BlackBerry is finally joining the app world.
After years of producing devices with technology so closed off that many application developers wouldn't touch them, BlackBerry Ltd. is embracing a more open approach as it seeks new lines of revenue.
"Our assumption is that we have to connect and play well with any kind of device," CEO John Chen said in an interview with the Globe and Mail, ahead of the company's Passport smartphone launch on Wednesday. "I don't care who you are, Apple or anyone else, [if you think] you're the only device … that's a failed strategy."
The Passport features more than 240,000 apps, including key names that were missing from its Q10 and Z10 devices that launched to many users' dismay with negligible app offerings. More important, for a company whose market share has fallen drastically, opening its technology to work on other devices offers potential new lines of business.
That move marks a shift from years past, when BlackBerry behaved like a lot of software and hardware incumbents: its apps weren't available on other platforms, and Apple or Google apps weren't on its phones. This "walled garden" approach creates value when you're the overdog, but as BlackBerry learned, not being the place for cool apps is a vicious circle that pushes away both phone customers and software developers trying to find strong markets.
The arrival of Amazon's Appstore, filled with thousands of Android apps, on the Passport's new operating system, BB10.3, formally ends that cold war for the Passport, upcoming Classic and older BB10 devices, when they get updated.
BlackBerry began moving in this direction as far back as October, 2013, when it made BBM, or BlackBerry Messenger, the private, secure BlackBerry-only chat app, available for Android and Apple phone owners. Cross-platform support grew the service to 160 million registered users, of which 85 million are monthly active users.
Another priority is finding ways to replace the revenue BlackBerry once earned from system access fees (SAF), money the company earned for every handset its carrier partners sold and which once added billions annually to the bottom line. As hardware sales shrink to more niche levels, analysts fret about how the company will make up for the sinking SAF revenues.
"Current services revenues will drop from their current run rate of $2-billion to $1.2-billion next year," Credit Suisse analyst Kulbinder Garcha warned in a research note. "In order for Blackberry to hit their guidance … and a return to growth for [fiscal 2016], the company would need to attract around 51 million users on their platform by year-end 2016."
Some of the updates in the BB10.3 – and some of the companies BlackBerry has recently acquired – point the way toward replacing those fees with a new software-first model.
The upcoming version 12 of BlackBerry Enterprise Server, the company's secure system which businesses can purchase and run on their networks, extends full support and mobile device management to Android and Apple iOS handsets. Recently purchased Securesmart's technology for encrypted voice calls could be offered as a separate fee tier, as could software from Britain-based MoVirtu that lets users run one device on two data plans (personal and work).
And it's why a new service on the Passport called BlackBerry Blend lets users create a secure remote desktop to manage work messages and files on other devices (PCs, Android and Apple tablets) without needing virtual private networks (VPN). Right now these technologies are tied to BlackBerry devices, but they could increasingly transform into pure software and security as a service offerings.
"The longer term strategy for BlackBerry is we're going to try to own the space of security in the Internet of Things," Mr. Chen said, referring to the burgeoning world of connected devices, from cars to refrigerators.
Technology companies are racing to profit from the increasing volume of devices embedded with technology that allows for wireless communication for home automation, medical device management and so on. "I think the market is going to be really, really huge in the [Internet of Things] world … not only about devices, it's all about interaction between devices," Mr. Chen added.
BlackBerry has created a technology solutions group hosting car-system maker QNX as well as the patent portfolio to find ways to make BlackBerry software the bridge that connects those devices in a secure and reliable fashion.
"This also drives the basic underlying principle of why we make so many of our technologies agnostic to operating systems," says Mr. Chen.
Frost & Sullivan telecom analyst Ronald Gruia isn't worried about the success of the Passport launch, which he thinks is just proof for the market that BlackBerry can still execute on hardware on its way to a software future.
"This a way to buy time while the business model shifts. That's what this has been designed for. Which is really a low goal, but it is better for you to set a low goal," he said.