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7/6/2006
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RIM Will Face A Tough Sell For Its Hosted BlackBerry Service

RIM hopes to seduce small and medium-sized businesses, but those companies already have plenty of options for wireless e-mail services, and some will want more control than RIM offers.

Research In Motion--free from the clutches of the NTP lawsuit--can now focus on growing its business, and it has its eye on the potentially lucrative small and midsized business market. But its hosted wireless e-mail service could be a tough sell: Businesses already have options, and some IT directors are concerned that they may lack control over the service.

RIM's new service, which it will offer through other service providers, is designed for businesses that want to give their BlackBerry-toting employees wireless e-mail, but don't have the internal IT resources to deploy BlackBerry Enterprise Server and the accompanying middleware. The hosted service supports Microsoft Exchange, IBM Lotus Domino, and Novell GroupWise, among other e-mail platforms. A number of RIM partners have signed up to offer it, including EDS, IBM, and Vodafone.

It's not a novel approach: Microsoft, Nokia, and Palm offer similar services through partners. But companies that haven't signed up for hosted wireless e-mail for their PDA-using employees may not be comfortable giving up IT control, particularly with an application that causes the most security problems. Among primary methods used for attacks, falsified information in e-mail attachments ranked No. 1 in a new InformationWeek Research survey of 744 U.S. companies that reported a breach.

Houlihan Lokey Howard & Zukin, an investment banking firm with more than 700 employees, has an in-house BlackBerry Enterprise Server for wireless e-mail. The firm can't imagine going with a hosted service. Even though technology costs and rollout times are much greater for small and midsized companies, deploying e-mail internally was worth it because it "delivers on security and compliance requirements," says Fred Weiss, the firm's IT manager.

Still, RIM's service is sure to draw some customers. Hosted services are "appealing to smaller businesses that want the power of enterprise mobile e-mail without the upfront investment in hardware and software, as well as personnel to manage these complex systems," says Justin Hectus, director of information technology at law firm Keesal, Young & Logan. But not his firm: It's using Good Technology's wireless e-mail service with its Exchange 2003 server, which is managed in-house. Hosted wireless e-mail for mobile devices will appeal to small businesses where checking e-mail remotely has significant benefits. That's not the case at New York's Bellevue Woman's Hospital, which has 400 employees--most using Wi-Fi-enabled laptops. Hospital executives are usually on-site, and most e-mails can wait until people are back at their desks, IT director Brett Kessler says. "In an environment where your entire [executive] suite can be counted on one hand, it's easy to pick up the phone instead of sending an e-mail," he says. But RIM isn't betting all its money on the Hosted BlackBerry Enterprise Server. In March, the company offered a version of the BlackBerry Enterprise Server as a free Internet download to small and midsized companies that buy BlackBerry devices, yet they still need the hardware on which to run them, and will deploy and manage them in-house.

Despite paying a $612.5 million settlement to NTP earlier this year, RIM is doing better than expected, according to industry analysts. The company's fiscal first-quarter financial results, ended June 3, boasted revenue of $613 million, up 9% from $561 million in the previous quarter and up 35% from $454 million in the same quarter last year. Net income for the quarter was $129.8 million, versus $18.4 million for the previous quarter and $132.5 million for last year's first quarter. RIM says it added about 680,000 new BlackBerry subscribers during its latest quarter, bringing the total to nearly 6 million.

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