BlackBerry is no longer the most sought after smartphone device, with more and more Indians migrating to competing brands. However, Sunil Lalvani, Managing Director, BlackBerry India, claims that the recent Z3 launch has been a huge success. In a conversation with Ajita Shashidhar, Lalvani talks about his company's four-pillar strategy and how the enterprise software business is becoming increasingly crucial for the company. Excerpts:
Q- BlackBerry is longer a smart phone-only company. Can you tell us about this shift in strategy?
A- When we first launched our smartphones companies loved the fact that they could get lot of productivity by having their virtual office on their device. That was more than a decade ago and we built on that success over the years to continue extending services and software to the corporate sector and to enterprises. So, Blackberry has always been offering software and solutions to customers, be it corporate customers or professional users/consumers.
Over the last two years a lot of companies have adopted iOS and Android, so the terminology called BYOD (bring your own device) has become common. This has brought down their capital expenditure, as they don't have to buy devices and give to their employees. They allow employees to bring their own device but they enable the corporate e-mail. When you are accessing company information and data on your personal device, there comes in an element of security. So how does the company ensure that this data is not getting compromised? Many financial services companies, pharmaceutical, retail and FMCG companies rely on a lot of data. There is a lot of sensitive data that goes around in the corporate environment and employees are accessing that data irrespective of the device. That's where security comes in and that's where BlackBerry comes in. One of the biggest strengths of BlackBerry is that it is one of the most secured platforms.
As things stand today, our Bes10, the enterprise software solution, has received certification from independent third-party certification providers. For BB10 we have 45 independent certifications. That's a testimony to the fact that BlackBerry is a very secure platform. So, irrespective of an employee bringing an Android or iOS to work, we can secure and manage that data. This has become the big differentiator for us today and it constitutes a large chunk of the 60 per cent revenue that comes from services and software.
It has been very successful for us in the last one year, for the simple reason that as growth of Android devices increases, the security concerns within the work environment are also being raised. India had the highest malware and spyware attacks last year from an Internet perspective. Most of these came from mobile platforms. That's where we walk in and ask corporate houses to deploy Blackberry's Bes10 enterprise server, that takes care of iOS, Android and BlackBerry. By the year end we would be adding Windows to it as well. Our revenue model in that is the license fee, which is an annual fee which a customer pays us to secure his or her mobile infrastructure irrespective of these three platforms. That's our core strength and the big differentiator that we are driving in the market.
Q- Why is it that you haven't talked about this earlier? BlackBerry is known more for its smartphones.
A-This solution is something which we talk to corporate houses a lot, because at the end of the day both the employee and employer benefit from deploying a Bes10 server. The person deploying it is always the employer as he needs to secure the work environment. We have been talking about it actively, but our mode of talking is different. Instead of doing above-the-line activities around that, we are doing CIO round tables, we are participating in CEO forums to talk about while BYOD is a boon, it also poses certain security challenges. They unanimously agreed that while BYOD reduces capex it also exposes the company to security vulnerability. So, you won't find us putting out a TV commercial on this for the simple reason that people won't understand what we are talking about.
Q- Has the enterprise software business always been bigger than the devices business?
A- No, it wasn't always bigger. About three years back about 60 per cent of our revenue came from hardware devices and 40 per cent from enterprise software. One of the reasons is because three years ago we didn't have this particular software for Android and iOS, what we had was a software just to manage BB devices. We rolled out Bes10 only in February 2013. In little over a year we have seen more than 35,000 Bes10 server deployments globally. Bes10 has opened up a larger addressable opportunity.
Each Bes10 server can scale up to multiple users. One Bes server can scale up to 30,000 users. India is one of the key contributors to the growth of Bes 10. Last quarter we rolled out a licensing programme called EZ Pass, which will help you migrate your existing management tools to move to Bes10. The EZ Pass programme was started in March this year and in the first quarter alone we sold 1.2 million EZ Pass licenses. Again, India was a sizeable contributor to this. That showed us there is a huge market for software. The beauty of this software is it bifurcates work and personal use. So, you can continue using Facebook, Twitter without any hindrance from the company and yet your work data stays under the control of the company.
