Too late to openness

I saw an interesting comment Wednesday on BlackBerry’s late conversion to openness. VC Fred Wilson wrote:

So RIM has decided that it is time to make Blackberry Messenger (BBM) cross platform. They announced yesterday that by this summer BBM will be available on iOS and Android.

The time to do this was in 2008/2009 when BBM was huge and everyone was on it. The core users were beginning to leave for iOS and eventually Android and if RIM would have let them take BBM with them, they would now own the biggest cross platform messenger out there. BBM is great and everyone knew how to use it and was comfortable with it.

But RIM execs waited four years to make this move. When BBM hits iOS and Android this summer, they will face dozens of cross platform apps that people use to message each other, one of which is in the USV portfolio. My bet is this won't help RIM or BBM much at this point.

Even when I was consulting to Symbian from 2006 to 2008, people were speculating when BB (then Research in Motion) would license or partner with its email platform. (Its BlackBerry Connect mail client was available for a few Nokia phones during that time). RIMM held strong market share in the US until 2009, when it began its unchecked fall towards zero.

As someone who studies the strategic use of openness, I’ve seen this tendency to put it off openness until too late, across a wide range of companies, product categories and decades. Wilson attributes this to The Innovator’s Dilemma, which I interpret as an unwillingness of firms to cannibalize their own high-margin business with low-margin (or low price) business.

Yes, cannibalization is hard. Yes, Clay Christensen made an important observation why such cannibalization is so hard. But having studied these sort of choices over and over again, I think “Innovator’s Dilemma” is too pat an answer: sometimes it explains why a firm can adapt, but it’s rarely the complete explanation.

It often happens that the managers know exactly what they're doing — increasingly likely after the publication of Christensen’s book.. I’d split this into two subcategories. One is that it’s a rational choice — milking a cash cow to the end and using that cash while it lasts to do something else. (For example, from 1999-2002 I took the rents from my printer driver business and used it to finance a shift to a new career).

The other variant is that the managers get it but the owners do not, a classical principal-agent problem. If I’m getting commission on sales (or stock options on current capital appreciation), why do I care about company performance 2, 3 or 5 years from now? It may be perfectly rational for me as CEO to get while the getting’s good, even if I know it will eventually all come crashing down. (I call this the Ceaușescu theory of management, given the predictably unhappy end to the Romanian ruler’s reign.). As such a CEO, I hope to be lucky enough to be I’m retired to my Maui estate before everything falls apart)

Finally, what I think the most common explanation is Da Nile (that river in Egypt). I’ve worked with, for and competed with a wide range of companies that just can’t recognize — or can’t admit — that the competition is a serious threat. Christensen identified conditions where this happens, but often the explanation is much simpler one: arrogance or hubris. (In marketing, we say “they’ve come to believe their own propaganda.”) Certainly BlackBerry/RIM has had this problem for years.

Intel’s once great founder-CEO (now Stanford business professor) had it right: only the paranoid survive. But having escaped Hungary after Soviet tanks invaded the country to crush a popular uprising, the former András Gróf lacks the complacency common among highly successful US business leaders.

RIM: we've seen this movie before

Research in Motion this morning promoted COO Thorstein Heins to be the new CEO. The two co-CEOs, Mike Lazaridis and Jim Balsillie, stepped down from any executive position but remain on the board. (Lazardis, a co-founder and the only remaining original director from 1984, becomes vice chairman).

The FT reported:

Thorsten Heins jokes that as a German, he knows something about discipline.
…
“Once I decide on building an idea, or on building a product or a service or a network, I do this very rigorously,” Mr Heins told the Financial Times. “Discipline in the development process, flawless execution, quality [and] accountability in the system.”

The analyst reaction was mixed; this comment from RBC (via the WSJ Deal Journal) seems representative:

On the one hand, this appears a positive step, as Messrs. Lazaridis and Balsillie are stepping away from the Co-Chairman, Co-CEO structure which some investors have highlighted as one source of RIM’s current problems… On the other hand it’s unclear to what extent the new CEO will be able to materially impact the vision and direction of the company in light of rapidly changing competitive conditions, and correct RIM’s seeming inability to navigate these challenges. CEO Heins, while a seasoned network executive, has never been a public company CEO, and lacks deep consumer marketing and software experience.

