NSN Services Chief: Huawei's Years Behind

Only a very few vendors are capable of winning the long-term, lucrative managed network services deals that are increasingly up for grabs, claims a top industry executive, and, for once, that select group doesn't include Huawei Technologies Co. Ltd. (See NSN Sees Managed Services as $277B Market, Ericsson, Sprint in $5B Managed Services Deal, and AlcaLu in Line to Win Reliance Deal.)

Rajeev Suri is head of services at Nokia Networks (NSN), one of the companies that has been bagging an increasing number of carrier outsourcing contracts: Its latest win is a five-year managed services deal with Brazilian fixed and mobile carrier Tele Norte Leste Partricipacoes SA (better known as Oi) worth €1.1 billion ($1.57 billion). (See Embarq Outsources to NSN, NSN Wins Orange Spain Deal, NSN Backhauls T-Mobile, NSN Wins in UAE, and NSN Wins in Indonesia.)

NSN now has more than 200 managed services deals, running networks that carry voice and data traffic for more than 220 million end users, Suri tells Light Reading. To achieve that, NSN has more than 10,000 staff in its managed services business.

In total, NSN's services portfolio -- Network Implementation, Care (maintenance), Consulting, and Systems Integration, in addition to Managed Services -- accounts for more than 20,000 of the vendor's staff, and now generates 45 percent of its (shrinking) revenues. (See Services Now 45% of NSN Revenues and Slump Slams Nokia Siemens .)

Building that level of business, and developing the operational models required to run multiple networks around the world, has taken years. And that's where Suri believes NSN and the other seasoned services players have a critical edge over Huawei, which has made itself a strong adversary in just about every other part of the telecom vendor industry. (See Huawei Closes In on Rivals.)

"It has taken a while to transform into a services and solutions company," says Suri. "In terms of some of our weaker rivals, such as the Chinese players, we are three to five years ahead in terms of capabilities and resources."

The key factor in winning deals and then making money from them is in building a template that can be used again and again. "It takes time... to stop reinventing the wheel, and make it repeatable. If you don't have [the model] today, it would take years to build. We can accelerate ahead of the Chinese."

And for deals that involve managing multi-vendor networks, "it will come down to a few companies. It's mostly us and one other [Ericsson] in managed services," says the NSN man.

Being able to maintain and run networks that have been built using equipment from multiple suppliers is key to winning new business, says Suri. "We're building our skills set for multi-vendor integration, and we now manage [equipment from] 70 vendors. Multi-vendor ability is key to us -– that's where we believe we can grow." At Orange Spain , he notes, NSN has supplied only about 30 percent of the network infrastructure it is managing. (See NSN Wins Orange Spain Deal.)

"It's a big trust game –- it's a big ask for the carriers. It comes down to the two of us," says Suri. (See Vendors Scrap Over Managed Services Deals.)

Ericsson clearly is NSN's biggest rival -– the Swedish giant even snatched a valuable chunk of potential business from under NSN's nose by outbidding it for Nortel's CDMA business recently. (See Ericsson Delivers Knockout Blow to NSN, Ericsson Wins O2 Deal, Ericsson Win Zain Deal, VOD UK Outsources to Ericsson, Ericsson Wins MBNL Deal, and C&W Picks Ericsson.)

It's not all going Ericsson and NSN's way, though. Alcatel-Lucent (NYSE: ALU) has also made headway, particularly in India, and, like Ericsson, holds up its Services division as its shining light in the current downturn. (See Asset Sale Helps AlcaLu to Q2 Profit Services Save Ericsson in Q2, AlcaLu in Line to Win Reliance Deal, AlcaLu, Reliance Laud JV, AlcaLu, Bharti Form Joint Venture, AlcaLu Supports BT Global, Sunrise Outsources to AlcaLu, AlcaLu Wins at VOD UK, and AlcaLu Wins Mobily Deal.)

So what of Huawei? And even ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763)? Do they have aspirations in the professional services market?

When Huawei reported its enormous 2008 revenues in April, it claimed to have 45 managed services contracts, adding that the value of deals signed in 2008 had risen by 67 percent year-on-year, though no financial details were provided. (See Huawei Reports 2008 Revenues of $18.3B and Huawei Wins at Mobily.)

At this stage, Huawei is not believed to be a serious threat to the sector's big three players when it comes to significant, strategic, multibillion-dollar managed services deals, though it has been linked with negotiations for a major deal in India. (See Unitech Turns to AlcaLu, Huawei.)