Going forward, we would launching Bes 12, which will take care of iOS, Android, Blackberry and Windows. Bes 12 is backward compatible to existing BlackBerry devices. So, a customer doesn't have to throw away his or her infrastructure, its backward compatible, which means a lot of investment protection.
Q- Can you elaborate on your business model?
A- Our business model is built around four pillars, one of them being devices, the second is enterprise software, the third one is BBM (the messaging service) and the fourth is Internet of things.
The third pillar, BBM, started the revolution of instant messaging. The youth segment took it on very quickly. You had to be a BB user to communicate with each other. Now BBM is also available across platforms. We have more than 85 million active users of BBM globally who are using it across platforms. India again forms a sizeable chunk of this business.
There are multiple instant platforms there for you to choose. However, BBM has the unique advantage of running on a network controlled and managed by BlackBerry. We have a global network that spans across 175 countries and we respect your privacy. If I have your mobile number I can ping you on other platforms as your identity is your mobile number. You may choose not to stay in touch with me but you have no choice as your identity is your mobile number. With BBM, the PIN number of your device is your identity, if you don't share your PIN number with me, I can't reach out to you. That's the differentiator.
A CEO of a leading FMCG company once told me that he gets a lot of sales data which he shares with his team. All of them are exposed to all kinds of social media platforms, so what stops an user from taking his sales data and putting it on a social media platform and publishing it to competition. He was concerned. We have rolled out a service called BBM Protected. It is a service by which you and me can stay in touch over BBM and have our messaging completely encrypted into it. There will be no possibility of third-party intervention. It becomes a closed user group.
We launched BBM Protected last month. We have got a fantastic response. Our charges for this is $29.95 a year. It is a published price we have globally. That is the new avatar of messaging we are taking forward through BBM Protected.
We have a roadmap to take that beyond. We have a complete enterprise BBM suite offering targeted at corporates and we would monetise it.
Our fourth pillar is Internet of things. Blackberry acquired a company called QNX, which is an embedded real time operating software which goes into equipment. It could be anything that is mission critical. Top-end luxury cars, all of them use QNX-embedded software in their cars. Even medical equipment companies and air traffic control use QNX. Each one of these sectors is classified as mission critical sectors and requires high amount of efficiency and reliability. We have brought QNX into India. We are talking to healthcare, automotive, power and energy sectors to begin with.
Coming to devices, it is a key chunk of our focus as most people associate the brand with devices. We recently launched Z3, which we launched in partnership with Foxconn (out of Indonesia) and that helped us reduce our prices. Previously, all our devices were manufactured in the US. Z3 is launched at Rs 15,900 in India, so it actually helped us bring the cost down. The Z3 caters to the mid-market segment and Z30 is for the high-end market.
Q- How does QNX work?
A- Many times in the auto sector, companies recall their vehicles, that is because they get frequent complaints from consumers. QNX gives real-time updates back to the auto manufacturer and says this batch of cars is having a similar issue. The message that will come on the dashboard is 'please get your car checked for free at your closest service centre'. That's a wow customer experience.
Q- The BlackBerry devices are no longer as popular, and this has led to a drop in profitability. Do you see a revival?
A- That is one of the reason I am sharing the four-pillar strategy with you and how each one of these pillars significantly contributes to revenue. If you look at the last quarter results, Q1 in particular, our cash reserves grew significantly.
We have already seen a huge off-take of Z3. We have seen a virtual stock-out situation of Z3. It's been two months since launch and it continues to sell very well. Z3 was conceptualised with emerging markets in mind, so the feedback that has come in from users who have tried out other platforms is that battery life on many platforms is a big challenge, specially on full touch devices. We have taken that feedback and Z3 comes with a 2500 mAh battery, but the beauty of that is coupled with the operating system, processor and the battery gives you a fantastic full day plus battery life and that's what people are loving. We are finding a clear comeback of users who migrate away from BlackBerry. We are seeing the traction growing for us.
Q- But the focus as of today is much more on the enterprise software business?
A- It is. If you look at the market evolution in the last two years, today you have a smartphone being launched virtually every week. You also have Android One coming out which will bring down prices further. So, you have to choose where your strengths are. Everything that I talked to you about positions us in the mid to high-end segment. So how do we compare ourselves with a low-priced Chinese handset? We don't want to play in that low-margin, high-volume segment.