BlackBerry: Bery Bery Focused on the Enterprise

Today, adoption of smartphones is growing faster than any other gadget. Every handset maker is trying to capture a huge chunk of the market. For some, it’s an alarming signal and are trying to be agile, whereas some reacted to this boom a bit late. In our

Voice & Data: BlackBerry burned its hands on its handset business a few years back. What went wrong and what did it cost the company?

Sunil Lalvani: Let me step back a bit. We all know that BlackBerry has been in this industry for over a decade but contrary to the overall perception in the market, we have always been more than smartphones. The first few years or the first decade of BlackBerry being in business globally was largely linked to the enterprise business and within the enterprise business, it was built around what we call as BlackBerry Enterprise Server, which was essentially a service that provides email on the move and to avail this service you needed to buy a BlackBerry device.

In the recent years, the smartphone boom has really taken off especially in markets like India. Over the last one year to eighteen months, we have seen a plethora of low-cost Android devices coming to the work space and market. Many of these devices are being manufactured in low-cost destinations especially in the Far East or certain emerging markets. BlackBerry by contrast was manufacturing devices in the developed world mainly in North America and parts of Europe. When we rolled out BlackBerry 10 which is an extremely powerful operating system, owing to manufacturing, supply chain and logistics, the device cost was higher than most Android devices in the market. BlackBerry did not have a single device and even now does not have a single BB 10 device below $175.

“With the new leadership team under John Chen, there was a deep analysis done as to how do we address the high cost for Blackberry devices”

This market segment of $50 to $175 which was left unaddressed led to a loss of marketshare.

Voice & Data: The company tottered about for a while without direction. What were the options available then and how did things pan out?

Sunil Lalvani: I could give you an Indian perspective on that as I have been closer to this market and have been in this system for over four years and know our strategy and execution in the India model. Globally, it varies a little bit for emerging markets vis-a-vis the developed markets, hence there would be a slight difference there but at a high level if you look at it, our revenues had soared to $20 bn and YoY growth was in excess of 50% and the smartphone boom was just beginning to take off in markets like India, Indonesia, and some of the other emerging markets and that is where BlackBerry’s decided to foray into the next device and operating system that we rolled out.

So, that got the work started on BB 10, BlackBerry acquired a company called QNX, based out of North America and built on BB 10 as an operating system. When you are rolling out a new platform and an operating system, the learning curve also takes a little longer. BB 10 was playing in, specifically in markets like India, Indonesia, South Africa, etc, where we have a pretty large market share. The previous leadership focused on rolling out BB 10 devices and targeting the same momentum we had the year prior but that slowed down because you have a product which starts from $200 upwards going all the way to $500 and you are leaving a completely untapped market below which is a huge market, especially in India of sub $200 and $150.

Voice & Data: What is the message behind the Foxconn deal?

Sunil Lalvani: It digs into the previous point. We analysed what worked for us and what did not work for us. With the new leadership team under John Chen, there was a deep analysis done as to how do we address the high cost for Blackberry devices. Foxconn has been the answer to that. Though the first Foxconn product is yet to roll out, nonetheless, the agreement with Foxconn entails that it is a five year strategic partnership where in the manufacturing, logistics, warehousing, etc, will be taken care by Foxconn. So in this agreement, we move a lot of overheads

that we were incurring in the past, be it logistics, manufacturing or supply chain, but we retain the core strengths which is the operating system, our patents, our security differentiation. It will help churn out devices at a slightly lower cost and inturn, also helps with a quicker go-to market and faster time to execute.

Recently, you had your software and services business account for 67% of your over all revenue.

It was 63% from services and software and 37% came from hardware.

Voice & Data: Do you expect this kind of ratio, almost two-thirds of your revenue coming from software and services going forward? Is that intentional?

Sunil Lalvani: As long as there is smartphone adoption or tablet adoption that is happening in the market, our software business and services revenue will continue to grow. Specific to your question, the answer is definitely. Simple reason is that services and software always tend to have healthier margins. From India’s point of view, for sure that we have seen our enterprise services and software business grow over the last three years and specially in the last one year when we rolled out what we call as BES 10, which is a cross platform management solution, it takes care of Android, iOS, and BlackBerry devices and even tablets of these platforms, it can seamlessly manage through one single centralized server and one management console. Our roadmap on this also continues to grow stronger so from BES 10 we are evolving it to BES

“From India’s point of view, for sure that we have seen our enterprise services and software business grow over the last three years and specially in the last one year when we rolled out what we call as BES 10, which is a cross platform management solution, it takes care of Android, iOS, and BlackBerry devices and even tablets of these platforms, it can seamlessly manage through one single centralized server and one management console.”

12 by the end of the year and BES 12 will add on functionalities like Windows operating system as well and integration of cloud going forward.

Voice & Data: What’s the model for

pricing?

Sunil Lalvani: There are three pricing models that exist for BES 10 today in the market. One is what we call the annual subscription, so even if you are using an Android device or iOS or BlackBerry device, you can subscribe to the annual subscription based model, the other is the perpetual license based model, where you can take a one-time fee in the perpetual CAL (client access licence) transfer to the customer. The third, which is more recently rolled out with our carrier partners, is the zero subscription model.

Voice & Data: What’s with the euphoria and optimism around BBM and BBM Channels?

Sunil Lalvani: Couple of things again I can talk from an India perspective because we are seeing a significant adoption of BBM and BBM Channels. The other element that I wanted to briefly touch upon as we talk about BBM is eBBM. So, the euphoria essentially is, there is a lot of talk in the market in terms of instant messaging, be it we talk to carriers or we talk to individual users. Everyone is on a social networking platform and instant messaging is becoming the key enabler or the key driver, whether we talk about Whatsapp, WeChat, Skype or even BBM. Blackberry’s messaging gives delivery assurance, does not encroach on privacy, and uses a unique PIN and not your phone number. We rolled out BBM channels, which is already in market and we are very soon going to roll out what we call as enterprise BBM or eBBM. The BBM channels adopt similar principle as BBM.

Voice & Data: What’s the market opportunity for QNX in India?

Sunil Lalvani: The interesting fourth pillar that we have as a part of our revenue stream is QNX. We are already seeing a lot of interest and a lot of traction on QNX in the India market, particularly from sectors which are deploying missioncritical processes, applications, etc, and the other interesting business model in India is the adoption of so-called ‘Internet of Things’. That is where we feel that we have a clear edge with QNX because QNX as an operating system specializes in embedded systems; it specializes in mission-critical processes and applications. Today, QNX is already deployed in a lot of automobile companies worldwide. It is deployed in CISCO routers, medical equipment, in some of the heavy engineering and industrial automation companies. So, we are already seeing a lot of adoption of QNX, we are bringing that into India, speaking to a lot of companies who are in these segments or these sectors and that is where the big thrust and the big growth prospects also look in.