Huawei needs paradigm shift to see enterprise success

Summary:Chinese networking vendor confident about expansion into enterprise market but analysts say paradigm shift will be biggest hurdle amid more established competitors in region.

Huawei is eyeing a share of the enterprise market and aiming to provide value to business customers, but a market analyst notes that the Chinese networking equipment vendor will need a huge paradigm shift to face more established competitors in the region.

More recognized as a provider of networking equipment for telecom operators, Huawei is now looking to establish a footprint in the enterprise space, according to Heng Song-Cheng, South Pacific director of enterprise solutions and marketing for enterprise business, Huawei International. He told ZDNet Asia in an interview that the company is aiming for a seat among the top three vendors in the Asian enterprise networking market.

Heng believes the company has a better chance in the region than Europe because there are fewer incumbent players in this region where the company also has a stronger brand.

While he demurred identifying which companies Huawei plans to dethrone, analysts told ZDNet Asia that the Chinese company would have to contend with Cisco Systems and Avaya as key players in the IP telephony market.

Sherrie Huang, research manager of communications and collaboration at IDC Asia-Pacific, noted that it is still "early" for Huawei in the enterprise game, especially when compared with other players which have been in the space for over a decade.

The biggest challenge the Chinese networking equipment vendor faces is the need to undergo a paradigm change, moving from selling networking infrastructure to servicing enterprises, Huang said in a phone interview, noting that these two segments are "quite different businesses".

Building the capabilities to target enterprises will take time, especially when it comes to human resource, she noted. Huawei would need to train its employees as well as recruit the right people familiar with both the network equipment market and enterprise business segment--a mix of knowledge which, the IDC analyst said, was "hard to come by".

Huawei in 2008 also faced allegations from Australia that it had links to the Chinese military and government, prompting claims that it could potentially be involved in cyber-espionage. The vendor had dismissed such suggestions as "ludicrous and inaccurate".

Huang noted that concerns over corporate espionage would not be a major challenge for Huawei as enterprises are less concerned about such risks.

Claudio Castelli, senior analyst for enterprise telecoms at Ovum, added that espionage concerns do not cut across all markets.

While it might be a worry for governments or defense organizations, it would not be a problem when selling to small and midsize businesses (SMBs), Castelli said in a phone interview.

Contending with established brands
Asked why Huawei was confident it would emerge among the top three players in the enterprise space, Heng said customers were looking for alternative vendors.

As a new player in the market, customers will be assessing how Huawei can "impact and bring value" to their business, he said.

According to Castelli, offering its products at a lower pricepoint may be the right strategy for Huawei. The Chinese vendor will need to leverage the channel model if it is looking to penetrate markets in the region, he added, noting that pricing may be an important factor for its channels, especially since Huawei is not yet a well recognized brand in the enterprise market.

Once it has established a place among businesses, the company can then grow its reputation and prove that its products are value for money, he said.

Huawei, in fact, appears to be beefing up its channel relationships. It announced in late-October that GrandTech Systems will be marketing and distributing Huawei's enterprise business products through its channel partner network in Singapore. The Chinese networking equipment vendor also launched a channel partner program in Hong Kong and Macau.

IDC's Huang agreed that cheaper offerings could be a way to open up the market. She added that this strategy will be more effective for SMBs as these companies are less concerned about quality or security, but more concerned about pricing. However, she noted that this market segment would bring in lower margins.

She added that pricing alone would not be sufficient to infiltrate larger enterprises.

That said, Huawei do have several strengths to succeed in the market, the analyst noted, pointing to the company's full portfolio of products, strong relationship with carriers and good financial standing.

The vendor can leverage its relationship with telcos to bundle products targeted at businesses, making it easier for them to penetrate the enterprise market, she explained.

Huawei's good financial posture allows its customers to have better paying terms and enables the vendor to sponsor early adoption programs, she added.

Topics: Security, Data Management, Hardware, Mobility, Networking

About

The only journalist in the team without a Western name, Yun Qing hails from the mountainy Malaysian state, Sabah. She currently covers the hardware and networking beats, as well as everything else that falls into her lap, at ZDNet Asia. Her RSS feed includes tech news sites and most of the Cheezburger network. She is also a cheapskate mas... Full Bio

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