Welcome to the DMZ
RIM partnered with handset makers largely because it believed partnerships work well for companies with industry positions like its own. Balsillie compares that position to a demilitarized zone, one he says facilitates convergence between traditionally separate parts of the telecommunications and hardware industries. But like the strip of land between North Korea and South Korea, RIM’s DMZ is also a buffer between two sides: the handset makers and the wireless carriers. “We are a middleware. And that’s a really useful place to be. A lot of people seem to be agreeing with us by buying our products and partnering with us,” says Balsillie.
RIM believes its status as first mover has allowed it to pioneer functions necessary in this middle ground, such as wireless data transmission and security. “If someone wants to be the middleware platform DMZ [like RIM], then I would think you would have to replicate the whole equation. You can’t just pick and choose parts,” Balsillie says. The DMZ role, he argues, requires you to please a number of parties: individual customers, corporate IT departments, handset manufacturers, operating-system makers such as Palm, and carriers all over the world. By the end of 2005, RIM will have signed on some 200 carriers – some profitable, others not – so that its services will be available everywhere in the world that its customers plan to be.
RIM’s neutrality, of course, does not protect it against other companies that would like to run the DMZ. Two of the most cited potential BlackBerry killers are Microsoft and Good Technology, the upstart privately held software vendor that has more than 5,000 organizations paying for its rival GoodLink system. For its part, Microsoft is introducing new versions of its mail server and PocketPC software that include support for push e-mail, BlackBerry style. Some say that Microsoft has a lock on so many corporate servers that with these additions, it will easily be able to move customers to a free Microsoft-run wireless platform next year. The DMZ is also flooded with other well-armed competitors, among them Seven, Intellisync, and Visto.
Part of what saves RIM from despair is that while its position in the market may be neutral, its customers’ feelings about its product are not. As RIM corporate-marketing vice president Mark Guibert explains, “Our customers became such raving, evangelical fans of the technology that the brand grew very virally and became very strong.”
That kind of loyalty and enthusiasm has worked not only at the level of the individual user, but also at the level of the corporation. “We should never underestimate the brand of RIM. Fortune 500 companies have a definite preference for RIM,” says Albert Chu of PalmSource. The software company worked with RIM to develop BlackBerry Connect for Palm OS, which allows PDAs equipped with Palm’s operating system to access BlackBerry wireless services. “We clearly want to enable any solution that our customers want; if our customers want wireless push e-mail, we want to make sure we have that enabled for our platform. If RIM is the best brand out there, then we want to make sure that there’s a RIM/BlackBerry solution on the Palm OS.”
Another way RIM protects itself is by partnering with the kinds of companies that could pose major threats. RIM denies that its partnership arrangements have anything to do with self-protection: “We are not partnering with companies because they are competitors,” says Guibert, but “because that is what we do really well.” Motive, however, is unimportant. The result of these arrangements is that RIM has given big companies a reason to want BlackBerry to stick around.
RIM’s small size has helped its dealings with prospective partners. According to Balsillie, when Nokia came calling in 2002, it didn’t see RIM as a competitor. (RIM has a market valuation of $12.4 billion; Nokia has more than $15 billion in cash. Nokia sells more than 100 million cell phones a year; RIM has fewer than three million subscribers.) “Nokia’s got a lot of worries; RIM’s not one of them. I am sure of that,” Balsillie says.