Successful open source vendors utilize business models that build a large user base through free software and monetize the adoption through some other product or service offering. In dated business terminology the free offering is considered a loss leader whose business case is supported by other offerings in the portfolio.
I’ve previously written that RIM needs to more effectively utilize open source software in its business practices. Well, RIM just demonstrated that they’re learning from successful open source vendors.
RIM introduced the free BlackBerry Enterprise Server Express (BESX), which offers wireless synchronization of BlackBerry smartphones with Microsoft Exchange or Microsoft Windows Small Business Server. While BESX is targeted at SMB customers, RIM still offers BlackBerry Enterprise Server (BES) as a priced enterprise grade product with additional enterprise-friendly features.
It’s interesting to not that BESX isn’t necessarily being used to build a user base that RIM will later monetize with BES. Rather, BESX is an attempt to build a user base that can be monetized through the sale of BlackBerry devices and ongoing monthly fees. This becomes vividly clear when one considers RIM’s revenue sources.
The “Device” category, not surprisingly, represents revenue from selling new smartphones. The “Service” category represents the monthly fee that RIM receives from carriers for every active BlackBerry device on the carrier’s network. The “Software” category represents revenue from the sale of packaged software such as BES.
While the “Software” category represented over $250 million in fiscal 2009 revenue, a respectable sum by most measures, it represents 2 percent of RIM’s revenue. By making BESX free, RIM hopes to make it more cost effective for small businesses to promote the use of Blackberry devices by their employees. As this occurs, RIM will capture “Device” and ongoing “Service” revenue.
Build adoption with free software and monetize adoption elsewhere in the offering portfolio. Seems like a very smart decision by RIM.
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