Behind RIM’s open door strategy

For many years, Research In Motion’s product strategy closely mirrored that of Apple: Design, build, service and support.

One could argue that for many years, this strategy served them well. In 2007, however, it seems RIM has turned a new leaf and shifted its focus: It has decided to imitate Hewlett Packard’s vision regarding open standards.

In April, RIM announced plans to license its operating system (OS) for its popular BlackBerry handheld devices to other manufacturers. By the end of the year, individuals and corporations will be able to purchase non-RIM devices, yet have a similar, if not the same, user experience as they would with the BlackBerry.

Why would RIM do this?

At its current level of operation, RIM is heavily dependent upon its hardware business. Depending upon the quarter, Info-Tech Research estimated that RIM’s hardware business, (i.e. the sale of its handheld devices,) accounted for approximately 73 to 75 per cent of its revenues in 2006. Hardware sales were high, due to the fact that if users wanted the BlackBerry experience, their only option was to buy a BlackBerry device.

In the fall of 2007, the OS will be available for download to use with other handheld devices. Once this occurs, RIM runs the risk of cannibalizing its hardware business. That said, software tends to be a more lucrative business than hardware.

Until the announcement on licensing its OS was made, RIM was able to grow its hardware business, based solely on the success of the OS. But it will hit a wall. Its business growth is heavily reliant on its ability to produce handheld devices. If it experiences a decline in production, or reaches capacity in its manufacturing facilities, its growth will be stunted – a situation not dissimilar to Apple.

HP, on the other hand, works with multiple organizations – partners – to develop, test and service its products, notably its software. In doing so, it leverages the entire industry to create a successful go-to-market strategy and product line. Over the past three years, both financial investors and IT clients have witnessed a growth in HP’s popularity.

The gamble worked for HP. It also enjoys a wide breadth of products to help support this diversification strategy. RIM has experienced tremendous success in a niche market. The gamble of opening up its OS to Microsoft Windows-based devices might prove to be extremely fruitful, but the move is not without its risks.

While Apple’s strategy has panned out, it has defined the company as a niche player in a large industry. RIM has aggressive expansion plans, but it needs to act quickly to increase its client base. The simple fact is its OS is popular and solid, so as long as RIM improves it, the future should be lined with success.

Michelle Warren is an industry analyst with the Indaba division of Info-Tech Research Group in London, Ont.

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