BlackBerry outage could accelerate shift to iPhone

John Stuart has been chained to his BlackBerry for years, first as a systems manager for Wall Street bank Morgan Stanley and then as chief information officer for Beverly Hills Wealth Management. But this week, Stuart ordered an iPhone from Apple Inc, ending his 7-year relationship with BlackBerry maker Research in Motion. His move highlights how even security-conscious banks and IT managers, who have been among RIM’s most loyal customers, are starting to defect, lured by improvements in rivals that challenge the BlackBerry’s much-vaunted security features. “RIM has always been at the top of their game when it comes to device management. Apple has caught up,” Stuart said.

The BlackBerry has been losing ground in the business market to the iPhone and, to a lesser extent, devices running Google Inc’s Android software, as companies gradually allow their employees to choose their own mobile devices. This week’s massive BlackBerry network outage, which spanned four continents, is likely to speed up RIM’s decline. RIM is already fending off investor calls for a management shake-up and possible sale or split of the company. Many banks already allow employees to choose their devices and the BlackBerry outage is likely to push more in that direction, according to Julie McNelly, an analyst with Aite Group, who advises financial institutions on data security. “The barn door is already open. Most of the horses are already gone,” she said. “This could potentially accelerate the process.”

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What’s behind the big bad RIM outage

The BlackBerry used to own the corporate market because companies believed RIM was best at protecting enterprise data and preventing the theft of corporate secrets. The outage highlights RIM’s Achilles heel: the fact that all BlackBerry messages are routed through its own data centers means information is more secure, but it also creates a single point of potential failure. That potential was realized this week. RIM’s worst ever outage started as a hardware failure in a data center in England. A backup system then also failed, creating a massive backlog, which in turn disrupted the delivery of mobile email from India to North and South America. Messages sent through phones from Apple and other vendors do not travel through any central network, so they do not have that same weakness. While that has meant rival phones were less secure in the past, many security experts say the iPhone has caught up to the BlackBerry, thanks to improvements in Apple’s latest iOS software. And for Android phones, a proliferation of third party security software has also helped. “In most ways, iOS is at least as secure as BlackBerry, namely in malware prevention, exploit prevention, etc.,” said Charlie Miller, principal research consultant with Accuvant and a highly regarded expert on mobile security. He said the BlackBerry is still superior in data encryption and manageability, but added that “reliability obviously is a problem recently for Blackberry.”

Apple is a big winner when workers get to pick their own phones, a trend known as the consumerization of IT. The iPhone 4S hit store shelves on Friday and thousands of people lined up around the world to get it. Companies can save money when they let employees buy their own phones. Employers don’t have to pay monthly bills and IT managers just have to install software that makes it possible for the phones to securely access corporate networks. At Credit Suisse, which only started this year to open its network to Apple and Android devices, about one-third of its 25,000 BlackBerry users have already switched phones. That has saved the European bank millions of dollars, according to Stephen Hilton, Credit Suisse’s global head of technology infrastructure services.

“We are seeing very rapid adoption of this ‘consumer technology’ platform,” Hilton said. “I suspect this (outage) would be another reason why people may reconsider.” Much of the iPhone’s appeal relates to its touchscreen interface, which RIM could yet catch up on if it makes use of The Astonishing Tribe, a Swedish company RIM acquired last year that used to focus on the Android platform. “These guys are really good user interface people and they have the ability to build a competitive touchscreen interface,” Gartner analyst Ken Dulaney told Reuters Insider. “It all comes down to this, the ecosystem, everything that RIM does, depends on their success in delivering a really good user interface to compete with Apple and Android.” 

An Aite Group poll of 402 wealth managers conducted before the outage found that 45 percent would choose an iPhone or iPad, compared with 14 percent for a BlackBerry. A survey released this week by Enterprise Management Associates, sponsored by Intel Corp’s McAfee Inc, found that 44 percent of iPhone users were “completely satisfied” with their device, compared with 34 percent for Android smartphones and 16 percent for BlackBerries. “It’s a tough situation to be in,” Forrester Research analyst Christian Kane said of RIM. “Nobody is going to necessarily stop supporting a device over an outage. But it doesn’t do any favors for RIM,” said Kane, who helps companies decide how quickly they should open up their mobile networks. It’s a mark of the inroads that rivals have made into the corporate market when this week’s BlackBerry outage was shrugged off by many on Wall Street.

One finding of an informal Reuters survey of more than 25 financial firms was that a lot of people simply were not bothered by the service interruption, compared with the panic that ensued when the BlackBerry went down in April 2007 and again in February 2008. One Wall Street banker said he would not have even noticed had his firm’s IT department not said something. It is hard to estimate BlackBerry’s corporate market share as RIM does not give out much information. But its share of the global smartphone market fell to 11.7 percent in the second quarter from 13.0 percent in the first quarter, according to estimates from Gartner analyst Ken Dulaney. In contrast, Android’s share rose to 43.4 percent from 36.4 percent, and Apple’s rose to 18.2 percent from 16.9 percent.

Reuters