RIM Customers Working on Contingency Plans

By Scott Moritz and Olga Kharif - Jul 10, 2012 3:21 AM GMT+0700

Research In Motion Ltd. (RIM) customers from GoDaddy Group Inc. to asset manager Thames River Capital UK Ltd. are preparing for the worst: the loss of the BlackBerry service their employees depend on to communicate.

RIM’s stock has slumped more than 70 percent in the past year, and tumbled 19 percent on June 29 after the company posted a quarterly loss and delayed the BlackBerry 10 operating system, increasing the pressure on RIM to find a buyer or sell assets. While RIM has built infrastructure to ensure continued service, some customers are devising backup plans as RIM prepares to face shareholders at its annual meeting tomorrow.

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Corporate customers, the backbone of RIM’s business, are fortifying contingency plans so they won’t be affected by a possible breakup of BlackBerry-maker Research In Motion Ltd., or other setbacks. Photographer: Simon Dawson/Bloomberg

“In the past three months there’s been a lot of concern that the BlackBerry platform won’t be around in the future,” said Maribel Lopez, founder of Lopez Research, a wireless- industry consultant based in San Francisco. “It’s not unheard of for a large phone manufacturer to go out of business.”

Corporate customers, the backbone of RIM’s business, are fortifying contingency plans so they won’t be affected by a possible breakup of the BlackBerry-maker or other setbacks. With millions of employees connecting to the office through mobile e- mail, companies have been eager to establish a fallback or replacement plan, said Avi Greengart, a technology research director at Current Analysis.

Thames River Capital supplies about 140 of its 170 employees with smartphones, most of them BlackBerrys, said Robert Cockerill, head of infrastructure at the London-based money manager. With the delay of BlackBerry 10 and a service contract with RIM expiring this year, Cockerill said he expects much of his staff to switch to Apple Inc.’s (AAPL) iPhone or devices based on Google Inc.’s Android platform.

Service Disruption

Cockerill has brought in MobileIron Inc., a Mountain View, California-based developer of software that helps companies manage and protect data on mobile devices and tablets. MobileIron provides security for Thames River Capital including encryption and password protection for non-BlackBerry devices such as iPads, he said.

Thames River Capital is preparing for scenarios where BlackBerry service may be shut down, disrupted, or if a competitor such as Microsoft Corp. (MSFT) acquires RIM and converts the operating system to its Exchange e-mail service, he said.

“There is a risk of RIM getting bought,” Cockerill said in an interview. “But if you have the right support you can be agnostic and it won’t really matter.”

MobileIron Chief Executive Officer Bob Tinker said his customer list includes 100 Fortune 500 companies, and about a quarter of those customers are financial services firms.

Embrace Innovation

“Large enterprises don’t want to be locked in with a single vendor anymore,” Tinker said in an interview. Customers want to embrace all the innovation in mobile and RIM’s delay of BlackBerry 10 doesn’t help that, he said.

“CIO’s are now asking us: ‘What do we do if RIM gets acquired or if they restructure,’” said Tinker.

Norton Rose LLP, a law firm with 6,000 BlackBerry-equipped employees, is using MobileIron’s software to support iPhones and iPads, which were given to some staff members as secondary devices, said Vlad Botic, group enterprise architect at the London-based firm.

Botic, who said Norton Rose would like to continue using BlackBerrys, began exploring alternatives last year after the three-day BlackBerry outage that caused users around the world to lose data services amid a network failure.

“RIM isn’t in a good position right now,” Botic said in an interview. “The problem with BlackBerry, which was highlighted when the service went down, was that the only way to solve it is with an entirely new device.”

‘Significant Outage’

While the chance of BlackBerry service getting shut down is slim, Botic said he has scheduled a meeting with RIM this week to seek assurances that there won’t be a disruption in the event of a takeover.

GoDaddy, an Internet domain-name and hosting company, could switch users to iPhone or Android devices “within hours,” said Auguste Goldman, chief infrastructure officer at the Scottsdale, Arizona-based company.

In the event of a “significant outage” for BlackBerry devices, GoDaddy has a plan to migrate users to other platforms, Goldman said in an interview.

“The BlackBerry infrastructure and services are among our most valuable assets,” said Nick Manning, a spokesman for Waterloo, Ontario-based RIM. “BlackBerry customers depend on our robust network and they can continue to depend on it going forward.”

RIM shares fell 5.3 percent to $7.67 at the close in New York.

iPhone, Android

Six staffers at Nationwide Mutual Insurance Co. first began planning for the possibility of a disruption in BlackBerry service last year. To prepare, Nationwide retained Good Technology Inc., whose software for servers and phones can provide secure corporate e-mail and calendar services to iPhones and Android devices.

“You could see that RIM started to decline,” Robert Burkhart, director of new technology innovation at Nationwide, said in an interview.

Today, the number of BlackBerrys Nationwide associates use is down to 7,000 from about 8,500 a year ago, while the number of non-BlackBerry devices used has risen from zero to 4,450, Burkhart said.

“We are well on our way to having a dual environment, so if RIM did go out, we’d be okay,” Burkhart said. “If people are starting contingency plans now, they are behind the eight ball. They should have been looking at this all along.”

Good Technology, which works with 4,000 corporate customers worldwide, including eight of the top 10 financial services companies, has seen an inflow of customers concerned about RIM’s prospects and making contingency plans.

Contingency Plans

“We’ve had two meetings this month with large financial services firms on this topic,” Brian Carr, senior vice president of worldwide sales at Sunnyvale, California-based Good Technology, said in an interview. “In the last year, I talked with half of Fortune 100 companies, and it’s a concern for all of them. Every single one of them is looking at contingency plans.”

The concerns are prompting many companies to speed up their transition from BlackBerries to other types of mobile devices, Carr said.

RIM has struggled to keep up with Apple’s iPhone and devices based on Google’s (GOOG) Android platform. Last month, RIM said it would cut 5,000 jobs and posted a quarterly loss that was five times bigger than projected. Sales last quarter plunged 43 percent as RIM’s share of the global smartphone industry fell by more than half to 6.4 percent in the first three months of the year, according to research firm IDC.

BlackBerry Migration

“RIM’s situation is dire, but even in a worst-case scenario, RIM’s servers aren’t likely to get turned off anytime soon,” said Current Analysis’s Greengart. “Still, IT managers are looking more seriously at alternatives to BlackBerry. There’s a whole industry ready to provide security and management around Apple and Android,” he said.

The migration from BlackBerrys started two years ago for Ken Lawonn, senior vice president of strategy and technology at Alegent Health, an Omaha, Nebraska-based health-care provider.

The shift was prompted by user preferences, rather than concerns about the future of RIM, said Lawonn who uses Good Technology’s software. The number of Alegent’s 300 smartphone users with BlackBerrys has shrunk to 10 percent from about 50 percent two years ago, he said.

“Should something occur, we believe that’s going to be a fairly easy transition,” Lawonn said. “If my BlackBerry broke down, I’d look at the options, and if a BlackBerry wasn’t available, I’d pick up an iPhone and be on my way.”

To contact the reporters on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Olga Kharif in Portland at okharif@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net