RIM Partners Expect More Blackberry Compromises

Research In Motion on Monday hammered out an agreement with the Indian government to allow the Blackberry service to continue running in that country. The deal calls for RIM to provide local Indian security agencies with "some technical solutions" for keeping track of the Blackberry service's encrypted e-mail, a senior Indian government official told The Wall Street Journal Tuesday, without elaborating further.

RIM couldn't be reached for comment on the agreement.

It's a shift from RIM's stance in early August, when it rejected Indian authorities' request for access to encrypted BlackBerry e-mails and messages. RIM is facing similar government demands in Saudi Arabia and the United Arab Emirates, and it's a good bet that other countries will also start asking pointed questions about the Blackberry service.

Although the nature of RIM's agreement with Indian authorities is unclear, RIM partner believe any compromise on security would affect the consumer Blackberry service and not the more heavily encrypted business-focused service, which runs on a Blackberry Enterprise Server sitting behind the corporate firewall.

"I'd be surprised if RIM backed down very far," said Steve Beauregard, president of Santa Monica, Calif.-based RIM partner Regard Solutions. "For a decade, RIM has been pounding into everyone's head that they would not compromise on security, and this looks like an agreement that's designed to allow the Indian government to save face."

David Bean, president of eAccess Solutions, a Palatine, Ill.-based RIM partner, is also of the mind that RIM is giving Indian authorities a way to show they've done their due diligence on the Blackberry service. "I think this is really just a case of diplomacy," he said.

For the past several weeks, RIM executives have been explaining that BlackBerry's security architecture prevents even RIM from accessing users’ private information and communications. Sometimes, their frustration with the repetitive nature of this task has been readily apparent.

"Everything on the Internet is encrypted. This is not a BlackBerry-only issue. If they can't deal with the Internet, they should shut it off," RIM co-CEO Mike Lazaridis told The Wall Street Journal earlier this month.

The problem RIM faces is that its business model depends on revenue sharing with carriers, which means carriers can opt to sell other smartphones and pocket the difference, says Alan Gould, president and CEO of Westlake Software, a wireless solution provider in Calabasas, Calif.

RIM will have to continue maneuvering to keep the Blackberry service running because recurring revenue is a such a key pillar of its business model, and it needs to grow its Blackberry user base, he added.

"RIM does not really care if they offer encryption or not. Their entire objective as a business is to sell more phones and collect recurring revenue from partnering with carriers. If a local government says they want a change, they will make it," Gould said.

RIM has traditionally set itself apart in the mobile market with the strong security of the Blackberry, but as more foreign governments try to clamp down on Blackberry-using criminals , RIM will have to continue negotiating to keep the service operating, notes Allen Nogee, an analyst with In-Stat in Scottsdale, Ariz.

"Many Blackberry devices are now being sold to non-business users, and RIM is being forced to make the adjustment or risk being left behind," said Nogee. "I don't think they have any choice but to allow this kind of access."