When I heard the news, two words immediately came to mind: Michael Spindler.

Spindler was Apple Europe president, promoted to Apple CEO after John Sculley was ousted in 1993 (and before Spindler was ousted for Gil Amelio three years later). Spindler was a notoriously operations-oriented executive (nicknamed the “Diesel”) who sweated every detail in sight.

I’ve never met Heins, so I don’t know if he has the Spindler stubbornness and lack of imagination. However, in most companies the COO (contrasted to the VP of R&D or the VP of marketing) tends to focus on implementation rather than generating great new ideas.

Certainly RIM could use to ship better products sooner, so improving execution is a good idea. But in the end, will it change RIM’s eventual fate? I doubt it, any more than Spindler’s (or Amelio’s) execution was ever going to save Apple. RIM has still to solve its fundamental problems.

RIM had a great run, bringing email to the cellphone, solving key ergonomic and battery life issues. However, like Nokia (and unlike Samsung, LG and even Motorola) they underestimated the impact of the iPhone and the desire of cellphone owners to access the open Internet. Pursuing the same strategy (even with better execution) and expecting better results is the very definition of insanity.

RIM doesn’t need new execution: it needs a new strategy. Nokia made a bold move — which may or may not work — but at least licensing Microsoft’s platform provides an ally, newer technology and perhaps the badly needed economies of scale.

RIM clearly lacks the scale to support its platform alone, in the face of the Android onslaught and Apple’s continuing success in controlling the industry’s wallet share. It was rumored to be trying to license its platform to other firms, but who would want it now? That’s the problem with most proprietary platform leaders: they open up when it’s both too late to hurt the company and also too late for any potential partner to care (NB: DEC, Sun, Sony).

One strategy for RIM would be to concentrate more on the server side, providing BlackBerry push e-mail to handset makers, network operators and business users who don’t have BlackBerry hardware. The problem I can see is that the traditional BlackBerry business model is dying because most of the differentiation is gone: why would I pay $10/month for BlackBerry services when I can get gmail (or hotmail) for free? (This is exactly the Windows 95=Macintosh ’89=Macintosh 2000 problem.) Or, as one analyst quoted by the WSJ put it, “Our discussions with carriers suggest declining relevance and increased pushback on BlackBerry fees.”

Another strategy would be to sell the company for the value of the patents, as Nortel (the oldest of Canada’s onetime telecom giants) and Motorola (the creator of the cellphone) have done. Obviously the RIM management has little interest in this as long as there’s any other alternative.

Absent a partner, RIM is going to go the way of DEC, Sun and Motorola, sold for its residual value. Even after the management change, RIM appears no closer to forestalling that seemingly inevitable outcome.

Dead BlackBerry bounce

Normally sober Rich Karlgaard of Forbes says it’s time to buy Research in Motion stock:

Research In Motion, much despised now, will enjoy share price bounce backs, as predictions of the company’s death will prove to be premature. In other words, RIMM is a good stock to buy now, even if its future is the cloudiest of the big four. Invest in Apple, Google and Microsoft. Be a trader with RIMM.

Even more so than some of us, Karlgaard re-interprets the contemporary world through the lens of the PC, Internet and dot-com booms. His argument is that the penetration of smartphones today is like PCs in 1989, with plenty of upside left to go.

The problem with the analogy is that the winners after 1989 were Compaq and Dell, commodity makers of the commodity standard PC. In today’s world, that would be LG, HTC and Samsung.

As a card-carrying PC historian, I’ll bite. The problem is, in this analogy the RIMM BlackBerry is much like the Commodore Amiga — a highly differentiated product with a loyal following that got swamped by the economic and psychological bandwagon effects behind the IBM PC that nearly drowned Apple too.

Atari, Commodore, Digital Equipment and many other once-great computer companies never came back.

Nowhere is it written that trouble cellphone companies will someday rebound. (Exhibit B: Motorola. Exhibit C: Sony Ericsson).