ZTE doesn't show up on the managed services radar -- one minor engagement in Ghana appears to be its highlight -- and it didn't highlight any aspirations when it laid out its main R&D focus areas earlier this year. (See ZTE Secures $15B, Highlights R&D.)

What's next for NSN - more growth?
NSN, meanwhile, is hungry for more services deals. It's currently generating more than €1.4 billion ($2 billion) in quarterly revenues from its services, compared with Ericsson's 20 billion Swedish Kronor ($2.77 billion) and AlcaLu's €873 million ($1.25 billion), and Suri is keen to be the market leader.

So is further growth expected this year? Suri won't provide a forecast, but notes that revenue from services has increased steadily as a proportion of overall sales during the past few years, from about 33 percent during the first half of 2008, to around 40 percent at the end of last year, to about 45 percent now.

Certainly the NSN man is expecting to strike further deals, and he's expecting further traction in Latin America following the Oi contract. "Once you win an initial deal in a market, it sets the others thinking" about the benefits they could see from following suit, he states. "We expect the Oi deal to open up the market, and we're already in discussions with other operators, though these are starting with just some field operations services, but there's an active level of interest."

Geographically, Europe has "the biggest momentum" for managed services deals, while India and Australia are hot markets in Asia/Pacific. The U.S. is picking up too, though deals in the Middle East and Africa tend to revolve around building a network and then handing over the keys to the operator.

Despite the current growth curve, NSN isn't planning to add to its three existing Global Network Solutions Centers -- one in Portugal (Lisbon) and in two in India (Chennai and Noida) -- that support its outsourcing customers, says Suri, though the vendor is doing as much as it can from these operations centers. (See NSN Opens Service Center in Delhi.)

"Whatever we can do remotely, we do, as long as it's underpinned by automation. We want to keep things as centralized as possible. We can manage thousands of base stations remotely from Chennai. A lot can be done remotely, and we see that come through on our margins," says the NSN man.

That's not to say more centers are off limits, though. "If there's business in a large region that builds up, and there's a need to keep things in that region, then we would consider that, but once the customers decide to opt for remote management they want to keep the costs as low as possible," and so opt to be managed from an existing site.

— Ray Le Maistre, International News Editor, Light Reading

saker 12/5/2012 | 3:59:29 PM
re: NSN Services Chief: Huawei's Years Behind

Suri can never understand why huawei can success in his remaining days. He know nothing about his rivals how can he lead his company?


greatwall7 12/5/2012 | 3:59:29 PM
re: NSN Services Chief: Huawei's Years Behind It is true what Mr Suri says that NSN and Ericsson has a proven and structured Managed Services model, and if we compare that of the Chinese they dont have proper processes in place. NSN have elevated itself from mere box selling to solution selling and services selling. However the Chinese are highly competent people, and we may see they will quickly overtake NSN in the same way they have overtaken NSN in Box to Box Product comparision, After the merger of Nokia with Siemens, lots of good guys have found the NSN culture deteriate with inferior products, and processes of x-Siemens taking precedence over x Nokia , so much so that it has become a soul-less monster without the killer instict. Lets see what happens in the telecom battlegrounds of China and India ( Africa next) ...
Soupafly 12/5/2012 | 3:59:28 PM
re: NSN Services Chief: Huawei's Years Behind Whilst NSN have a valid point, regarding current Huawei service maturity the tone of these comments and the article are at odds with the real world! Fact is Huawei is about to take the technical lead in a number of areas and has demonstratable technical advantages vs. Nokia/Siemens. The assumption that a move up the value pyramid will somehow save the business and negate the chinese challenge is nonsense! What will happen now in shenzhen, is a re-doubling of their energy and efforts and a renewed commitment to services. (Assuming that was not there already!) Something about stirring up a hornets nest comes to mind!
macster 12/5/2012 | 3:59:28 PM
re: NSN Services Chief: Huawei's Years Behind

"Fact is Huawei is about to take the technical lead in a number of areas and has demonstratable technical advantages..."

Please do elaborate...

Alek 12/5/2012 | 3:59:28 PM
re: NSN Services Chief: Huawei's Years Behind

NSN, Ericsson companies has time experience. However the number 200 NSN are contraсs which were signed long time ago. Today Huawei number 1 in new UMTS contracts and swap project

Soupafly 12/5/2012 | 3:59:28 PM
re: NSN Services Chief: Huawei's Years Behind Do people not read and understand anymore?

