RIM CEO Jim Balsillie Talks Channel

Research In Motion Chairman and Co-CEO Jim Balsillie spoke with Editor/News Steven Burke at the Intel Solutions Summit about the BlackBerry maker's plans to attack the SMB market through the VAR channel, with the help of Intel and the telecommunications carriers. Here is an excerpt of the interview.

CRN: How big is the opportunity for RIM to work with solution providers in attacking the wireless handheld market?

BALSILLIE: We are at 10 percent of where we want to be in SMB and in the channel relationships there. Wireless has been so strong, mainly in the high-end carrier B2B enterprise. There is just such an untapped market there [in small and midsize businesses] and such an opportunity. It is a higher-touch relationship. It is very high value-add. Channel partners aren't optional. They are mandatory and central to it. That is why we are here. That is why we care.

CRN: You have chosen to go through telecoms to establish relationships with VARs. Is that putting RIM at a disadvantage?

BALSILLIE: No, because the telecom channel strategies have traditionally been weighted in two areas. They have their retail agents, and that is where they have put 75 percent to 80 percent of their activations. Fifteen percent to 20 percent has been in their B2B sales force. So the actual channel strategy for B2B is a great new growth opportunity for the carriers. It is generally seen as untapped for the carriers because the SMBs just go buy a cell voice plan from an agent.

But how the data and solution part has been handled really hasn't gotten the attention it deserves. What has been exciting here is that Intel has gone and fundamentally arranged master agent relationships with Sprint, Nextel and Cingular, and they just pass all that through to the channel. So the channel has got it all prearranged and pre-set up. And the compensation is very, very nice. So there is a great agent comp. Frankly, you sell a box and you might get $50 bucks as a VAR. But you'll get $200 bucks for activating a BlackBerry. So you can [get] five times your margin just by attaching a data plan to it. This is very profitable for the carriers. So they are prepared to comp the channel. And it is very high ROI for the user. Once you communicate, they buy. And that is the channel opportunity.

CRN: Many partners want to establish a direct partner relationship with RIM. Will they have that opportunity? Will you do your own channel program?

BALSILLIE: We do a tremendous amount of support in those channel programs. By all means we do a tremendous amount of support directly in the channel: training, applications and so on and so forth. But you as a channel person have nothing to sell if you don't have an [agent] deal with a carrier. How do you activate and get comped $250 bucks for activating a user? So at the end of the day, you need an agent. That is part of the code that Intel has cracked. They have gone and become a master agent, and they are going to expand it globally.

What Intel has done has is given you structure as a VAR. It is a bigger deal that way. On the one hand, you can work with us. We support you. You get all our stuff. And you continue to do your normal business. But now you actually for the first time will get agency comped for activating a telco relationship. It is important to understand these devices are network appliances you don't buy them without a teclo subscription account. You can't buy them without a telco. In the PC world or the server world you are used to this disintermediated game where the customer says build my solution, thank you very much I'll go buy my T-1 elsewhere. That is not how it works in wireless. They come together. So how do you align that relationship. I think it is nicely aligned. I think it is working. It is flowing.

CRN: Talk about BlackBerry Enterprise Server 4.1 and what it will mean for solution providers.

BALSILLIE: You can buy it today. It has gone through an extensive test and development cycle. There are two or three new things with 4.1. There is much stronger management, a centralized management console for multiple BES [Blackberry Enterprise Servers] as well as role-, job- and group-based administration. So it fits much more with high-end administration. The application or service part, which is so powerful, is native instant messaging for realtime computing. So you have a native interface for Novell, Live Communications Server and SameTime. I have to say, that is the app that I see growing fastest in the enterprise: realtime computing and realtime IM. The third thing in it is service architecture tools, with IBM Eclipse back-end tools and an XML HTTP interface. What that means is you can link it to vertical apps. Most SOHOs and SMBs have intranet apps. They have dispatch, CRM or help desk. CRN: What about the simplified small-business offering in the 4.1 version?

BALSILLIE: We have commercialized it to make it much simpler and easier, so you can start with one user and go to multiple users.

CRN: How big of a difference is that going to make?

BALSILLIE: That's big. We have to realize that part of our job is not only to make it richer as a solution but also to make it easier to buy and provide a lot more support to the channel. The message is, this is a really important channel. It is a really important segment. I would have to say, it is the most untapped segment in wireless data by far. The SMB and reseller channel by far is the area that has not gotten the attention it should have to date for the size of the opportunity. I would like to say that has changed effectively now.

CRN: How do you make sure the carriers step up on this? They are all going for the direct sale, and they pay very little attention to the SMB.