RIM is on the losing side of a 3- or 5-sided standards war. Its great hope, the Playbook tablet, has failed to capture the public attention or interest. (I tried to use one at my local Office Max but gave up when I couldn’t figure it out.)

RIM peaked at $144 in June 2008 and now languishes below 30, almost where it was 5 years ago before America learned what a smartphone is. Absent an acquisition, I don’t see how it will ever visit $100 ever again — and Nokia’s alliance with Microsoft seems to have eliminated the only possible acquirers.

Since the iPhone came out 4 years ago, Apple stock is 2.67x the June 2007 price while RIM is at 49%. Despite a huge advantage in installed base, distribution (and enterprise integration), the great smartphone boom has left RIM shareholders by.

So RIM’s long-suffering shareholders should take note of Karlgaard’s advice — and sell on good news or even a dead cat bounce. RIM tested $70 on Feb. 18 and it’s been steadily downward ever since. Even if this is a temporary bottom, prices above $50 will bring out a lot of itchy buyers, so anything beyond that is pure gravy.

RIM shot across Apple's bow

Consistent with my observation a week ago about living in a BlackBerry nation, the NPD Group said today that Research in Motion upped its US market share to nearly 50% in 2009 Q1. Three out of five of the top smartphones were from the Ontario company. Now smartphones account for 23% of the market, unchanged since Q4.

The iPhone has fallen behind the BlackBerry Curve (sold by all four carriers) but ahead of the BlackBerry Storm (exclusive to Verizon). NPD notes that RIM was helped by aggressive marketing by its cellphone partners. It singled out Verizon, which has been aggressively promoting BlackBerries with a 2-for-1 promotion.

As I’ve argued for years, by giving an exclusive to ATT, Apple gave the majority of the market a reason to promote everything else. The largest US carrier, Verizon, doesn’t have an iPhone (yet), and so is promoting every other smartphone in sight: today BlackBerries, tomorrow Android, and perhaps sometime an iPhone, Palm or Nokia phone.

Still a BlackBerry nation

This week I had a two-day trip to the Michigan State telecommunications center to deliver a talk (more later). Due to the difficulties of getting to Lansing from San Jose (or SFO), that meant six flights through five airports in a 42-hour period, including a circuitous routing home: LAN-ORD-LAX-SJC.

Because my talk was on the iPhone (as was the Q&A and much of the informal discussion), on the trip home I was thinking a lot about iPhone and smartphone usage patterns. But instead of the iPhone, what I observed was a remarkable overlap between BlackBerry owners and airline travelers.

I didn’t see the phone model of my seatmate on the first leg. On the second leg, I was among the last to board the flight to L.A. at O’Hare airport: walking onto the plane, three of the eight people in first class were intently reading on their cellphones — all BlackBerries. When I squeezed into my middle seat, the two guys on either side were reading on their BlackBerries. On the final leg to San Jose in a CRJ-70 with 2+2 seating, my only seatmate was reading something on a BlackBerry.

All of these BlackBerries had thumb keyboards — no Storm in sight. In fact, these were all standard width phones — no Pearls either.

When I hang out with tech types here in the Valley, the iPhone is it, and the BlackBerry is passé. This includes not just those in the industry, but also housewives and students who have the bucks to buy the pricey phone and its pricier data plan. That also applies to many tech-savvy college professors or grad students that I meet in my travels.

But when you look at the market share numbers, the BlackBerry is still killing the iPhone. Here is the IDC smartphone marketshare for the US, as released in dribs and drabs of press releases over the last 15 months.

	2007	2008
Company	Q4	Q1	Q2	Q3	Q4
RIM	35.1%	44.5%	53.6%	40.4%	47.5%
Apple	26.7%	19.2%	7.4%	30.1%	22.3%

The story, of course, is pretty simple. Apple has only one model, and so gets a huge boost when it comes out (and had a 2nd boost in Xmas 2007) but otherwise tapers off the rest of the year.

The other reason is that to launch the iPhone in the US, Apple gave one company an exclusive, thus limiting its sales. Clever distribution ploys aren’t going to get around the fact that Research in Motion sells through almost everyone (even MetroPCS) while Apple is only selling to the 28% of the market that is on or willing to be on AT&T.

