Huawei Adds Chinese Five Spice to Digital Recipe

Like a fastidious chef setting out his ingredients, China's Huawei has laid out five "big initiatives" as part of its strategy for addressing telcos' future needs. You might call it the Chinese five spice of the digital transformation recipe.

Announced at a press conference in London earlier this week, and already described on our Telco Transformation website, those initiatives cover the areas of video (big video -- everywhere), IT (big IT -- enabling), operations (big operation -- agile), architecture (big architecture -- elastic) and connectivity (big pipe -- ubiquitous).

That doesn’t leave much off the plate, and maybe that's the point. Following recent market consolidation, there are really just two other equipment vendors that can address future end-to-end needs in this way: Ericsson AB (Nasdaq: ERIC) and Nokia Corp. (NYSE: NOK).

Ericsson remains the mobile market leader, and yet its cupboards have arguably looked barer than its rivals' when it comes to IP network technologies. A tie-up with IP routing giant Cisco Systems Inc. (Nasdaq: CSCO) promises some tasty new concoctions, but it has yet to produce anything of substance. (See Cisco + Ericsson: From Soup to Nuts.)

Then there is Nokia, whose major challenge over the next few months will be to ensure that integration of the Alcatel-Lucent (NYSE: ALU) business it recently acquired does not prove a distraction from innovation. (See Finn de Siècle for Alcatel-Lucent.)

Huawei Technologies Co. Ltd. 's biggest problem is perhaps overcoming resistance to the use of its technology in the US and some other Western markets, where governments have argued (unconvincingly) that Chinese authorities use Huawei's equipment for espionage activities. (See Curing America's China Syndrome .)

But that has not slowed down Huawei's progress. Although it has yet to report results for 2015, its revenues are expected to have grown to about $56 billion from $46.5 billion in 2014. Over that period, Ericsson's rose by 8%, to 246.9 billion Swedish krona ($29 billion), while Nokia's were up 6%, to €12.5 billion ($13.9 billion), and Alcatel-Lucent's by 8%, to €14.3 billion ($15.9 billion). (See Huawei's H1 Sales Grow 30% to $28.3B, Ericsson Shares Tumble Despite Profit Growth and Nokia's Suri Goes on the Defensive.)

All three Western companies, however, were flattered by foreign-exchange effects and flagged sales declines in constant-currency terms.

To stick with the culinary analogy, Ericsson's smorgasbord is not whetting the telco appetite as it once did. And if results from Nokia and Alcatel-Lucent included a few welcome treats (at the earnings level), whoever heard of Franco-Finnish food?

What's clear, as far as Huawei is concerned, is that the opportunities it is targeting will mean catering to a vast market in the next few years. It reckons the video industry could potentially be worth about $100 billion (it does not say over what time frame), and that enterprise cloud might ultimately be a $1 trillion opportunity.

No surprise, then, to see such an obvious overlap between Huawei's "five initiatives" and the "growth areas" that contributed about $5.3 billion to Ericsson's revenues last year -- 20% more than in 2014.

Comprising IP networks, cloud, TV and media, industry and society and OSS/BSS, these look more focused than Huawei's marketing pitch. Scratch the surface of Huawei's initiatives, though, and it's even more apparent the two companies want to cook in exactly the same kitchen.

Under the broad categories of operations, architecture and connectivity are technologies like SDN, NFV and 5G that will shape the communications networks of the future.

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

And as it looks to capture business in these areas at the expense of its European and North American rivals, Huawei is naturally emphasizing the importance of "openness" and "collaboration" to its strategy.

The Chinese company has promised to invest about $1 billion over the next five years in what it calls a "developer enablement program." It already claims to be working with about 600 partners at 10 "open" labs across China, Europe and other regions.

This garnish is sure to make its dishes look more attractive as operators increasingly demand fully interoperable technologies that will allow them to work with numerous vendors, instead of being tied to one supplier's products.

But it will take more than partner programs to persuade the service provider community that progress is being made in some key areas.

As recently as November, a senior executive from Vodafone Group plc (NYSE: VOD) complained about the lack of "leadership" on virtualization.

"We are determined to base our whole journey -- transport, infrastructure and virtualization of the portfolio -- on open interfaces, but we have the weakest link in this area," said David Amzallag, Vodafone's head of network virtualization, SDN, NFV, during Light Reading's "OSS in the Era of SDN and NFV" conference in London. (See Vodafone Calls for End to Five Nines.)

Along with the engineers of Ericsson and Nokia, then, Huawei's digital chefs have got their work cut out.

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

aamir786 10/19/2019 | 3:18:14 AM
Good info On a more positive note for BT, the operator has announced it is creating 1,400 new apprenticeship and graduate jobs in the UK this year, with a third of the new apprentices being earmarked for the aforementioned Openreach division.
iainmorris 2/18/2016 | 5:30:09 AM
Let's not forget devices Worth noting, of course, that a strict revenue comparison between Huawei, Ericsson and Nokia isn't entirely fair because of Huawei's large and growing devices business. That said revenues from the service provider business rose from about $26.6 billion in 2013 to $30.9 billion in 2014, when they accounted for about two thirds of the total.
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