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CEO Chat With Eric Xu, HuaweiCEO Chat With Eric Xu, Huawei

In a rare and exclusive interview, Eric Xu, Deputy Chairman and Rotating CEO of Huawei Technologies, talked to Light Reading CEO and founder Steve Saunders about convergence, virtualization, industry politics, doing business in the US and economic success.

Steve Saunders

September 16, 2015

13 Min Read
CEO Chat With Eric Xu, Huawei

Last week saw a big day in the 15-year history of Light Reading when Editor-in-Chief Ray Le Maistre and I were invited to interview the Deputy Chairman and Rotating CEO of Huawei Technologies Co. Ltd. , Eric Xu, in person, in Madrid during the company's annual Ultra-Broadband Forum event.

Huawei, and Xu, have traditionally steered clear of such media engagements. At the same time, Huawei has this year been the subject of increasingly intense levels of scrutiny from the communications industry, due to its phenomenal growth rate of 30%, unprecedented for a major supplier in the telco market. (See Huawei's H1 Sales Grow 30% to $28.3B.)

Figure 1: Eric Xu, Deputy Chairman and Rotating CEO, Huawei Eric Xu, Deputy Chairman and Rotating CEO, Huawei

My first question to Eric and his senior team (all of whom were in the room -- no pressure, right?) was whether they were familiar with Light Reading. This prompted general hilarity amongst our Huawei hosts, as it emerged that Light Reading is actually the daily "go to" read for the entire company.

Points, Light Reading!

A good ice-breaker, but perhaps we shouldn't have been surprised: As the interview progressed it emerged that Eric's outlook on the communications industry has much in common with Light Reading's.

Notably, both Light Reading and Huawei see a pressing need for the industry to depoliticize the standards process around NFV; we both see virtualization as a step in a journey that ultimately ends in the cloud; and, with Eric, it's all about the money -- seeking new ways to use technology developments such as virtualization and ultra-broadband to help his customers grow their business.

Page 2: Convergence of telecom and enterprise

Page 3: Virtualization and the cloud

Page 4: Open standards and industry politics

Page 5: Enabling new services such as 4K TV

Page 6: Success factors

Page 7: Doing business in the US

— Stephen Saunders, Founder & CEO, Light Reading

Next page: Convergence of telecom and enterprise

Convergence of telecom and enterprise

Steve Saunders: Eric, what is your view on the convergence of the telecom and the enterprise markets right now?

