BLACKBERRY'S NEXT BIG DRIVE
QNX system paying off, but Google’s racing in
Even before things started really going south for BlackBerry Ltd., it was clear that its purchase of QNX Software Systems in April 2010 was a transformative acquisition. The deal gave Research In Motion, as BlackBerry was known then, the basis for its next operating system and, vitally, provided a foot in the door of the emerging connected-car market.
BlackBerry’s dizzying decline over the next few years is welldocumented territory, with the once-dominant company’s share of the global smartphone market collapsing to 0.5% by the third quarter of 2014. But, unlike so many other decisions that BlackBerry made in the interim, the acquisition of QNX remains a rare success. Founded by two University of Waterloo graduates in the early 1980s, the Ottawa-based QNX had already established a global presence in the auto sector, when it was acquired by Stanford, Conn.-based Harman International Industries in 2004. Harman vastly ramped up QNX’s presence in cars, making it an industry leader in telematics — the computer programming in a car that goes into everything from safety sensors to the GPS system — by the time the 270-employee company was sold to Research In Motion.
Today, thanks to QNX, BlackBerry commands more than half of the rapidly growing market for in-vehicle infotainment — software that manages everything from music and phone calls to navigation and weather forecasts in your car.
Despite all that, QNX still generates only a fraction of BlackBerry’s revenue; results for the division aren’t broken out, but “software and other” accounted for about 8% of BlackBerry’s total revenue in its most recent quarter, while about half of QNX’s revenue comes from the auto industry. But the in-vehicle software market is one of the only areas left where the onetime giant BlackBerry still commands supremacy. And, as it happens, it’s a market that is kicking into overdrive.
“Not only is the demand in the individual vehicles skyrocketing, but the demand in each vehicle — how many systems can run on our operating system — is skyrocketing too,” Andrew Poliak, QNX’s global director of automotive business development, said in a recent interview.
A 2013 forecast from the GSM Association of mobile operators predicted that the connected-car market will be worth €39 billion (about $56 billion) by 2018, three times its value in 2012, thanks to a sevenfold increase in the number of new cars with mobile connectivity.
And Mark Boyadjis, senior automotive technology analyst at IHS, estimates that there will be 400 million connected cars on the road by 2020, up from 82 million in 2014.
“More and more of these cars, from the high end to the low end, are getting infotainment systems that require a bona fide operating system environment,” Mr. Boyadjis said in an interview.
“We’re forecasting QNX to remain the leader of this market through 2020.”
A good illustration of BlackBerry’s dominance of the in-vehicle software market is its ubiquity at the Consumer Electronics Show in Las Vegas last month. Mr. Poliak said that every booth within eyeshot of QNX’s location on the show floor belonged to an automaker that uses its software.
Although the average driver has probably never heard of QNX, it’s the platform behind the infotainment systems of most major automakers, including BMW, Chrysler, General Motors, Honda, Hyundai, MercedesBenz, Toyota and Volkswagen. As of early January, QNX said its software had been deployed in more than 50 million vehicles worldwide.
BlackBerry scored a major coup in December when Ford Motor Co. announced that it had dropped Microsoft Corp. in favour of QNX to power the latest version of its Sync infotainment system.
Speaking at the North American International Auto Show in Detroit last month, Ford CEO Mark Fields said QNX “will give us even more capability and intuitiveness in our Sync system” and threw in a little jab at Microsoft’s intuitive user friendliness, compared to QNX’s.
“[With QNX], you don’t have to talk like a robot to your car: ‘Play Bruce Springsteen, track Born to Run.’ Now you can just say, ‘ Hey, play Born to Run,’ ” he said.
Of course, BlackBerry has stood astride an industry before, only to find itself suddenly surrounded by competitors devouring its market share. And QNX also puts BlackBerry in the strange but unavoidable position of helping the devices of those very same smartphone competitors. QNX supports Apple CarPlay, which allows users to access their iPhone apps from the built-in dashboard display of their cars, as well as Android Auto, for Google-powered devices.
“Once you start getting into ways to replicate your screen, it requires a lot more sophistication on the platform,” Mr. Poliak said.
“So consumer demand for connected devices is actually driving the need for advanced operating systems like ours in entry-level vehicles.”
This is another area of potential growth for QNX. The GSM Association estimates that 21 million vehicles sold in 2018 will have smartphone integration systems, up from 1.9 million in 2012.
However, collaboration and competition often go hand in hand in the tech industry, and connected cars are no different.
While Apple has shown little interest in developing its own operating system for vehicles, Android software is already making inroads through the Open Automotive Alliance, a network of technology and automotive firms focused on bringing the Android operating system to cars.
“General Motors was one of the founding members of the Open Automotive Alliance with Google, which is setting about making Android more relevant inside of the car,” Phil Abram, chief infotainment officer at GM, said in a recent interview.
And therein lies the challenge for QNX — GM’s OnStar service was QNX’s first big customer, but GM is also helping Google in its quest to establish Android as a dominant player in the same market.
Because Android is built on Linux, an open-source platform, Google doesn’t make money from it, but the giant of search, cloud services, mapping, mail and so much more clearly stands to benefit from the increased penetration of Google apps in vehicles.
“Android and Linux … present probably the biggest competitive threat to QNX,” Mr. Boyadjis said.
According to an IHS analysis from June, Linux-based platforms will overtake QNX to become the leading infotainment operating system by 2020.
For the time being, however, BlackBerry’s QNX continues to cement its status as the dominant provider of in-vehicle software. Last month, LG Electronics announced that it would use QNX platforms to build a variety of systems for the global vehicle market, including infotainment, instru- ment clusters and advanced driver assistance.
And Mr. Poliak said there are plenty of other opportunities for innovation, including remote software updates and the ability to share your settings and preferences between vehicles so you could, for example, program a rental car to mimic your personal car.
“We’ve got all this capability, which is exactly what car companies are looking for, that can really take us that next huge step from providing embedded technologies to helping [manufacturers] manage their vehicles in the field,” Mr. Poliak said.
The best part of this for automakers is that it allows them to adapt to technological advancements much faster than they’ve been able to in the past, said GM’s Mr. Abram.
“We used to have to guess what people would want five years from now and start building it into cars now,” he said.
“Now we have platforms that allow us to innovate at the speed of the consumer electronics industry, rather than the car industry.”