This exclusive is of course a legacy of its 2007 revenue sharing model. In 2008 (when Apple added the majority of its countries), the norm appears to be multiple carriers. In a quick spot check, that’s two carriers in Chile ((unlike Claro and Movistar), India (Airtel and Vodafone), Italy (TIM and Vodafone) and Sweden (Telia and Telenor), three in Australia (Optus, Telstra, Vodafone) but only one in Canada (Rogers and its Fido subsidiary), Japan (Softbank) and Mexico (Telcel).

This leaves out the differences in the devices and usage. Both devices seems popular for Internet use (as opposed to Palms which are often used as just organizers). However, the BlackBerries seem to be about reading text while the iPhone seems more about surfing the web. (Both are obviously used for e-mail).

Apple has some hope. The 20ish young man next to me en route to LAX put his BlackBerry away when the plane took off, and spent the whole flight with his iPod Touch. He said he would have bought an iPhone but still had a contract on his BlackBerry.

In 2008, Apple added most of the interesting countries, so in 2009 it won’t be able to add countries (except China) that will significantly grow its global market share. This leaves two options for growing share in the rapidly growing smartphone segment that was up 22.7% last year. However, I have major doubts whether Apple will pursue either one.

One is to release a broader product line in 2009 — not just one model but many, as it did with the iPod. However, Apple seems loath to cannibalize its premium product, nor (I suspect) is it willing to tinker with the original vision (e.g. by adding a keyboard).

It may be that Apple will add other types of mobile devices to increase unit sales without regards to cellphone market share bragging rights. After all, Apple sells 3 iPod Touch units four every 4 iPhones worldwide, and all of these models are driving revenue to the App Store. The rumored Apple netbook might similarly be an iPhone OS device that doesn’t count towards cellphone market share.

The other option is to add additional carriers in those countries where it originally granted an exclusive. One problem is that it appears the exclusive doesn’t expire until until 2010. The other is that Apple COO Tim Cook explicitly said last week that Apple has no interest in CDMA, which rules out the majority of the US cellular market (Verizon-Alltel, Sprint, US Cellular, MetroPCS, Cricket). T-Mobile is less than half the size of either AT&T or Verizon.

So if the 2007 story was the iPhone’s initial foothold, and 2008 was global proliferation based on 3G support, I suspect that 2009 will be about proliferating new devices that are not necessarily phones. That will leave US a BlackBerry nation for at least a few more years.

The Storm is a washout

In preparing for my talk this morning, last night I thought I’d get around to checking out the BlackBerry Storm that got so many rave reviews when it was announced by bloggers (like me) who’d never seen one.

In a word, it was disappointing. The performance of the network (1x not 1xEV) inside the Circuit City store was sluggish. As reviewers have noted, it was really buggy (a firmware update is apparently out but was not installed).

The browser was particularly awful. It updated the screen in splotches (almost as though it were doing server-side rendering). When I rotated the device the splotches (or tiles) got out of sync and so the screen was unreadable. I haven’t been able to find who made the browser, but this is not the WebKit-quality browser found on the iPhone and S60. The performance claimed in Endgadget was unrecognizable:

Thankfully the browser has been considerably updated. If you have any experience with RIM's last attempt at mobile browsers (the Bold), then you know what manna from heaven any fixes would be. 4.6's browser is, in a word, unusable. Load times are painful, rendering is only sometimes accurate, and mostly it's just a tortuous mess to get around in. We can honestly say that the Storm's implementation is leaps and bounds beyond what the company has previously offered.

The sales clerk rationalized the network performance — not implausibly that there was poor radio reception inside a large 2 story building. But he said it was the worst BlackBerry he’d ever seen.

The reviews have been even more harsh. The most often quoted is the NYT review by David Pogue, which is relentless. Here is just a miniscule excerpt

It can take two full seconds for the screen image to change when you turn it 90 degrees, three seconds for a program to appear, five seconds for a button-tap to register. (Remember: To convert seconds into BlackBerry time, multiply by seven.)