Eric Xu: It's quite obvious that we are seeing technology convergence. Huawei has been working on a software-based network architecture for future telecom networks for a while. We're also looking into the network architecture for enterprise networking environments and what we've found is that there are no major differences versus the telecom network. There are primarily two core technologies that are driving the network architecture of both telecom and the enterprise. The first is IP. All the telecom networks have moved to IP, the same thing has also happened with the enterprise. The second driver is IT technology. Of course, IT started out in the enterprise, but a few years ago I predicted that IT would end up reshaping the telecom network in the same way as IP has done and right now you can see this trend becoming increasingly apparent. The IP and IT architectures for telecom networks and enterprise networks are almost the same. And we're also seeing the same products being developed for use in both markets. That's what Huawei means when we talk about ICT convergence, and this is something we've been aware of for a long time. That's also the reason why we have consolidated our enterprise and telecom R&D organizations into one division. This means we can now use the same technologies, products and architecture to serve both telecom and enterprise markets. And that's also the reason why we have decided to move into the enterprise and establish our presence there. The other convergence question focuses on whether enterprise companies will resell excess capacity on their networks to third parties, or whether, conversely, the telco will be able to penetrate further into the enterprise networking environment. Well, on this one we all need to wait a while and see how it plays out, though from my point of view, the telecom operators have some advantages because they are more experienced and they are in a better position to deliver the entire end-to-end network. And one thing which isn't in doubt is that, in the future, the entire network will be virtualized. This means telecom operators are in a position where they can not only provide virtualized networks to enterprise customers, but they can also accommodate very specific individualized requirements from different types of customer over those virtualized networks. Next page: Virtualization and the cloud Virtualization and the cloud SS: You have made some interesting comments about the need for the business case for ultra-broadband technologies to be more clearly defined. Do you think virtualization is an essential component of ultra-broadband moving forward? EX: Well, first of all, when people talk about 'virtualization,' a lot of the time they forget what it really is. Virtualization started out in the IT space, where it refers to virtualizing a CPU into several virtual machines to be used by different applications. For Huawei, virtualization isn't as significant as the cloud, which it is part of. NFV, for example, is about using software to realize network functions which will be then deployed in cloud data centers. Another concept which is important is virtualizing the data center [VDC]. The VDC is another way in which Huawei can meet the needs of different types of company. SS: Is it possible to truly virtualize the data center today? Some carriers are worried that while they might be able to virtualize individual functions, they can’t yet virtualize the entire telecom data center as part of a contiguous business technology strategy. EX: We've developed solutions designed to help telecom operators leverage their investment in central office facilities and bandwidth to build data centers that are logically centralized but physically distributed. We call it the Distributed Cloud Data Center Solution. The major service providers are freeing up central office resources and also have abundant bandwidth. We have the solution today which lets them turn simple central offices into data centers that are physically distributed but logically act as large fully centralized data centers, serving the needs of individual customers. SS: Are any operators trialing this capability? EX: Some are discussing it, some are testing it, including Telefonica, Vodafone and some of the Chinese operators. We are also in discussions with AT&T, which is looking for ways to capitalize its central office resources. Next page: Open standards and industry politics Open standards and industry politics SS: Light Reading believes the future of communications will consist of low-cost, high performance, interoperable hardware with a separate layer of open network software and then lots of value added applications and services. For that future to become a reality there needs to be open standards. Really open standards. Right now there is a lot of confusion and a lot of politics around the standards for things like NFV. How does our industry get through the politics to make the future of ICT a reality? EX: The telecom industry truly faces some challenges. In order for the industry to grow, to be more productive, there must be a radical change at the network architecture level. To do that, all the players must look at the future of this industry, long-term, before deciding how to move ahead. If people only care about their own short-term interest, or trying to play politics by putting up barriers using standards, it's just going to hurt the long-term interests of our industry. Ultimately, I believe it will also hurt their own interests. If you look at the equipment vendors, we are both competitors and partners that work together. We share the same interests in terms of safeguarding and maintaining the long-term development of this industry, in terms of standards setting, and in terms of competing with other new entrants coming from other backgrounds. First and foremost we need to make sure our industry can survive. Then, we should work together, and work hard, to ensure the overall industry grows in size. Only then will it be time to fight between ourselves for the biggest slice of the pie. I think in the long run the people who are trying to use the standards process to set barriers will be spotted, and they will get called out on that. SS: Well, Light Reading will write about it then everybody will know what's going on. EX: Yes, indeed! Light Reading should do that. You must be neutral and expose those kind of behaviors [including] playing politics and setting barriers. And we want you to hold Huawei accountable as well. Next page: Enabling new services such as 4K TV Enabling new services such as 4K TV SS: Let's talk about services and profitability. As a hardware and software vendor, how can Huawei help carrier customers generate new services and new sources of profit, including from developments such as 4K? EX: That's exactly what Huawei is working towards. We know all too well that if telecom operators are not in a good shape, we won't be able to sustain our own growth. In the end, it's going to be Huawei's business that will be affected as much as theirs. That's why, over the past few years, in addition to working on products, we have been spending an increasing amount of time and effort around building an ecosystem and standards to help the industry to sustain its growth. Ultra-broadband [UBB] is an example of that. Telecom operators need to see real value coming from the UBB network now if they are going to deploy it. They must see new revenue sources. And for a long time this has been something that the industry has been really confused about. So we need to find the right services and applications that can help telecom operators drive revenue from UBB. A good example is 4K video. We believe that telecom operators need 4K-on-demand services in order to demonstrate a clear enough value to end users that they will be willing to pay for it. Offering high definition versus standard definition isn't enough -- users will just stay with their terrestrial, cable or satellite providers. Huawei has been working to drive the establishment of this end-to-end ecosystem around 4K. We have invested heavily in 4K TV sets, set-top boxes and content platforms and helped drive down the price of 4K equipment to the point where consumers can afford them. At the same time we have been growing our consulting and integration services to see how we can help telecom operators to better monetize the UBB infrastructure for 4K and we have worked with universities to help establish a unified standard to measure the user experience with video services; Our top line goal is to drive increasing availability of related services and equipment, in order that our operator customers can tap into the value from ultra-broadband. Next page: Success factors Success factors SS: So Huawei is going through a period of incredible success, one that is unprecedented in the telecom industry. What is the single thing that you attribute this to? Is it culture, pricing, technology? And can you sustain the level of success and growth and profitability that you have today? EX: First, I want to say that we are definitely not yet in a position to declare this an unprecedented success. We are still working towards success. I always say that I can only see what might happen in the next five years. After that, I definitely cannot say what will happen. Our mission is to survive now, and in the future. But if I had to point to one thing that has helped drive the growth over the last 20 years, it would be the benefit-sharing mechanism. Today, Huawei is owned by 80,000 or more employees and with this benefits system, the interest of every employee is tightly aligned with the interests of the company. That helps to motivate our people to work hard and to really dedicate themselves to the growth of this company. In the past, China's laws meant this benefit-sharing program was only open to Chinese employees of Huawei, but last year we launched an extension of the program that covers the entire workforce, including non-Chinese staff. Our staff are now compensated directly in proportion to the success of the company; we do well, they earn more. Worse? Less. You can imagine just how powerful this is in motivating them. If I had to name one other factor, it would be our customer-first culture. We don't just instill this culture, we live by it. Customers are the only people we can make money from, so if we don't serve them well… SS: I know the feeling. Is it part of Huawei's strategy to hire more international employees? And what about hiring more women in senior positions within Huawei? EX: Our strategy it is about attracting the best out there in the world, regardless of whether that is a man or a woman. To be honest, we don't have a specific plan targeting a set number of women that we’d like to include in our senior management team. As long as you are a talent, you are welcome to join us. Next page: Doing business in the US Doing business in the US SS: Huawei has had some very significant customer wins in North America recently with rural telecom companies. Light Reading believes it's inevitable that Huawei will win Tier 1 customers in North America at some point. How long will it take? EX: [Laughs] Maybe you can ask the US government and let me know what they say? Honestly, I don't even think the Tier 1 operators in the United States can answer that question right now. If it was their decision, as commercial organizations, I think it's a simple answer. But, as I say, maybe the US government can answer this question. SS: Well, for what it's worth, Light Reading's editorial position is that Huawei should be allowed to do business with Tier 1 customers in North America. That's on the record. EX: [Nods] I don't think it is Huawei's interests that are hurt most by the fact that we are not present in the US – it's probably the US consumers, who ultimately end up paying more money to enjoy telecommunication services. SS: Eric, thank you very much for talking to Light Reading. EX: It's a genuine pleasure to talk to you. Today, when we look at the articles Light Reading has written about Huawei, they're mainly positive. I would actually prefer to see some criticism of Huawei by Light Reading. Because Huawei right now is simply too big, and it's easy for us to lose sight of that. So I think having some articles from Light Reading that point to areas of improvement would be a great first step to becoming better. It would be better for you as well because Light Reading articles criticizing Huawei are always shared much faster than the positive ones. SS: We can deliver! (General laughter from Light Reading and the Huawei team -- all very jolly, a bit like the end of an episode of ChiPs.) EX: Ok!

