Can Huawei sidestep security fears through global allies?

Chinese networking giant says it's still 'a small player' in the enterprise and cloud space, but its Deutsche Telekom partnership may prove to be a calculated step to ease into the international market.
Written by Eileen Yu, Senior Contributing Editor

Once plagued by reports that it is a security risk, Huawei Technologies may be laying the groundwork to ease into the international cloud market through global partnership with the likes of Deutsche Telekom.

Huawei insists it is still an insignificant player in the enterprise and cloud space, choosing for now to focus primarily on its domestic market and preferring to be "prudent" about any potential expansion plans.

At the Huawei Cloud Congress 2015 held in Shanghai this week, top executives from the Chinese telecoms equipment vendor stressed that it was still "a small player" in the enterprise space and would need a strong partner network to drive its cloud ecosystem.

During his keynote address, rotating CEO Eric Xu said Huawei would have "limited" capacity and it would not be possible for the company to be all things to all customers. As such, it would need to focus on key areas, namely, IT infrastructure, software platforms, and enterprise cloud services to create a cloud ecosystem.

Xu explained that this would encompass "business cooperation" at its core, alongside technical partnerships and skills development. The aim, he added, would be to establish "an open and dynamic cloud ecosystem" with its partners, including independent software vendors, systems integrators, and internet service providers, playing a key supporting role.

Earlier this year, the company launched its public cloud services in China and announced plans to extend its collaboration with Deutsche Telekom, in which the German telco will provide cloud services on Huawei's platforms. This will enable Huawei's China customers, for instance, to replicate their cloud services in Europe -- hosted in designated Deutsche Telekom data centres located in Munich, Frankfurt, Amsterdam, and Spain.

According to Korbinian Lehner, a company executive stationed at the German telco's booth at Huawei Cloud Congress, several Huawei customers were currently trialling their public cloud services with Deutsche Telekom. The service is slated to be officially launched at next year's Cebit show in Hannover, Lehner told ZDNet, adding that this joint collaboration would be based on a revenue-sharing model.

While the partnership was not exclusive, he said Deutsche Telekom's infrastructure was one of the most established in Europe and built to meet the region's stringent data privacy and security requirements.

This, in fact, may play up well for Huawei, which has faced allegations it is spying on companies -- specifically the US businesses -- on behalf of the Chinese government.

Global partners can help allay cloud security concerns

Although it has denied any foul play, security concerns have continued to linger and its collaboration with Deutsche Telekom may help allay such worries, providing foreign companies the option to host their Huawei cloud services outside of China.

However, Huawei's president of enterprise business group Yan Lida said its partnership with the German telco was purely "a business decision" and not a conscious effort on its part to address security issues.

He noted that Huawei was still "a small player" in the global cloud and enterprise space, where it still had some ways to go in terms of market development. As such, its focus was on the Chinese market and ensuring its products were able to address all of its customers' current and future needs, Yan noted.

Frank Liu, Forrester Research's analyst for infrastructure and operations, believes Huawei will maintain primary focus on its domestic market, so security-related issues related to the US will be of little concern to the Chinese vendor.

Noting that its enterprise revenue was driven mainly by customers in China and Europe, Liu said Huawei would focus on selling its private cloud offerings in these markets. The US market, in comparison, would not be a focus in Huawei's cloud push, the analyst said.

He further echoed Huawei's emphasis that it was still a small player in the cloud space. "In 2015, Huawei [unveiled its] decision to offer public cloud services only in China and focus on vertical delivery capabilities," Liu explained. "Huawei today still is a new player in public cloud market, and with limited investment and overseas expansion."

Yan said Huawei would work primarily with carriers in delivering cloud services in markets outside of China. Because Deutsche Telekom was its first global partnership in this space, and announced only in June this year, he said it would want to assess the relationship before deciding if it was ready to similar collaboration in other regions.

Doing so also would depend on demand from customers as well as partners, Yan said, noting that the company would be able to reveal more details including revenue figures when the service was ready to be formally launched.

Huawei's enterprise business group clocked $1.8 billion in revenue for the first half of the year, up 48 percent from the same period last year. The business unit chalked up $3.14 billion in revenue for the whole year of 2014, when the company's total revenue hit $46.5 billion.

To make bigger inroads into Asia-Pacific and global markets, Liu said Huawei would need to continue building out the local channel ecosystem around its private cloud offerings and rope in partners with the capabilities to deliver local vertical services.

The vendor also should provide more case studies of customer rollouts in the Asia-Pacific region, the Forrester analyst said, adding that Huawei would do well to extend its support for emerging technology areas such as containers and native cloud applications.

At the cloud congress, the Chinese vendor unveiled plans to drive the adoption of industry clouds, delivering services catered to the needs of specific verticals.

Here, Huawei has identified finance, government, energy, and transport as the four major sectors for which its efforts will be focused, as well as four other smaller verticals including education, utility, and media, Li said.

Based in Singapore, Eileen Yu reported for ZDNet from Huawei Cloud Congress 2015 in Shanghai, China, on the invitation of Huawei.

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