July 2005

The Willing Partner

Research in Motion's stock has climbed 800 percent in three years, thanks to a strategy of licensing its hugely successful BlackBerry email software to Nokia and Motorola.

By Alex Frankel

The Case: Corporate customers have loved Research in Motion's BlackBerry since its 1999 launch. But as the popularity of the device increased, so did the number of the company's critics, many of whom believed Research in Motion was too small to maintain its dominance. When the company began to license its software in 2002, many saw this move as a drastic change in course. Instead, it was an object lesson in smart partnering.

Research in Motion

FY 2005 revenues: $1.35 billion
Employees: 3,000
Number of e-mails sent across North America that go through RIM’s data center each day: 100 million

In November 2002, Research in Motion (RIM) and Nokia announced a licensing arrangement allowing Nokia to offer its customers the ability to receive e-mail using RIM's BlackBerry software. The news perplexed industry watchers. For the three years before the deal, only RIM's devices could connect with the company's enterprise server, so that RIM owned both parts of the market for wireless e-mail: the devices and their software. RIM, in fact, seemed to own the very notion of that market.

The BlackBerry was the hardware equivalent of a killer app, the now overused term popularized in the 1980s to describe a piece of software so attractive to users that they feel they cannot be without it. Every new technology needs a killer app to establish its acceptance; for wireless e-mail, the BlackBerry filled that need. As businesses started to deploy the device to an increasingly mobile--and pressed -- workforce, BlackBerry emerged as a critical tool for businesspeople.

Why, then, would RIM make its proprietary software available to others? Why would the company partner with a massive competitive threat such as Nokia? To many observers outside RIM, these decisions signaled a major shift in the company's business model. But to those inside RIM, they stemmed from a strategy the company had always followed.

RIM's case highlights a business problem that countless technology companies have had to deal with: when a company creates a revolutionary product whose software becomes critical to the establishment of a market, it has to figure out whether to keep its software all to itself or license it in an effort to make its technology the industry standard.