Will frustrated customers ditch BlackBerry?

Research In Motion's recent network troubles could be a boon for Apple and Google as frustrated BlackBerry customers consider alternative smartphones.

The worldwide BlackBerry outage that has plagued Research In Motion this week has left millions of subscribers in dozens of countries without access to e-mail and other messaging services for days. And the outage, which is likely one of the biggest in RIM's history, could tempt some of the BlackBerry faithful to ditch their "crackberries" for competing products form Apple and Google.

Angry customers have already taken to social networking sites such as Twitter to vent their frustration. And more than a few have said they're ready to give up on the BlackBerry.

@Gemified Day 3 of #BlackberryOutage. I'm wondering if they have any customers left willing to get a Blackberry again. Dear Blackberry - SORT IT OUT!

@Lkhall buy an iPhone! "@ariannahuff: I'm traveling with AT&T BB, TMobile BB and Verizon BB. What else can a girl do? #blackberryoutage"

@SharonDuceyJam Thank you blackberry for giving yet another reason to shop for a new smart phone. #blackberryoutage

It's hard to say whether customers such as these will actually follow through on their threats to leave the BlackBerry, which is still very popular among corporate customers, government agencies, and other business customers.

But as competition in the smartphone market intensifies, it's clear that the outage couldn't have come at a worse time for RIM. Not only has the company seen profits sink and revenues fall as sales of the BlackBerry weaken in key markets, like the U.S., but executives are also facing challenges from activist investors who want big changes at the company.

Meanwhile, competitors, such as Apple, Samsung, HTC and others, are gearing up for a big holiday season of smartphone sales. Apple in particular is a significant threat. The much-anticipated new iPhone 4S goes on sale Friday. Pre-orders for the device, which started last week, have already broken records. And even though some consumers were disappointed that the new iPhone won't sport a new design or support 4G LTE network technology, analysts are still expecting it to be a hot seller.

Google and its many partners that use its Android operating system are also expected to have strong sales over the next few months as companies, such as Samsung and HTC release new Android smartphones.

"It's certainly not a good time for an outage like this to happen," said Charles Golvin, an analyst with Forrester Research. "I don't think I'd go as far as to say this is the straw that breaks the camel's back for most customers, but it's hugely damaging, especially in light of the current competitive landscape."

Indeed, Apple and Google Android have already put a significant dent in RIM's sales of the BlackBerry. Even as RIM has expanded its customer base overseas, the company has suffered market share loss in key markets like the U.S.

According to a recent comScore survey, Apple pushed RIM out of the No. 4 spot for handset makers in May 2011. And in terms of smartphone operating systems, Google's Android share jumped to 38.1 percent from 33 percent compared with a survey done over a three month period, which ended in February. Meanwhile, RIM's share of the market fell. And the company was bumped by Apple from its No. 2 spot in terms of smartphone operating system providers in the U.S.

The architecture of RIM's messaging platform for the BlackBerry is both a blessing and a curse. All the e-mail and data generated from and delivered to BlackBerry devices passes through RIM's servers in data centers throughout the world. This architecture is great on one hand, because it allows the company to add additional security to the messaging. It also allows companies that use the BlackBerry to have more control and management of the devices and the communications on those devices. And it's for these reasons that many companies and government agencies, even the president of the United States, has relied on the BlackBerry.

But this architecture also means that data passes through servers that can turn into single points of failure. This is exactly what happened in the case of this outage. There was a failure of a core switch in one of RIM's European network operation centers. The fail-over for this infrastructure element didn't kick in, and service was disrupted. And as service was down for that particular network operations center, affecting millions of users in a particular geographic area, the backlog of messages backing up in RIM's network created a cascading failure that has rippled throughout almost every major market that RIM serves.

"When the BlackBerry works, the network is a competitive advantage," Golvin said. "But when it fails, it's a millstone around their neck."

RIM has had network outages in the past. There were two significant outages that affected the company's e-mail and messaging services in 2007 and 2008 only 10 months apart. And there was another outage in 2009. More recently, the company suffered a minor outage of its service in the U.S. and in Canada last month.

Previous outages, though noteworthy, were likely not deal breakers for RIM customers, because there were few smartphone choices. The Apple iPhone was just coming to market and the Google Android platform hadn't even been launched.

But 2011 is certainly a new era in the smartphone market.

"The timing of this outage is just so much worse because of the competitive dynamics now," Golvin said.

There are also signs that RIM may be losing its competitive advantage with its core audience, business customers. And the recent outage calls into question the confidence many companies have had regarding the reliability of the BlackBerry.

There's already been a trend among many professionals to carry two devices. One for work, which is usually a BlackBerry and is primarily used for email, and a personal phone, such as an iPhone or Android device that is used for everything else but corporate email.

But as security and management features improve for the Apple iOS devices and Android, more companies are starting to allow their employees to use these devices for work too.

"RIM's core base of customers is under attack," Golvin said. "There's a tremendous amount of momentum in the enterprise market for the iPhone. It's not yet there for Android, but it's coming too."

Unfortunately for RIM, it has done little to wow customers with new devices. It announced a LINK TEXT HEREnew flagship smartphone for this fall, but the new phones have not generated the same buzz that competing products, such as the Samsung Galaxy II or the Apple iPhone 4S have generated. RIM concentrated a great deal of effort over the past year in developing the tablet called the Playbook, which has largely been a flop.

Where the company goes from here is hard to say. Without new products that excite its base of customers, it's hard to see the company holding onto market share. And an outage, such as this one, could be the event that tips some teetering customers to look for an alternative.