Huawei's hunt for enterprise partners

Huawei keen to build a presence out of China and the success of this strategy depends on its ability to form crucial partnerships with corporates.

Huawei held its annual industry analyst conference in Shenzhen, China, in April 2013. For the second year in a row, the event, which had previously focused on service providers, included an enterprise track. Huawei’s Enterprise Business Group (EBG) is a $US1.85 billion  organisation that operates internationally and whose portfolio extends from telepresence and a very mature contact centre platform, though IP telephony systems and data centre solutions, to BYOD solutions and GSM and LTE technologies.

As Huawei expands its market presence outside China, it is finding that it cannot necessarily be the sole provider of enterprise solutions. Rather, it needs to integrate easily with third-party technology and rely more heavily on strategic alliance partners that can offer multi-vendor solutions in which Huawei products are only a part. This will provide an opportunity for service providers and systems integrators seeking an eager new technology partner with which to do business.

Expanding channels and alliances

Huawei has long preferred to present itself as a one-stop shop for its enterprise customers’ communications, networking, and storage needs. This is especially true in China, where it is a trusted, top-tier developer that enterprises often turn to first. However, outside of China, the company is often less familiar to potential enterprise buyers.

To get on their shortlists Huawei invested $80 million in marketing in the past year, about half of which was dedicated to enterprise marketing initiatives. The company has also invested heavily in its global channel program. It now has more than 3,500 resellers and distributors around the world, a 60 per cent increase on the number of channel partners it had last year. In 2012, 55 per cent of Huawei’s enterprise sales were via resellers and 11 per cent via service providers. Its reseller sales are expected to grow to 65 per cent in 2013, and the company’s goal is to grow that figure to 80 per cent in time.

Huawei has signed up only a handful of distributors in the US (Arrow and Synnex are among the most recent), and it continues to encounter a climate of distrust. However, Telefonica, SingTel, MTN (Nigeria), and Airtel (India) may find greater opportunities in other regions where the company is viewed more favourably. Where Huawei wins an enterprise customer’s PBX business it also wants to provide other elements of the overall solution, as it tends to do in China.

It is therefore in the process of building a corporate alliances program, and in late 2012 hired Michael Lee Thomas, formerly director of strategic alliances at Cisco, to spearhead this initiative. Throughout 2013 he will establish a strategic alliance framework that is intended to make Huawei an easier company for service providers, systems integrators, and large consulting firms to do business with. Huawei hopes to create corporate alliances with high-profile firms such as Accenture and IBM. The company will need to adjust its corporate culture to effectively partner with large, top-tier firms in the enterprise space, allowing others a slice of a pie that it has tended to want to keep for itself.

Slower than expected enterprise growth

EBG was a $US1.46 billion business in 2011, increasing to $1.85 billion  in 2012. This is not bad growth, but it is short of the optimistic forecast of $US4 billion figure that Huawei previously expected EBG to generate by 2012. Going forward, Huawei expects EBG to bring in $US2.7 billion in 2013 and approximately $US10 billion in 2017. These figures are considerably lower than the $US15 billion –$US20 billionn previously predicted for 2015.

At the analyst event Huawei executives were not entirely clear as to why they had ratcheted back their expectations for EBG growth. They cited a “deeper understanding” of the enterprise market as the motivation behind the change, as opposed to market conditions or political sentiment in specific regions.

Huawei says that more than 50 per cent of its unified communications sales, more than 40 per cent of its contact centre sales, and more than 50 per cent of its telepresence solution sales are now outside of China. So even with the more moderate expectations for EBG growth, Huawei’s partners in Europe, South and Central America, and Asia-Pacific should expect growing opportunities for the resale of Huawei enterprise products as the company seeks to expand its presence around the world.

Brian Riggs is a principal analyst in Ovum's Enterprise Telecoms team.