The Big Push

— April 10, 2007

2006 can be characterized as a massive land grab in the mobile push email space, as headlines consistently heralded the advent of the "BlackBerry killer." A whole new ecosystem of vendors that now includes such diverse players as handset makers and OS providers are vying for the space.

Indeed, Canada's Research In Motion (RIM) had a big target on its back last year because its BlackBerry service has effectively created worldwide user awareness of the benefits of push email. Today BlackBerry is almost as synonymous with mobile push email as the Kleenex brand is interchangeable with tissue. Push email is now the key application for a wireless wide-area data system in the enterprise, and the addressable market is enormous: approximately 650 million corporate email accounts, of which around 8 million, or just 1.2 percent, are already mobilized, according to research firm Current Analysis.

Not just for the corporate elite anymore, push email is quickly making inroads deep into organizations, as hard numbers that point to better worker productivity are emerging. Push email RFPs are now handled as mainstream IT projects that have significant budgets allocated for them.

Up until the latter half of 2006, smartphones with push email capability were cost prohibitive. In 2005, the only viable non-RIM device for push email was the Palm Treo, priced between $300 and $400. This year, Cingular Wireless fired the first salvo in a bid to achieve greater penetration of smartphones in the enterprise market. The operator announced two exclusive smartphones at a price point of $150--one, the first Nokia Eseries device to be sold by a U.S. carrier and the other a Cingular-branded HTC device running on Microsoft Windows Mobile 5.0 called the Cingular 3125.

"We used to see email deployments as fairly homogenous and mostly BlackBerry," said Mike Woodward, executive director of mobile professional solutions with Cingular Wireless. "Now there are different needs. Users want touchscreens and smaller form factors and lower costs."

Those desires are opening the door to competitors Good Technology, set to be acquired by Motorola, and Microsoft. Despite a number of false starts, Microsoft appears to have become a serious contender in the push email space, as a number of enterprises consider native MS Exchange with ActiveSync as a strategic mobile email platform going forward.

"It's worth noting the sheer speed at which Microsoft has established a comparable penetration within the RIM [mobile] carrier channels," said Emma Mohr-McClune, a senior analyst with Current Analysis, during a recent telebriefing. "The solution certainly exhibits some weaknesses, but it's fair to say that Microsoft is moving faster than its competitors, and we strongly recommend [keeping] an eye on this player."

The 800-Pound Incumbent
The major advantage of the RIM BlackBerry remains simply this: It has a significant foothold of "addicted" users in many organizations. RIM's strengths in having an end-to-end solution that includes middleware, a proprietary operating system and built-in security on top of its device have given the company an industry-leading position. Having a solution tied to a specific device means the service can be tightly integrated.

RIM's continued death grip on the push email market was evident in the second quarter that ended Sept. 2, 2006 when RIM added approximately 705,000 BlackBerry subscriber accounts; by the end of 2006 it had brought the total BlackBerry subscriber account base to nearly 7 million. Corporations have the opportunity to incorporate new solutions as they expand the use of push email throughout their organizations, but many are staying with the tried and true.

David Heit, director of enterprise product management with RIM, said the company's growth is coming from two areas: increased geographic and channel reach, and a deeper penetration into its existing enterprise customers.

Eugene Signorini, VP of Yankee Group's Enterprise Research division, concurs. "RIM has been more focused on seeding the market and other geographies and planting a foundation as the market matures," he said. "As companies become more comfortable with RIM, the company is hoping it becomes the de facto standard."

But the highly publicized patent infringement fight between NTP and RIM that RIM settled for $612.5 million earlier last year hurt RIM somewhat. The event left many enterprises worried about a possible shutdown and opened the door to competitors to replace RIM or become a second solution in the enterprise.

Good has been a primary beneficiary, as it has doubled its customer base in the last 12 months to 12,000 enterprises nationwide. "We saw sales accelerate during the patent fight, and we didn't see sales come down," said Cingular's Woodward. "Enterprises are opening up and looking at other solutions because they realize the email is valuable to operating their businesses.

Dan Rudolph, director of product marketing with Good, estimates that its solution co-exists with BlackBerry in about 50 percent of its customer base.

With Motorola's pending acquisition of Good, RIM faces more formidable competitors. Motorola and Nokia, which bought middleware provider Intellisync in late 2005 for $430 million, are looking to compete solidly in the market. However, Nokia isn't getting the traction it should have from its purchase, analysts say. And Motorola still faces the tough prospect of integrating Good into its hardware division and assuring customers such as Palm that it will continue Good's device-agnostic approach.

These players have an opportunity to one-up RIM beyond push email, if they play their cards right, to become the top suppliers of end-to-end solutions for mobile business process applications. It's clear that email will be the launching point of a widening landscape that will include services such as valued-added device management and security and the mobilization of corporate databases and applications.

RIM is seeding the market for this transition through its BlackBerry Mobile Data System (MDS), a development framework that allows BlackBerry customers and third-party developers to easily create BlackBerry-oriented wireless applications that go beyond push email, such as access to corporate databases. But a dominant position in this arena isn't certain.

For sure, RIM will continue to make strategic acquisitions in this area to help stave off competition. Earlier this year it acquired Ascendent Systems, a provider of voice mobility solutions for the enterprise that makes the Ascendent Voice Mobility Suite, a standards-based software that integrates with existing PBX and IP-PBX telephony systems to "push" voice calls and extend desk phone functionality to mobile users on their wireless or wireline phones.

