Business Transformation

Software or Hardware: China Telcos Tell Huawei to Decide

WUZHEN, China -- Operations Transformation Summit 2016 -- It may have been Huawei's party, but its star guests weren't afraid to share their opinions of the host.

Both China Mobile Ltd. (NYSE: CHL) and China Telecom Corp. Ltd. (NYSE: CHA) warned from the podium at the Huawei Operations Transformation Forum the company to make a choice: software or hardware.

China Mobile Senior Vice President Li Zhengmao said Huawei needed to "make up its mind." He said he had told Huawei Technologies Co. Ltd. executives that with the decoupling of hardware and software and the emergence of open source the company would have choose one or the other.

"If you do software your value is much higher than with hardware," he said. With the growth of open source in telecoms, "you don't need to reinvent the wheel. You just add your own things on top."

Li cited the Aero SDN controller designed and now being trialed by the Chinese telco. With virtualization, operators would go to OEMs to have hardware built to their specs, rather than order them from a specialist vendor.

"As long as I have the software the software can run on the hardware," he said. "Huawei should not have the mindset that customers will buy hardware and software together. If you go down this path you may run into problems in ten years or so."

China Telecom Vice President Zhen Jicai, a former chairman of the state-owned vendor Datang Telecom, echoed his point. Because of virtualization, networks were becoming "more open and more generic," he said. Huawei faced the question of whether it "becomes a software integrator or a hardware manufacturer."

For more NFV-related coverage and insights, check out our dedicated NFV content channel here on Light Reading.

Huawei teamed up with China Mobile and China Telecom earlier this year to announce a new industry open source orchestration group called OPEN-O. (See OPEN-O Focused on Orchestrating SDN & NFV.)

Li made his remarks while outlining for the first time the operator's idea for a new telecom network and architecture, which the operator calls Communications 4.0.

"We need to reinvent the network," he said. "'Evolution' is not enough, and neither is 'future.'"

The company has begun building out a test network, called NovoNet, with trials underway in Shanghai, Guangdong and Zhejiang.

He said NovoNet would be built on a new architecture combining SDN and NFV technology, integrating the IT and the network and with a new operations model.

— Robert Clark, contributing editor, Light Reading

Mitch Wagner 11/7/2016 | 9:10:28 PM
Re: Why not both? If a new strategic direction jeopardizes a company's existing successful business unit, leaders of that business unit will fight the new direction even if the new direction is better for the company.
mendyk 11/7/2016 | 8:23:44 AM
Re: Why not both? Robert -- what you're describing is what goes on in any number of large organizations. Individual operating units have numbers to meet, and those individual targets determine their success or failure. It's very difficult for a company of any size to execute a major strategy shift in this context. So in a way, this is evidence that Huawei isn't all that different from other companies in terms of organizational issues.
R Clark 11/7/2016 | 4:20:48 AM
Re: Why not both? I suspect this is aimed at the Huawei account executives who pushed back strongly when China Mobile built a controller with its own software an hardware from a local OEM (and probably on other occasions). Huawei senior execs give the appearance of being committed to nerw business and revenue models but still has a number of teams well-remunerated for selling traditional products and are reluctant to change.
Pull_Request 11/5/2016 | 6:17:19 PM
Re: Why not both? Because of the ultra-intense politics between the product lines. Huawei is now poised for a very difficult transition that it is not currently equipprd to survive. First, the transition from hardware to software always fails at the Go To Market, just ask Cisco. Second is the emergance of open source software as a dominant factor in future networks. Huawei will struggle with open source on many levels because it's not culturally capable of grasping the nuances of open source. This should be interesting to watch.
mendyk 11/3/2016 | 2:15:08 PM
Just ... wow I wonder how surprised Huawei is by the apparent criticism from some of its more closely held customers. The company has spent more than a decade now in building up market share in telecom equipment. The comments at the event cast a different light on that achievement.
Mitch Wagner 11/3/2016 | 12:31:14 PM
Why not both? A company with the resources of Huawei should be able to do both hardware and software. Key to success would be the keep the business units independent, with a firewall (I hesitate here to use the usual business cliche "Chinese wall") between them, so customers can be free to choose either hardware, software, or both from Huawei. 
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