I will give 1 example, of said.

2) IP - Huawei's NE5000E is ahead of Cisco and Juniper Networks equivalent systems - on power, density, space and scaleability. (See this LR announcement/release for additional information: http://www.lightreading.com/do...

As for the other areas, I will leave it to you to read around and check the analyst reports.

People have assumed that all the chinese vendors do is bring out "me-too" tech. That significantly under-estimates them and negates the underlying approach asian peoples typically adopt. A mantra which states that something must also be improved upon.
The japanese did it originally with TVs (I still have a black and white -Ferguson branded portable) - the TV as we know it was originally developed in the UK and US. The japanese moved into the market and improved the performance to price variable.

That is what I think Huawei and ZTE are capable of doing - over the long term.

macster 12/5/2012 | 3:59:27 PM
re: NSN Services Chief: Huawei's Years Behind

Do people not read and understand anymore? I will give 1 example, of said. 2)

I did read your earlier post. There were no example to back your "facts". You did not specify anything - hence my request. The tone of your response is very unbecoming!

It's interesting to note you saying "Fact is Huawei is about to take the technical lead in a number of areas and has demonstratable technical advantages..." and then giving a 15-month old link.

Here are some facts for you - facts that relate to the article (and to the real world). The managed services market is bigger than the infrastructure market. This market is set to grow further. Operators from O2 IE to VF UK to Warid in Bangladesh to Sprint have gone down the services road. India is all managed services. Orange wants to "promote the Orange brand and not worry about the train set". This is the real world.

Finally, I do not understand your reason(s) for bringing up the Asian angle thingy. Very odd! 

P.S. Maybe it's just me, but I think of "technical lead" or any lead as being brave enough to do "disruptive" things (such as PICs [INFN] or the iPhone) or being continually innovative (e.g. 160 1000G lambdas over 1000s of km - an example!!!). Or even coming up with a "novel" managed services angle. Or even starting a new market (e.g. netbooks).


Soupafly 12/5/2012 | 3:59:26 PM
re: NSN Services Chief: Huawei's Years Behind

Fair enough macster. Apologies for any offence caused, none intended.

Am not sure exactly what you were expecting me to post, on a public forum like lightreading? References to patent applications might be useful, but like I said anyone can dig those out for themselves. You dont need me for that. Last year the chinese took the No.1 position. (http://www.wipo.int/pressroom/...

There is no question that the managed services market is bigger than the infra-structure one. Totally agree.

Yes, all operators are looking at this area to determine how they make savings. But in my experience if your not able to offer them defined -x% savings then it "Managed Services" becomes a moot point. They are not looking at a migration to MS for the sake of them, the principal driver is operational cost savings. The migration also introduces additional risk into the network, in areas that are not easy to manage or identify.

The asian angle is just an example. Disruptive technologies are arguable, even the word innovative is a subject for debate - in my view. If your logic of PICs or the iPhone are examples then we partially agree.

Infinera's biggest customer Level(3) is in the process of examining Huawei optical. (This is on LR) and the chinese have their own UL-DWDM solution, its currently used in russia, if I remember correctly. The iPhone's principle innovation is around the GUI. Something that Apple excel at, along with marketing. Other than that I see nothing innovative in the hardware and itunes integration was borrowed from the iPod.

If continual innovation can save a company then tell me why NS / A-L / Ericsson and even Cisco are under intense competitive pressure from the chinese? If any of them had consistently delivered "continual innovation" then no matter what the asians try, they can always beat and stay ahead of them - through superior product and leadership. The fact that they cannot technically distinguish themselves and have lost significant market momentum & share, is clear evidence of my view that "continual innovation" is just a buzzword, with relatively little substance or reliable delivery across the industry.



oscarpozos 12/5/2012 | 3:58:05 PM
re: NSN Services Chief: Huawei's Years Behind

Working for this Chinese company? I don't think so.


At the end, humans are humans. Even tough Huaweii is becoming strong as network infraestructure vendor they have a long way to go in order to change their work culture and environment, because this is basically a modern way for slavery in the XXIst century.

I have several colleagues that resigned from Huaweii and went to NSN.

Keeping the way that Huaweii has in doing business and leading people for services won't take them where NSN is now,

Hierachical way on doing things (from China) will be actually the reason for them to fail in the future. I've received feed back from all operators in LAT and it is not good, services from Huaweii are a total dissaster!

This is not a threat for NSN at the moment in Services, but yes, they are as Technology Supplier!

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