industries. As any recently conducted enterprise mobility research will reveal, security requirements clearly trump all other factors when making enterprise mobility investment decisions and is not unique to “regulated” industries. However, security requirements do differ by market segment with many organizations not opting for the premium services offered by Good and BlackBerry. The recognition of its security cache is in a way a double edged sword in that the value of the company’s offerings are so strongly associated with particular industries such as financial services, healthcare and the public sector that organizations in other sectors may not acknowledge these solutions as viable options for their business.
The challenge for BlackBerry and Good is scaling this opportunity in the broader “un-regulated” market where security requirements are equally acute but not all encompassing and focus on capabilities such as user experience (not Good’s forte) may be greater. To maximize their opportunity, the consolidated company needs to ensure it does not compromise its leadership position in the premium mobile security solutions while expanding its portfolio to deliver more price/performance competitive solutions.
Sleeping with the Enemy
The competition between both companies has been fierce with Good successful at convincing many legacy BlackBerry customers to migrate to their solution. The effort expended at positioning their solution as superior and pointing out clear deficiencies of the other’s solution (Not “Good” Enough) has been immense with both CEO’s not being shy about publically calling out the other. This is certainly not the first time a competitor has been eliminated through acquisition (see Oracle and PeopleSoft) and the benefit of removing the distraction created by the incessant mud-slinging cannot be understated. However, this introduces an especially interesting dynamic with many legacy BlackBerry customers coming full circle. One of them offered the following comment on a blog post announcing the deal by Good CEO Christy Wyatt.
“Many of the Good customers I speak to have moved to Good specifically to get away from the failing (financially and strategically) Blackberry. This will undoubtedly trigger a re-evaluation of our own commitment to Good. I am very disappointed by this announcement.”
Addressing Good customers – especially those that switched from BlackBerry – will be challenging. Yes, BlackBerry intends to maintain Good’s solutions for several years until it figures out how to integrate both solutions. However, Good customers need to be reassured that there is a clear roadmap and dedicated R&D for the mobility solutions they have invested in and that the integrated solution provides credible value for them. Rebuilding trust will be necessary as Good customers need to understand why they should believe that the vendor Good sales and marketing summarily slammed now represents a favorable go forward option for them.
During his tenure as BlackBerry CEO John Chen has made several interesting acquisitions including Secusmart, Movirtu and WatchDox. John and his team have done a good job at folding these solutions into the BlackBerry portfolio, adding to their already strong reputation at integrating acquired businesses. Clearly the Good integration presents an entire different challenge. BlackBerry is addressing many of the gaps in its stagnating EMM/MDM business (its closest competitors are significantly outpacing them in top level revenue growth), attempting to provide a more comprehensive EMM solution. Ensuring that it maintains competitive status quo as it integrates Good’s solutions over the next two years will present the greatest challenge.
Putting the Pieces Together
Good has had its eye set on an IPO for a while now to provide a much needed infusion to its business. However, with the calamitous conditions in public markets and the recent performance of publicly traded competitor MobileIron, these doors were closing quickly for Good, if had not closed completely. The cash position at Good when compared to their trailing cost of revenues effectively removed much of their negotiating leverage. That said the deal that the Good team was able to secure – while nowhere near the multiples reached by AirWatch – is fair for both parties.
In a recent interview posted on BlackBerry’s blog with Christy Wyatt and BlackBerry COO Marty Beard (John Chen must have been busy) both made some very interesting statements (concessions?). Marty acknowledged that the Good acquisition will mean the “end of compromise for customers” while Christy countered that “customers have been asked to make tough choices: do they want deep management, deep security, and great user experience or enterprise scalability?” suggesting, perhaps, that they had been mutually exclusive. Clearly with Good, BlackBerry addresses some key issues, especially multi-platform support (leveraging Good’s strong iOS and growing Android installed base), container capabilities and the development partners leveraging Good’s SDK.
However, while BlackBerry is shoring up its EMM and cross-platform support capabilities through this acquisition, to what extent is BlackBerry equipped to fully address the growing requirement to support customers efforts as they move beyond addressing BYO support requirements and look to truly transform their businesses through the application of mobile solutions? This is what many of its competitors are focused on today. BlackBerry has been playing catch-up for a while now. What it deeply needs is for this transaction to leapfrog the competition.
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