RIM And Cisco Feel The Pain

BlackBerry-maker slashes 10% of workforce. But bigger problems loom: Has RIM missed the application boat?
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On the heels of one of the more promising tech company earnings sweeps weeks in recent memory, Research In Motion is announcing it will lay off 2,000 employees, or 10% of its workforce. That rattle you hear is the collective head shaking of the mobile industry.

RIM's announcement doesn't come as a big surprise. It's just making official what the company declared last month. "Job cuts will be spread across the company's worldwide operations," InformationWeek's Paul McDougall wrote. These cuts "bring its total staff complement down to about 17,000 from 19,000." McDougall notes that the latest smartphone market share data (via comScore) shows the BlackBerry has fallen 4.2% down to 24.7%; that's compared to 38.1% for Android and 26.6% for the iPhone. In a hotly contested race, 4.2% is significant. (RIM has taken issue with some comScore data, by the way.)

Although RIM telegraphed its layoffs, I still gulped when I read the details. There also were a few management changes, which, coupled with the job cuts, will let RIM focus on growth opportunities, the company said. As AllThingsD writer Ina Fried points out, these changes don't really address the organization changes many are calling for--namely a move around the co-CEOs, Jim Balsillie and Mike Lazaridis.

RIM has said these cuts will force the company to focus on the big growth opportunities. We're all waiting.

There's nothing seriously wrong with the BlackBerry product line (including the PlayBook) that can't be fixed--a better processor behind the Torch touch-screen experience, faster phones overall, more variety and choice, email and other fundamental services on the PlayBook. But if that was all the ails RIM, it wouldn't be the butt of all the jokes: How many PlayBooks does it take to screw in a lightbulb? Only one, but it requires a BlackBerry smartphone to actually turn the light on.

The problem is fundamental, and perhaps unfixable: RIM has missed the application boat and it's quickly sailing away. About 18 months ago at the 2010 Mobile World Congress, I asked a RIM executive about the company's commitment to working better with developers. He acknowledged that RIM had its work cut out for it, but that the company was focused on fixing the problem. Since then, RIM has made a big deal about creating software development kits across a variety of development paradigms, including the Web, Adobe AIR, and Java. It also seems to be close to releasing its Android application emulation environment (users can run slightly modified Android apps on the BlackBerry Playbook).

Those may well be the right steps, but consider this small, yet telling anecdote: InformationWeek recently held its Healthcare IT Leadership Forum and, as part of that event, we hosted a "mobile app smackdown," choosing a handful of the most innovative applications running on mobile platforms. Most of the demonstrations used the Apple iOS versions; none used the BlackBerry. When I talk to medical professionals, the preponderance of medical applications they use is startling; and most of the medical world seems to use Apple mobile devices for these tasks. (View our slideshow of some interesting mobile healthcare apps.)

Not to belabor the point, but as we reported last week, mobile devices have become so fundamental to providing healthcare, the FDA is now thinking it needs to offer some regulation, specifically where those devices are controlling medical equipment, tracking patient data, and providing input on things like medication dosage.

Healthcare is just one industry, of course, but the app trend is similar across industries and among professionals.

For RIM, a 10% workforce cutback was necessary, financially. Organizational changes were inevitable. But RIM must be swift and aggressive in changing how it approaches its growth opportunities. That could include de-coupling its BlackBerry phones from its rock-solid mobile infrastructure (BES) and creating a mobile cloud that is regulation- and security-friendly across all industries, and that works with every mobile OS platform.

That may not sound very sexy to a company that is taken with its television and billboard ads. But it's just what the doctor ordered where CIOs are concerned.

Cisco is facing similar pressures. It too has been a staple in the enterprise IT diet, running our corporate networks reliably--if expensively--for years. And yet its outlook has been gloomy, in the wake of some missteps and bad turns. Its consumer technology focus hasn't panned out, and the company's efforts to re-define the data center through its unified computing architecture, while ambitious, haven't exactly inspired customers the way Cisco products of old once did.

As a result, the company had to lay off thousands, and the answers to Cisco's ills seem almost defiant. In response to a column from InformationWeek Editor-in-chief Rob Preston last week, in which we noted some of Cisco's recent struggles, Cisco quibbled with market share data, asking us to look at the data a bit differently. As Art Wittmann points out on InformationWeek on Monday, new views of the data still don't paint Cisco as the high flyer of yesteryear, at least in the context of a new world order that converges server-based computing, storage, and networking.

As long-time followers (and customers) of both RIM and Cisco, these are disappointing times. The soul searching and deep introspection is heartening, but it's not enough, especially if the result is simply that you're only fooling yourselves about what has gone wrong, and, more importantly, what can still go right. Shoot the messenger at your own peril.

Fritz Nelson is the editorial director for InformationWeek and the Executive Producer of TechWebTV. Fritz writes about startups and established companies alike, but likes to exploit multiple forms of media into his writing.

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