RFID and AIDC News: What is Zebra’s Strategy for Motorola’s Mobile Wireless and Data Collection Businesses?
In early 2014, printing and RFID system focused Zebra Technologies announced it was acquiring the “Enterprise Systems” business from Motorola Solutions, in a deal that closed in late October. That left Motorola to focus on its radio systems business.
It was a somewhat surprising move, certainly moving Zebra up the supply chain food change. What was the strategy behind the deal? How fast and how far will the integration of Motorola into Zebra go? Is Zebra now a “solutions” company?
SCDigest editor Dan Gilmore recently interviewed Mike Terzich, Zebra’s Chief Administrative Officer who is leading the integration program, on these and several other topics.
Gilmore: Mike, before we start talking about the Motorola Enterprise acquisition, you’ve been around the Auto ID industry for two decades. Not long ago, it was a very recognized and defined space. Now, not so much. It doesn’t receive much press coverage at all today, though SCDigest is trying to rectify that a bit. Is it because it’s just so easy to make it work today that end users just don’t need much education any more?
Terzich: I think part of the reason that it has evolved the way it has is that if you look at who the industry icons were back in the day, the Intermecs, the Symbols [Symbol Technologies], the Telxons, the Hand Held Products, Datamax – all of them have been consolidated up into large industrial conglomerates. Zebra is really one of the last of the independents.
For years, you had so much independent development, and every manufacturer had their own operating language and everything was proprietary, so that added a dimension of complexity that users had to deal with. Over time, as architectures became more open and interoperable, the mystery kind of disappeared on how to implement and integrate this stuff. The question now is not really about the technical aspects, but issues like how to optimize my assets across my supply chain network. Today it is much more of an application and business question than it is a technical one with Auto ID.
Gilmore: I must admit the Motorola announcement took me a bit by surprise, though it was clear there were some tensions within the old Motorola Solutions between the radio side and the wireless and data collection businesses. What was Zebra’s strategy in making this deal?
Terzich: A little bit history – we tried to be part of the opportunity back in 2006 and 2007 when Symbol Technologies was put on the market and eventually found its way to Motorola. We made a pitch at the time – I was personally involved – and as I like to say we were a day late and a dollar short in terms of making a deal.
So our interest level from a strategic perspective has really been in place for seven years. So when the opportunity re-presented itself last year, our CEO Anders Gustafsson and Motorola started to have some conversations. For us, it was always about the attraction of where we saw the market evolving, and this whole concept around enterprise apps and intelligence, the interest of companies to optimize across their value chains, and we felt that the combination of Zebra and the enterprise mobility business from Motorola made complete sense because it allowed us to offer a broader portfolio and a higher percentage of the solution offering.
For us, it also allows us to become closer to the application development side of the business. As a printing company, while we had a vision and an aspiration to be part of where enterprises were willing to go in terms of managing their business, it’s hard to lead application and solution development around your brand when you’re the printing component. Printing has become almost second nature today, while the wireless business and the portfolio Motorola has there in terms of mobile computing and the trends were we seeing with Cloud-based application development, the Internet of Things, asset optimization, and ubiquitous mobility – that’s what enticed us to say this is still a very relevant strategic opportunity today as it was back in 2007.
Gilmore: I understand you have rather fully integrated Motorola in already. I would have thought that initially, given the very different nature of the business, that you would have started with it as separate SBU. I also understand you are quickly getting rid of the Motorola brand name in favor of it all being Zebra Technologies. Is that correct, and if Yes, what was the thinking?
Terzich: It’s semi-correct. Where we are integrated is in our go-to-market strategy and our face to the customer. When you look at where Motorola Enterprise Mobility was selling, who their customers were and their routes to market, it was a combination of strategically calling on some very large end users and a significant reseller and integrator channel. It turned out that the amount of common end user customers and channel partners between Zebra and Motorola Enterprise is really quite significant.
So we had the opportunity to integrate sales forces, and when you think about it through the eyes of the sales team, your carrying more products in your sales bag, you are selling largely to the same channel partners that Zebra and Motorola were both selling to independently. The largest end users are mostly customers in common, so there was some natural synergistic opportunity in our go to market model.
Where we have remained separate is in the R&D and development side, because the product lines are complementary not competitive, and over time Motorola’s competency in mobile computing, data collection and wireless networks are unique skill sets for us. So we are maintaining separate engineering and product development organizations, but we come together with a common global sales and marketing organization.
