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Enterprise

Can the enterprise cloud save RIM?

By
Alex Konrad
Alex Konrad
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By
Alex Konrad
Alex Konrad
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July 19, 2011, 11:26 AM ET
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FORTUNE — The legend of the CrackBerry lives on, even as the days of the device’s corporate ubiquity have faded to black. As iPhone and Android-based smartphones gain ground, Research in Motion’s future looks murky, but one thing is certain: If RIM survives, it won’t be because of one of the devices it announced last week.

At its annual shareholder meeting, RIM unveiled a line of seven planned devices on the Blackberry 7 Operating System, starting with the Bold 9900 and Torch 2. Those seven devices might slow RIM’s rapid loss of market share temporarily. Yet within its core market — corporate users — RIM faces a more dangerous crisis: Companies are finding it increasingly easier to switch to iPhones and Android phones. Under pressure from employees, IT departments that previously supported only BlackBerry devices are rapidly switching to a system known in the industry as “BYOD:” Bring Your Own Device.

According to MGI Research, about 30% of companies now offer full reimbursement for employees to use the smartphone of their choice for work purposes; 15% offer partial reimbursements, while only 45% provide company-issued phones. Those numbers have changed significantly since 2009, when only 10% of companies issued each type of reimbursement.

As the elder statesman of corporate devices, RIM stands to lose the most this shift. When employees tell their IT departments they’d prefer to use the latest, most popular smartphone devices, “those conversations are not about RIM,” says Bob Egan of the research and consulting firm Sepharim Group. “RIM’s struggle is to get back in the game, to get cool.”

RIM doesn’t separate enterprise sales in its financial statements, but its total income for the last quarter was $695 million, down from $934 million the previous quarter and $769 million for the same quarter last year. Analysts acknowledge that RIM (RIMM) remains the gold standard in the enterprise for now, but Apple is gaining traction in the corporate world. In January, the equity research department of Deutsche Bank publicly defected to the iPhone, and other companies have been recently rumored to plot a switch to Apple’s (AAPL) iOS. As early as last summer, AT&T claimed that 4 out of 10 of its iPhone sales were to enterprise users.

To its credit, RIM can see that writing on the wall. “We recognize that BYOD is not a fad,” says Pete Devenyi, senior vice president of email and management platforms. “It’s something we have to focus on.”

During the shareholder meeting last week, co-CEO Jim Balsillie had fighting words for investors concerned about Apple’s inroads in enterprise, declaring, “We understand enterprise customers better than anyone.”

This answer is evidence that RIM is merely telling investors what it thinks they want to hear, says Egan. Such cynicism dominates Wall Street’s position as well. RIM’s stock traded above $60 this year until March, when it began a rapid descent, falling below $30 by late June.

UBS analysts followed Tuesday’s meetings with a note to clients warning “it is unclear to us what RIMM does on a sustainable basis to stem the rising Android and iOS tide in the consumer, enterprise, and international markets.”

That’s not as harsh as analysts at Needham and Company, who labeled RIM “guilty until proven innocent,” invoking the ghosts of Digital Equipment and Lotus Development.

Reenergizing the enterprise effort

While RIM struggles to overcome skepticism about its ability to produce another winner, the key to its enterprise strategy lies in a “single pane of glass.” That’s how Devenyi explains RIM’s strategy for offering the company’s enterprise solutions across multiple platforms. He says RIM listened to its corporate customers who faced demand from employees to use iOS and devices on Google’s (GOOG) Android OS in the workplace. Through the RIM pane of glass, IT can centrally manage a range of devices without having to run multiple support programs.

Devenyi says corporate customers are drawn to products such as BlackBerry Balance, which does away with the two-phone financier or lawyer by subtly dividing the user’s device into corporate and consumer sides. While such a division provides security — you can’t copy data from the corporate side and paste it into your Gmail account, for instance — Devenyi claims the divisions will be largely unnoticeable in daily use.

RIM also plans to offer a cloud-based version of its BlackBerry Enterprise Server – giving companies the same safety as an internal server, but without the tax on resources.

RIM recognizes that tablets are a major area of enterprise opportunity, and Devenyi points to enterprise software in development for the PlayBook (Balance will arrive later this summer). Still, the lukewarm reception to the first version of the tablet might put the pressure on its successors.

While RIM revs its engines to promote devices in the hopes of recapturing its days of consumer market leader glory, its future lies in the enterprise. Egan acknowledges that expanding BlackBerry’s enterprise services and features is a good move. “But they are still using it as a carrot to buy BlackBerry devices.”

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