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About the Author(s)

Steve Saunders

Founder, Light Reading

Steve Saunders is the Founder of Light Reading.

He was previously the Managing Director of UBM DeusM, an integrated marketing services division of UBM, which has successfully launched 45 online communities in less than three years.

DeusM communities are based on Saunders' vision for a structured system of community publishing, one which creates unprecedented engagement among highly qualified business users. Based on the success of the first dozen UBM DeusM communities, the UBM Tech division in 2013 made the decision to move its online business to the UBM DeusM community platform – including 20 year old flagship brands such as Information Week and EE Times.

Saunders' next mission for UBM is the development of UBM's Integrated Community Business Model (ICBM), a publishing system designed to take advantage of, and build upon, UBM's competitive strengths as a leading provider of live events around the globe. The model is designed to extend the ability of UBM's events to generate revenue 365 days of the year by contextually integrating content from community and event sites, and directories, to drive bigger audiences to all three platforms, and thereby create additional value for customers. In turn, these amplified audiences will allow business leaders to grow both revenues and profits through higher directory fees and online sponsorship. The ICBM concept is currently being discussed with a broad group of business leaders across UBM, and is earmarked to be piloted in the second half of 2013 and early 2014.

UBM DeusM is Saunders' fifth successful start-up. In 2008, he founded Internet Evolution (www.internetevolution.com), a ground-breaking, award-winning, global online community dedicated to investigating the future of the Internet, now in its fifth year.

Prior to Internet Evolution, Saunders was the founder and CEO of Light Reading (www.lightreading.com), Heavy Reading (www.heavyreading.com

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