It’s been fun watching Research In Motion over the past few years. Not so long ago, the Waterloo, Ontario-based BlackBerry maker was the darling of the Canadian technology and business industry. The company rode its email/paging device – a smartphone before there really was such a thing – to riches and widespread praise. But, whether it was national pride or the fact that the company’s stock paid off for so many, a lot of people in Canada had blinders on to the company’s slow decline.
RIM has been sliding since Apple debuted the iPhone back in 2007. The device revolutionized the phone business, first by bringing a good internet experience to mobiles, then by adding customized apps to the equation. RIM got caught flat-footed and has been trying to catch up since, a struggle that is now manifesting itself in tablets as well. In the meantime, Google jumped in and has since muscled to the top of the smartphone heap with devices that run Android software. Like Apple, Google understood what people want in their mobile devices and capitalized. RIM, meanwhile, seems puzzled.
With lacklustre financial results reported last week, RIM’s hold-out supporters among investors, analysts and media finally seem to be abandoning ship. Some have called for a management change at the company.
That might help, but the problem goes deeper. RIM has finally hit the ceiling that just about all Canadian technology companies get to, where they just can’t compete with U.S. rivals. Whether it’s an internal implosion like Corel or Nortel or whether it’s selling out to a bigger rival, like ATI and Cognos did, there comes a time when Canadian tech companies inevitably peter out.
The reasons are varied but in the case of RIM, it’s happening because the company has to tangle with the two current titans of the U.S. technology industry: Apple and Google. There’s a reason the Canadian company – in its current form – can’t compete with those powerhouses and it comes down to the number one rule of real estate: location, location, location. Both Google and Apple are Silicon Valley stalwarts, which give them a number of advantages over RIM:
Compensation: Salary estimates vary, but according to Glassdoor.com, the average RIM software engineer makes about $70,000. That’s almost 30% less than the average $97,000 a similar employee makes at Google and Apple. With tax rates between the province of Ontario and the state California being similar (about 33% vs. 38%), Silicon Valley employees take home a significantly bigger chunk of change. But what about Canada’s much-vaunted health care system? Well, working for companies like Apple or Google nets some pretty sweet privatized medical benefits. Much has also been made about the high cost of living in Silicon Valley, but many young software engineers aren’t exactly interested in buying stately homes in wine country. They’re looking to live close to the fun and action, in San Francisco, which is actually cheaper than many major U.S. cities. Sure, it’s not as cheap as Waterloo… but then again, uh, it’s not Waterloo.
Opportunity: So let’s say those bright Canadian software engineers move down to California and go to work for Google or Apple. Then, after a little while, they get a bright idea for their own company. Who can they get to fund it? Well, the options in Silicon Valley alone are stunning. There probably aren’t that many venture capital companies – let alone ones with a technology focus – across all of Canada. Having all that VC money kicking around is the biggest draw for entrepreneurial techies. The history of Silicon Valley is rife with even the worst ideas getting millions thrown at them, which proves the place literally drips with opportunity.
Intellectual Environment: The University of Waterloo is a fine school, but it pales next to Silicon Valley’s resident brain factory, Stanford University. Stanford ranks third in studies that compare graduate accomplishment, next to Tokyo and Harvard Universities (Waterloo doesn’t make the list), and second in producing billionaires (next to Harvard again). Aside from RIM co-founders Jim Balsillie and Mike Lazaridis, it’s difficult to name any other billionaires who came out of Waterloo. Being surrounded by the best and brightest minds in Silicon Valley tends to elevate those around them as well.
Weather: The draw of climate can’t be underestimated. By this measure, Waterloo has nothing on Silicon Valley, which averages more than 300 days of sunshine a year and a winter-time low temperature of 41 degrees (5 degrees Celsius). Waterloo, on the other hand, has an average low of minus 11 and 43 centimeters of snow in January. It’s funny that Canadian software engineers get paid to work in Silicon Valley – they should be paying the companies to escape that kind of weather!
Ultimately, RIM can try to attract the best and the brightest minds but given all of those factors, those people are going to go to where the grass is greener… literally. While a management change may help, there’s really only one thing that can save the company: a move to California. Of course, with all that Canada has vested in the company, that’s about as likely as Mike Myers ever making another funny movie (i.e. it won’t happen). As such, all company watchers have to look forward to with RIM is its inevitable purchase by Microsoft, the groundwork of which is already being laid.