BlackBerry under siege

August 16, 2010: 11:01 AM ET

Research in Motion's biggest assets face enemy fire: one by foreign governments demanding more control, the other by cutting-edge tech.

Saudi Arabia and the app economy -- the two don't usually have much in common. But recently they've taken to delivering a joint beating to RIM. And it's been painful to watch, especially when you consider RIM's (RIMM) history as a tech leader. More than a decade ago, the company launched the first BlackBerry, building its reputation on the security of its enterprise servers and that oh-so-usable physical QWERTY keyboard. The message was obvious: if you wanted a corporate-strength smart phone that just worked, go BlackBerry.

But it's 2010, not Y2K, and safety and a solid user experience are feelings millions of mobile users take for granted, whether they're tapping away on a BlackBerry, a Motorola (MOT) Droid 2, or an Apple (AAPL) iPhone 4. The innovations that once propelled RIM to the top of the smartphone chain now seem to be locking them in place: lose the keyboard and they alienate their users (witness the heavily criticized Storm and weakly reviewed Storm 2); loosen the security and they alienate the corporate market. When it came out that the company will reportedly provide Indian officials with technical solutions to access encrypted data from its messenger and enterprise mail services, big customers like JPMorgan (JPM) and Goldman Sachs (GS) demanded explanations, according to Bloomberg.

Meanwhile, telecommunications companies in Saudi Arabia await the green light from their industry regulator, the Communication and Information Technology Commission, on whether to go ahead with a BlackBerry messenger ban that would affect 700,000 users. Chances are that won't happen. The CITC and local phone operators are nearing a deal that will see RIM set up a server in the kingdom and allow authorities to access data on it, including user emails and messages.

Such deals would seem to defy a statement RIM released last week that insisted the company abides by four guiding principles, including the two below:

  • RIM uses the same BlackBerry Enterprise Server architecture everywhere and will not change it. It also does not have the ability to give decryption keys for customer data to be deciphered.
  • The company maintains a consistent global standard for lawful access requirements that does not include special deals for specific countries.

The bans could have, ironically, been a big boost for RIM's reputation and fodder for future marketing campaigns. (Imagine the appeal of a slogan like, "Banned in Saudi Arabia.") Instead, RIM is giving the impression that it will willingly serve data up on a plate for government officials. What's the point in hyping a titanium safe when the combination is permanently taped to the underside?

But RIM isn't just suffering by having its security reputation questioned. It's also dealing with the innovator's dilemma, especially around the QWERTY. A contingent of users refused to make the transition to software-based virtual keyboards popularized by iPhone and Android handsets -- their fear being that they couldn't possibly type as quickly on a pane of glass as they could on a keyboard with physical keys. And some studies comparing typing speeds on different smartphones bear that out. So RIM kept developing better and better keyboards, leaving the competition in the dust.

But instead of chasing RIM, the competition simply took another route. A legion of app developers have been looking for ways to make phones more usable and, it turns out, designing more responsive physical keyboards wasn't on their roadmap. As Google 24/7 editor Seth Weintraub reported, a texter using the Swype app (think "connect the dots," only with alphabet and numeric keys) achieved a Guinness Record of 42 words per minute on a Samsung Omnia, with the average Swype typing speed hovering around 40 wpm.

More exciting: this week's official release of Google (GOOG) Voice Actions for Android 2.2. The product enables users to have a more "hands-free" experience. Users can issue voice commands to dictate and send texts and emails, listen to particular music tracks, call contacts, visit web sites, and get directions without having to touch a keypad. Though obviously a new product – we noticed some lag when we played around with it yesterday  – Google's latest app pretty much works as advertised and could prove to be a worthy alternative for the 30% of smartphone users who insist on a QWERTY.

That's the last thing BlackBerry needs: customers who are tempted to swap their once-trusted smartphone for another one entirely – one that's more secure and innovative.

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About This Author
JP Mangalindan
JP Mangalindan
Writer, Fortune

JP Mangalindan is a San Francisco-based writer at Fortune, covering Silicon Valley. Since joining in 2010, he has written on a wide array of topics, from the turnaround of eBay to the evolution of net neutrality. A graduate of Fordham University, Mangalindan has also written for GQ, Popular Science, and Entertainment Weekly.

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