Gilmore: And what about the branding? Is the Motorola name gone, it is now all Zebra Technologies going forward?
Terzich: From a contractual/legal perspective, we have to get off the name and the “batwings” [the Motorola logo] as part of the transaction, so it’s not like we have a choice. We can however leverage the Symbol Technologies brand, and we are going to do that as a product brand is some isolated areas. But Symbol as a name has been out of circulation for about seven years, and while it has some affinity say in the reseller community, the long term strategy is that everything will be branded Zebra Technologies.
But in the transitional period there will be some product that have to transfer to a Symbol products sub-brand as a means to get off of the Motorola bat wings.
Gilmore: What’s your take on wireless systems market? It really now is just down in the US to just two major players, Honeywell and now Zebra. Is it is still a good market, a growth market?
Terzich: What’s interesting about the combination is we’re now number one in mobile computing, number one in data collection, and number one in printing. We have a very large global service organization. And then you get to wireless LAN, and that’s the fifth of our major revenue buckets.
What’s interesting about wireless LAN is that it has the highest growth profile of any of those segments, but clearly Motorola’s position here is not number 1. You have some very large players [e.g., Cisco] that operate in a more horizontal market mode, and focus generally on more “carpeted” areas of a business, versus a distribution center or shop floor or a retail store. I think Motorola had done a nice job of carving out a niche relative to some markets that we service, principally in the retail and some of the hospitality markets, and the product has been successful and we have quite a bit of customer loyalty in these sectors.
So our strategy going forward from a wireless LAN perspective is to be very vertically focused and application specific where the product has some advantages, and to build off that customer loyalty. We don’t think the answer is to compete broadly in the wireless LAN marketplace because we don’t have the R&D engine or the brand equity in some of those markets or applications.
So we are going to stick to our knitting, which will concentrated in retail, hospitality and healthcare, where our product seems to resonate.
Gilmore: You and Motorola use primarily a channels strategy. Are you in the solutions business, and can you do that if you use a channels strategy and are one-step removed from the customer?
Terzich: Great question.
One of the things that most people don’t realize is that Zebra, organically before the Motorola acquisition, had about 80% of its business through channels and about 20% through some large, named strategic accounts. And those accounts tended to be some very sophisticated adopters of technology that effectively act as their own systems integrator.
These are large retailers, large transportation companies, and large manufacturers that well understand how to deploy technology to drive efficiency and productivity. So that was our composite, and Motorola’s was very similar, the difference being that because Motorola offered enterprise mobile computing, they tended to call a little higher in those organizations, and they worked more closely with application developers and independent software developers because usually the real problem is solved by application software and re-engineering of business processes.
So Motorola may have been calling on maybe 40% of its revenue from a strategic account perspective, and that means they had a seat at the end user table and they are influencing those companies, even if those are sometimes still being fulfilled through channels.
So where do we fall in the solutions spectrum? Both product lines do not constitute a solution by themselves, they still need to connect to application software and that requires integration support. So the channel will remain a very vital part of the strategy.
At a very simple level, we see that there are opportunities for better enabling application software. So how do we make mobile printing devices and mobile computing and data collection devices better together from a product design set? How do we make our technology more interoperable and attractive for application development?
When you look at this technology and how ubiquitous it is you, find that deployment is really though many hundreds of application developers. You don’t see a small number of applications as being really dominant. Our job is to continue to work with those developers to make our solutions as easy to integrate with them as we can.
No CIO or CFO goes to bed at night thinking “I need to bar code something.” But they do wake up and say I need to take a billion dollars out my supply chain, or whatever the figure is. What we do is often a key piece of what becomes the strategy to achieve those goals.
Gilmore: If I understand it right, you have released your own Voice solution, originally developed by Motorola’s Psion unit in Europe, here into the US market. Before, Motorola relied exclusively on partners here for Voice software. What is the strategy?
Terzich: Ultimately, Voice as a technology is just another extension of using mobility to make operations more productive and efficient, especially in warehousing applications. So it’s really just a continuum to us of bringing more capability to those that are trying to optimize workflow. Workflow has become without question one of the biggest areas of opportunity across anyone’s supply chain. This is part of why we are so excited about the combined portfolio in general, and our Voice solution is part of that.
Gilmore: Mike, appreciate you sharing your insight today.
Terzich: Thanks Dan. I enjoyed the conversation.
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