In short, trying to navigate this thing isn’t just an exercise in frustration — it’s a marathon of frustration.

I haven’t found a soul who tried this machine who wasn’t appalled, baffled or both.

Apparently, Storm owners wrote in droves to agree. While I lack the BlackBerry benchmark to compare, there’s no way this device has the user experience of the iPhone I’ve borrowed or even the clunky (but adequate) Nokia E65 I bought last year with my own money.

Why did RIM ship a buggy device that would damage their reputation? Were they that worried about missing the Xmas sales season? Was it just an ordinary case of marketing promising a date that engineering wasn’t sure that it could make?

The other major disappointment was the virtual keyboard. Supposedly the clicking of the touchscreen was supposed to find a more realistic feel than regular touchscreens like the iPhone or Nokia N810. But it lacks the patented iPhone gestures for screen navigation.

Not only was the feel inadequate, but as with the iPhone — the screen goes away when you need the virtual keyboard. What’s the point of having a large LCD if you can’t use it?

The Google/HTC/T-Mobile G1 and Nokia N97 (like many LG and Samsung) phones have it right: a slide out keyboard is the real answer. However, I'm curious as to why there aren't more Bluetooth external keyboards available or in use.

Ideally, there would be something that 's portable enough to fit in a briefcase, but fast enough to support 60-80 wpm typing that an experienced computer user can hit. Something like the old GoType keyboard for the Palm PDAs, which I used for a couple of business trips and conferences. A Nokia guy told me he uses a Bluetooth keyboard with his S60 phone. Apparently one has been promised for the iPhone but not released.

Finally, a worthy iPhone challenger

In response to T-Mobile’s gPhone and AT&T’s iPhone, Verizon Wireless is getting a bPhone — the new BlackBerry Storm, which was leaked last week and officially announced this morning.

The new BlackBerry 9530 appears to be the flagship smartphone of the world’s largest cellphone carrier, Vodafone, and is being first released by its partly-owned US subsidiary, Verizon Wireless. It melds the traditional BlackBerry features with an iPhone-inspired touch screen interface, showing that Research in Motion is interested in more than just CrackBerry keyboards.

The announcement is interesting on many levels.

First, reviewers are generally calling it the strongest iPhone challenger yet, certainly better than the gPhone (aka T-Mobile G1). As Wired wrote:

To put it mildly, we’ve seen a butt-load of handset makers jump on the iClone bandwagon since Apple’s device was announced in 2007. Without exception, every attempt has failed to come close to matching the iPhone’s nearly mythic combination of intuitive UI, responsive touchscreen, and gorgeous hardware. The Storm, though, gets closer than any device we’ve ever laid hands on.

And in one critical area — you might want to sit down for this — The Storm actually beats the iPhone.

The main improvement is ClickThrough, which provides the best tactile feedback yet of any touchscreen phone. The consensus is that this is the one area where it’s clearly better than the iPhone.

Not surprisingly, the Canadian systems innovator is also planning an application store to compete with the iPhone App Store. RIM has had a wide range of 3rd party Java-based applications for years, but is now making these available to users in a more convenient and integrated fashion. The key difference is that the content will be controlled not by RIM, but by the carriers. (No mention of the store is made in the official announcement).

This says some interesting things about competencies. In 2007, Apple releases its first mobile phone and an important new smartphone platform. Through a combination of software, industrial design and PR flair, Apple redefines the mobile phone experience for American cellphone buyers and, to a lesser extent, those in the rest of the world. How do firms respond?

• Motorola (#1 in the US, #3 in the world) continues to dabble in smartphones with halfhearted efforts using Windows Mobile and Symbian UIQ, but doesn’t aggressively promote any of them. Despite the smartphone challenge, the cellphone division is distracted by its much larger problems, including plummeting market share and a desire of Motorola corporate to jettison the division before it sinks the parent company.
• Samsung (#2 in the US and the world) and LG (#3 in the US, #5 in the world) — the major suppliers to Verizon Wireless in recent years — have a typical Japanese/Korean response: phones with great hardware, lots of features, and uninspiring software.
• Nokia (#4 in the US, #1 in the world) add an application (and everything else) store to strengthen its dominance of the European smartphone market, but fails to find a carrier that wants to push its phones in the US. It’s reportedly waiting until next year for a full-on iPhone challenger.
• RIM (#5 in the US) leverages its handset software, dominant back-office technology and loyal customer base to make the most effective iPhone challenger yet.
• Google enters the US smartphone market not with a branded cellphone maker, but with HTC, the #1 ODM: its G1 falls somewhat shy of the mark.

