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Huawei Goes Indie for OSS

Ray Le Maistre
5/29/2008

Huawei Technologies Co. Ltd. has signaled its intention to be a major player in the telecom software world by creating an independent business unit, Huawei Software Technologies Co., that will chase OSS and applications development business at the world's telecom operators.

The move comes just as Huawei's main rivals in the telecom infrastructure market, such as Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), and Nokia Networks , firm up their own OSS plans in an effort to play an even bigger role in the next generation network (NGN) migrations planned by many of the world's major carriers. (See Major Vendors Kiss OSS.)

And it's no wonder all the big players are increasingly turning their attentions to this space: While many of the hardware markets stagnate, putting pressure on the vendors' top and bottom lines, the market for OSS and BSS (operations support systems and business support systems), service delivery platforms (SDPs), and the integration services that are needed to implement and run them, is growing.

According to the analyst team at OSS Observer , the Global Telecom Software market is set to grow in value from $17.1 billion in 2007 to $25 billion in 2011. And Huawei wants a piece of that growth action to help it reach its sales targets. (See Huawei Sets Bumper Sales Target.)

In addition, the role of OSS vendors has become much more strategic to the world's carriers as they implement NGN strategies, as alongside the deployment of new fixed and wireless networks comes an associated, and in many cases much needed, "IT transformation" process that involves the replacement of hundreds of software systems with a smaller number of multifunctional software products that are increasingly important to the operators' service creation and service delivery strategies. (See Telecom Transformers, Turning Point for OSS, SDP & SOA: Progress Report, Telstra Outlines Massive OSS Project, OSSs Need Convergence, Too, and Who Makes What: OSS .)

So what is Huawei doing? In the same way that it has created separate, standalone units for its mobile handset and storage/security lines of business, so Huawei has spun out what was formerly its "Application & Software Product Line" into what is now Huawei Software.

In an interview conducted by Ovum Ltd. analyst Cynthia Leung and published on the Huawei Website, Dr. Che Haiping, head of Huawei Software, notes that the new unit has been designed "with a relatively independent and flexible business operation approach," though a Huawei spokesman assures Light Reading that this is an internal spinoff only, and has not involved the formation of a financially and legally separate company.

Haiping states that the new unit is focused on research and development "in the areas of VASs [value-added services] and operation support systems." The move, he says, is partly in response to a greater focus on telecom software and service creation by the likes of Ericsson and Nokia, and also because "companies including Microsoft Corp. (Nasdaq: MSFT) and Google (Nasdaq: GOOG) are actively entering into the telecom field. They have already set up relatively independent or totally independent business units responsible for exploring and carrying out convergent services trials."

And like its telecom equipment rivals, Huawei says that its software is interoperable with the network equipment from multiple vendors and that it has developed a number of telecom software partnerships, with companies such as Convergys Corp. (NYSE: CVG), IBM Corp. (NYSE: IBM), and HP Inc. (NYSE: HPQ), to deliver a full range of capabilities. (See Huawei Resells VPIsystems OSS, Huawei, HP Team Up, OSS Firms Team Up, Huawei Gets OSS Certification, and Huawei Joins Muse OSS Program.)

Haiping's colleague, Huawei Software's head of marketing Guo Yajun, tells Leung that value-added services are "becoming increasingly important for operators' further development. For example, China Mobile has attached great importance to its overall VAS strategy... In addition, European operators such as Vodafone and Telefonica are increasingly focusing on VAS and have been cooperating with us in this field since 2007. Both are keen to introduce into Europe the VASs that are common in the Asia-Pacific region, as European VAS revenues still constitute a small percentage of total income."

Yajun also notes that Huawei Software is in line for further investment from its parent company, while Haiping claims that the new off-shoot is "capable of system integration" by working with another part of the giant Chinese vendor, Huawei Technical Service Co., or "Huawei Service."

Being able to provide professional services and integration support was one of the weaknesses within Huawei identified recently by analysts from Heavy Reading. (See Heavy Reading Homes In on Huawei.)

— Ray Le Maistre, International News Editor, Light Reading

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