"Our focus on this market space is still around a fairly rapid evolution of capabilities," said Heit. "Once people get that wireless email actually works and works well, you duplicate the experience with a lot more things in the office."

Fighting the Good Fight
With its acquisition of Good, Motorola now has the middleware piece to offer an end-to-end solution to effectively compete against RIM. Good has the push email expertise and a large, loyal customer base. Plus it has significant carrier channel partnerships with U.S. operators Cingular Wireless and Sprint Nextel, but no presence with Verizon Wireless or outside of the United States.

Motorola already had a relationship with the company, having used Good's push email solution in its Q phones. But the Q also supports several rival mobile email platforms, including RIM's BlackBerry solution. Through this acquisition, Motorola appears to be opting to abandon its open platform approach to email in favor of pushing its own solution to lock it directly to the phone, much the way RIM does with BlackBerry.
Motorola claims it will continue to build upon Good's customer and carrier relationships by maintaining Good's multi-device strategy, at least in the short- to mid-term. Analysts don't believe that strategy will go over well with some device makers.

"The acquisition will severely constrain a major relationship that has put Good on the map--the one with Palm and the Treo devices, which is a very large part of Good's business," says Jack Gold, head of J.Gold Associates."

However, Good's Rudolph says, "Our stated goal is to stay with the multi-device strategy. Our customer base is very multi-device, and we want to keep going with our market development with Palm. I think we'll work through it."

Good's advantage to date has been its multi-device strategy. But this multi-device strategy is also a double-edged sword. While Sprint Nextel and Cingular have positioned Good's solution as the leading enterprise email solution for non-BlackBerry devices, it struggles with a reputation for being expensive, notes Kathryn Weldon, a principal analyst in Enterprise Mobility with Current Analysis.

"It is often hard for customers to understand and for salespeople to articulate why they should not just go with Microsoft Direct Push, for example, when they would have to pay extra for and manage a Good server solution," she said. "Part of the problem is that its Mobile Defense Suite is perceived as being too closely tied to Good's specific email solution rather than as a security solution for the entire remote device regardless of what applications are running on it."

In short, Motorola may give Good the financial muscle it needs to compete, but it needs to find a way to better compete with RIM's tight integration with its hardware, which gives RIM that market advantage. Said Weldon: "Good can either add features that make it work better with Motorola's devices--to match RIM's multimedia management controls, for example--or work with multiple devices from various vendors, as it does now. It cannot do both."

Microsoft: The Hefty Newcomer
Earlier this year Microsoft integrated push email capability directly into Exchange Server 2003, eliminating the cost of third-party push email solutions. Cost and familiarity are the main advantages of Exchange Server ActiveSync, said John Starkweather, group product manager with Microsoft Enterprise Division.
Market share information for the Exchange Server ActiveSync is difficult to determine since Microsoft doesn't make or sell devices or servers. But one of the key features that makes Windows Mobile advantageous is its relatively easy integration with the Exchange server. Microsoft Exchange has about half of the market for corporate email seats, with that share expected to grow steadily through the end of the decade.

"For that reason alone, a new version of Exchange has the potential to set the direction for the email market," said Starkweather.

Today, however, the addressable market is small. Although 50 percent of corporate email seats use Microsoft Exchange, fewer run Microsoft Exchange 2003. Direct push requires Service Pack 2 for Microsoft Exchange Server 2003 on the server and Windows Mobile 5.0 on the device in combination with the Messaging and Security Feature Pack.

That doesn't mean Microsoft is a player to ignore. According to a recent survey from research firm Freeform Dynamics, the number of enterprises citing native MS Exchange with ActiveSync as their strategic mobile email platform was almost identical to the number committed to RIM. Freeform Research Director Dale Vile said the reasons are twofold: Microsoft's solution has matured and Direct Push is essentially available to Exchange 2003 users for zero charge.

One perceived weakness is the way Microsoft approaches security. In a recent report, Gold suggested enterprises might be turned off to using Windows Mobile 5.0 devices since data sent to the handsets via Direct Push are not encrypted on the devices themselves. RIM encrypts all data stored on the device even after it is received from the middleware server and decoded when used.

Further, RIM and Good use a middleware server to encrypt and route messages outside of a corporate firewall. Microsoft Direct Push requires direct access from the Internet to the Exchange Server, which makes some corporations nervous, despite the fact that the entire data stream between the device and Exchange Server is encrypted, said Yankee Group's Signorini.

Counters Starkweather: "We believe that important transactional data should be handled by Microsoft SQL Server Mobile/CE, designed specifically to manage the integrity of data and to work well with existing infrastructure. IT departments do not necessarily want to use an email technology to manage application-level data."

Moreover, Starkweather said the Windows Mobile platform is flexible enough to provide support for a third-party solution to add more protection on the client security side. But will that erode the cost advantage of Direct Push?

"Microsoft is going to be a key player with Exchange, but the key issue enterprises will have to evaluate is whether there is a significant cost difference between RIM and Microsoft," said Signorini. "It's still unclear whether there is." //

Lynnette Luna is a freelance writer with more than 10 years of experience writing about the wireless telecom industry.

She can be reached at lyluna@msn.com.

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