In other words, it’s not surprising that RIM has a strong product and Motorola, Samsung, LG and newcomer Google do not. The only surprise here is that Nokia has been unable (or uninterested) in making a compelling product for the US. Given its weak CDMA products — foreclosing a deal with the #2 or #3 carriers — perhaps the key obstacle is that it has no channel to US consumers other than iPhone dealer AT&T.

The “Storm” actually appears to refer to the BlackBerry 9500 family (cf. Nokia N95?), which includes Vodafone’s BlackBerry 9500 and Verizon’s BlackBerry 9530. I’m guessing that Vodafone will be selling different models. Vodafone was once interested in commoditizing handsets to avoid commoditizing its pipes. The announcement suggests Vodafone’s tacit admission that handsets are not going to be commodities any time soon.

Other things don’t change. While it has a brand new phone, Verizon Wireless continues its policy of tightly controlling subscriber access to 3rd party applications — either you’re “on deck” or not at all — a control ceded by AT&T to Apple (with the iPhone App Store) and abandoned by T-Mobile USA. The 9530 is also one of the few smartphones in years to come without Wi-Fi support, allowing bypass of the CDMA network at Starbucks or the office.

The 9530 is a fully dual-mode 3G phone that works on Verizon’s EV-DO network and in the W-CDMA technology used in Europe and elsewhere in the world. Is it that Verizon is tired of AT&T’s obnoxious ads about implausibly globe-trotting teens with no bars? Is it that the high-end BlackBerry users fit the actual profile of a globe-trotting executive? Or is it that BlackBerrry has a long relationship with Qualcomm (supplier of the chips for Verizon’s previous dual-mode BlackBerry)?

Switching costs: who decides, who pays?

This weekend at a conference I ran into an iPhone-carrying CIO of a local tech company. Since he runs Microsoft Exchange servers but hates Windows (refuses to run it on his MacBook Pro), I imagine he doesn’t want to be identified. Let me call him “LT”.

LT made a very important point about the switching costs that the iPhone faces in hoping to get adopted by American enterprises. Because RIM has been providing a good solution for years, the most savvy companies have long since installed BlackBerry push e-mail. I speculated that the switching costs for the entrenched BlackBerry users could prove an insurmountable barrier for Apple.

LT was carrying an iPhone running a beta of the iPhone 2.0 software, and it will go live at his firm once the final 2.0 software is released July 11. Employees will then have a choice of using a BlackBerry or an iPhone — so employees will vote with their feet.

Why go to all the trouble? Two words: top management. In most small- to-medium sized companies, if the top executives want a new toy, the IS department has to support it, and that’s what happened to LT.

It reminds me of the pilot study I did for my dissertation: I was studying switching costs, and had to decide whether to study standards adoption by individuals or organizations. I ended up doing my diss on consumers, but I made a conference paper out of what I learned about organizational standards adoption and switching.

What I found — consistent with my later dissertation findings on consumers — is that for customer-facing technology, the psychic switching costs were more important than the costs of the software or the deployment labor. The reason people don’t switch is that it’s a pain (or you can’t make them), not that the actual cost of switching is a deal-killer.

So if top execs want the iPhone, the IS department can support an iPhone. One of the things my study (and subsequent academic work experience) has shown is that, in some environments, staff doesn’t have much say because powerful users make their own decisions. Law firms and legal partners are one example; universities and faculty are another. I could imagine at some tech companies, spoiled geeks would be a third. (Or, worse yet, if you don’t support something, engineers will spend all their time trying to make it work rather than shipping product).

