Chinese equipment giant is on the verge of a dramatic move into the public cloud market as it looks for new growth opportunities.

Iain Morris, International Editor

April 11, 2017

5 Min Read
Huawei Takes Aim at AWS, Google With Public Cloud Move

Chinese telecom equipment giant Huawei is to make a bold push into the market for public cloud services -- a move that could potentially put it in competition with hyperscale web players such as Amazon and Google.

Revealed earlier today at an analyst conference in Shenzhen, where Huawei Technologies Co. Ltd. maintains its global headquarters, the plans could see the Chinese company launch its own public cloud services besides working in conjunction with service provider partners.

"Beginning in 2017, Huawei will focus on public cloud services," said Eric Xu, one of Huawei's rotating CEOs, in an official statement posted on the vendor's website. "We will invest heavily in building an open and trusted public cloud platform, which will be the foundation of a Huawei cloud family.

"This family will include public clouds we develop together with operators, and public clouds that we operate on our own," he said.

According to a report from the GSM Association's Mobile World Live publication, Huawei will even set up a new business unit to manage the cloud activities. That unit will be the fourth within Huawei, operating alongside the existing carrier, consumer and enterprise divisions.

Huawei is already active in the market for public cloud services through deals with operators including Germany's Deutsche Telekom AG (NYSE: DT) and France's Orange (NYSE: FTE).

The infrastructure-as-a-service (IaaS) offering from Deutsche Telekom was first unveiled in December 2015, with the German operator indicating that it planned to compete on price against web-scale giants such as Google (Nasdaq: GOOG) and Amazon Web Services Inc. (See DT Ups Cloud Challenge to Google, Amazon.)

Orange Business Services, the enterprise division of the French incumbent, announced its own public cloud move with Huawei just last month, saying it would focus on helping multinational corporations to migrate legacy enterprise applications to the cloud. (See Eurobites: Zain Trials 'Advanced' 4.5G Tech.)

But the suggestion that Huawei is to go it alone on public cloud is far more significant. It could potentially put the Chinese vendor in competition with some of the organizations it lists as customers, and seems to reflect a growing desire among telco suppliers to become service providers in their own right.

Even with Huawei's vast resources, however, competing against the hyperscale players will be no mean feat, and the Chinese vendor is likely to be eyeing opportunities in specific areas or geographical regions.

Deutsche Telekom, for instance, believes that many European companies value its security credentials and the fact that its German data centers are subject to more stringent data protection laws than facilities in other markets, including the US.

It has also previously argued that its systems integration and consulting capabilities give it an important edge over Google and Amazon.

Huawei would similarly be able to draw on a wealth of expertise in the technologies used to support cloud-based services. Just last month, it unveiled a new "all-cloud network" architecture aimed at helping enterprise customers with the transition to cloud-based operations and services.

David Wang, the president of network solutions for Huawei, told Light Reading's Steve Saunders that the new offering was very different from the more "generic" cloud announcements of the past.

"It's a concrete solution that will show all of our customers, our partners -- our ecosystem -- exactly how we will build this kind of a cloud-based network," said Wang. "In the past few years we've heard a lot of people talk at a high level about cloud functionality and services, but mostly that's all it has been: talk." (Click here for a full transcript of the conversation between Saunders and Wang.)

For more data center-related coverage and insights, check out this dedicated content channel here on Light Reading.

Even so, a Huawei move into IaaS could worry the likes of Deutsche Telekom and Orange Business Services, which are obviously trying to carve out a presence in the public cloud market, although Huawei is likely to downplay any concern that it will go head to head with its own clients.

While Huawei's fortunes have been in marked contrast to those of chief rivals Ericsson AB (Nasdaq: ERIC) and Nokia Corp. (NYSE: NOK), both of which reported sales declines last year, the Chinese vendor failed to increase profits last year after three years of strong growth and has warned about a slowdown in its main carrier market. (See Huawei's Sales Soar but Profit Growth Grinds to a Halt.)

Revenues from that business rose by 24% last year, to 290.6 billion Chinese yuan ($42.2 billion), accounting for about 56% of the total, but -- in a recent conversation with Light Reading -- Xu predicted that annual sales growth would fall to just 10% in future. That has put Huawei's senior executives on the lookout for new growth opportunities.

Other equipment vendors are also trying to diversify their businesses. Under a new strategy, Finland's Nokia is trying to expand in the enterprise sector, targeting a range of vertical markets it says are "adjacent" to the main telco business. (See Nokia: A Global Network Operator for the Enterprise?.)

In many instances, that will see Nokia taking on the role of service provider for organizations such as mining companies or government agencies deploying new public-safety systems.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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