BALSILLIE: The carriers will say straight up that their great strength is retail. They have 12,000 or 15,000 retail fronts. They have 1,000 or 2,000 stores. They have all these agents. They have a million plans. They have that all figured out pretty good. No. 2, [for] the high-end enterprise, they have their own B2B [sales force]. They are the very first to say we have to get this SMB, we are not sure what to do. Help us create programs. Let's get together. And quite frankly, that is why the Sprints, Cingulars and Nextels have been so receptive to Intel. I think the answer to the carriers is, what they have got to put on the line is channel comp. But they don't have channel execution.

CRN: It sounds like the BlackBarry penetration is pretty low with system builders. How big of an opportunity is there to take the Intel compensation to a broad market?

BALSILLIE: I think it is absolutely big. You have an account that can look at 3,000, 4,000 or 5,000 units, and the carrier can nurse it over time. You go to SMBs, where the total number of units is a couple of hundred units, and that is missing. You take a good VAR out there who can get a 500-unit opportunity, and that is great channel comp. There is $100,000 in channel comp plus straight sell.

CRN: Some carriers give away BlackBerry Enterprise Server. Some partners would like to sell the software on their own.

BALSILLIE: The carriers' attitude is, what is the total return to me for generating this opportunity? Now what they do is put the channel on an even footing that says, what is the total return for the channel for putting this opportunity together? The truth of it is, when it comes to the segments in touch and reach, you need the channel. Now there is a way to engage the channel. There wasn't as integrated a way to engage the channel before. And we have a much stronger proposition now because of Intel and our pricing.

CRN: Solution providers are looking to do the software and solution. What is your advice to them?

BALSILLIE: My No. 1 recommendation is get trained on what is possible with the enablers. Know what is possible. No. 2, just get properly engaged with us and Intel on programs.

CRN: How much money is being made by some of the Intel system builders doing BlackBerry activation?

BALSILLIE: It is really good money because these guys are under a lot of pressure selling a box. They have gone from 20 points to four points in the last year and a half. That isn't the play. But if you do something that requires a little more touch, a little more value-add and bing, those margins pop back up. They don't just pop up a little bit. They pop all the way back up.

CRN: How does it feel to get rid of the NTP lawsuit?

BALSILLIE: Honestly, it never changed our business activity. It never changed. We developed a tremendous profile on this, and it was just getting in the way. It is nice not to have the noise.

CRN: Does it free up any management cycles?

BALSILLIE: We are a pretty possessed management team. So at the end of the day, maybe it frees up more time to chill. But you always do the job you have to do. The question is, do you get time to relax? CRN: What do you think of challenges by Microsoft and Nokia and the BlackBerry's strength against them?

BALSILLIE: We work very closely with Nokia and have BlackBerry work on Nokia devices, and we definitely work closely with Microsoft in integrating with Exchange. This goes back to my [earlier] comments: Is something established, reliable, scalable, manageable, secure? Is it part of a carrier plan? Does it do services architecture, realtime computing and PBX integration? There are five or six dimensions that a CIO looks for.

CRN: What will the Ascendant systems deal mean to solution providers?

BALSILLIE: We are very excited about the Ascendant deal. What it does is fuses wireless with PBX. PBX has kind of been its own box. Quite frankly, e-mail used to be its own box, and we fused e-mail and wireless. What we are doing is the same thing with PBX, so when your PBX rings your BlackBerry rings. You will have management so you can actually do call forwarding, call transfer and hold. When someone phones your office, your home, mobile and office [numbers] all ring at the same time. If nobody answers, it goes right into one mail box. Just think of it as convergence of your PBX. What we kind of did with the desktop we are doing with the PBX. That is what we are doing with the services architecture and realime computing. The way I look it at is, the IT department is looking at four stories: real time, desktop, intranet and PBX.

CRN: What can VARs expect over the next year from RIM and Intel?

BALSILLIE: You are going to see a lot more channel programs for selling and marketing from us and Intel: training programs, marketing programs, ISV programs, carrier partnerships and international programs.

CRN: This is the first time RIM has been at the Intel Solutions Summit. How big of an effort are you making to crack open the market with systems integrators?

BALSILLIE: It's a huge focus. It's an enormous focus. I think it is the biggest untapped wireless data market, period. The enterprise is on a path of deeper and deeper penetration. The SMB is such a payback to the users, and it is such a profitable opportunity for the channel partner. It just needs attention.

CRN: Who will be the key channel liaisons for RIM?

BALSILLIE: It has to be us and Intel, because it is an IT relationship. The carriers already put up their programs and generous channel compensation. They have done their part. But at the end of the day, they are going look [to say], 'I don't know,' to this VAR channel, and 'Come and crack the code for us.' Put my comp on the line, now go attack the channel.

CRN: What kind of channel investment is RIM making in 2006 vs. 2005?

BALSILLIE: It is a dramatic increase. [Partners] are going to see all these programs where they can actually be an agent and get comp, all kinds of training by us and Intel, and market development programs where we can [work] jointly with them and with the carrier go in and make sure their end-user clients are aware.