So I want to thank LT for reminding me of this reality that CIOs face for switching costs: whether or not it's a good idea (i.e., economically rational), if your bosss(es) wants it, you have to do it. Thus far, the iPhone wannabes have not caught up to Apple’s software quality (particularly ease of use).

Flash in the phone

Flash is coming to Windows Mobile devices, and now Engadget speculates Adobe will develop it for the iPhone even though Apple has said no and remains unenthusiastic. Adobe later backed down on their prediction of imminent Flash for the iPhone.

The most compelling explanation for Apple’s reluctance is that Flash would open a new site of APIs with new applications that Apple doesn’t want. However, Flash would also require a change to Apple’s ban on interpreted languages, which are a potential security hole.

Many Flashaholics have said that Apple now can’t resist the inevitability of Flash for the iPhone, but that’s hope and not economic reality. Apple’s biggest rival in North America is Research in Motion, and the BlackBerry also lacks Flash.

The one place where I do think Apple needs Flash (actually Flash Lite) is Japan, where 80% of the current Nokia phones run some form of Flash. Of course, if Apple adopts, endorses or enables Flash for Japanese websites (or even bundles it), then it would be hard not to make it a use download worldwide.

Black day for Crackberry addicts

Research in Motion was in the news today — for a service outage for most or all Blackberry users in North America. They made the national TV news, the New York Times, the Wall Street Journal and several hundred newspapers and online websites. Somehow, RIM didn’t think that its biggest news of 2008 was worth mentioning on its home page, news pages or its support page. RIM was also late to explain its outage last April.

Various accounts place the outage at three-five hours. It seems to have affected all its major North American customers: AT&T, Verizon and Sprint in the US with Rogers and Bell Canada in Canada.

So this is our second major Blackberry outage in the past year, which has already seen outages for Skype and VOIP services. Unlike Skype P2P (which is free) and VOIP (which is a commodity), this is a premium business service — presumably something where people are expecting enterprise-quality reliability.

Perhaps network reliability is more than just the old 99.999% level promised by the old Ma Bell. It seems like the complexity of modern, software-controlled digital systems is inherently more risky than POTS. The Skype outage was due to servers crashing due to Microsoft pushing a Windows fix, while some of the startup VOIP services seem to vulnerable to single point of failure.

I wonder what the reliability is for Microsoft’s enterprise mail services? It seems like RIM will be vulnerable in the near term.

French paranoia

Two interesting tidbits of European mobile phone news in the International Herald Tribune this morning as I wend my way home.

First, the French government has banned use of Canadian-made BlackBerry devices.

“The risks of interception are real. It is economic war,” the newspaper Le Monde quoted Alain Juillet, in charge of economic intelligence for the government, as saying.

Since when did the French have any economic secrets worth stealing? About the only world-class products they are have are the TGV and the A380 superjumbo, both markets where US firms do not compete. It seems like they’re projecting their own spying habits onto their economic betters. (I wonder if they would be any happier if RIM moved its servers to the Qubeçois Republique).

As the follow-up story documents, crackberry-addicted French bureaucrats are in serious withdrawal without “Le BlackBerry.”

The second article brought news that next January, Nokia will combine all its mobile phone divisions into one. Right now they have three divisions: Mobile Phones (basic devices), Multimedia (phones featuring video and television) and Enterprise Solutions (for corporate use). The combination will not affect reporting on the Nokia Siemens Networks joint venture.

I don’t follow Nokia well enough to understand the history of the distinction, but it certainly seems artificial today. Business users want music and video to play in airports, while many of the thumb-keyboard users (at least in the US) are individuals or at least buying the device on their own.

The Bloomberg report in the IHT also played up that product and services revenue will be aggregated — the press release makes it clear that Nokia will not break down its revenues except to separate the Nokia Siemens JV. Certainly Nokia is trying to grow both its software and services revenues; software should have good margins (with sufficient scale) while services tend to have poor margins. Nokia may be able to get growth as a solutions company. However, I have to wonder if the real motivation is that that they expect weak growth in hardware sales, and so want to increase (but not report out) service revenues to disguise the maturation of their primary markets. Look for their gross margin (or return on sales) to decline if they make a big shift to services.

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